Why hard money lending is a good option for investors right now?

February 6th, 2018

Investors have many ways to invest in real estate right now. In addition to traditional flipping of properties, you can consider lending money to other real estate investors. There are certain conditions that you need to follow, to keep your business legal. Other than that, there is no reason you should not look at investment in real estate as a good way to earn a secondary income, or to create a neat savings plan.

Safe investments

Real estate has always been deemed a stable, safe investment. This is because people are always going to need real estate, whether to build homes or offices, create factories, or for any other purpose. So, investing in real estate is a safe way to earn a tidy profit. You need to research the area well, to ensure that the investment yields good returns, but usually, with a bit of planning on your part, your investment can offer the best returns.

Many opportunities

Right now, you can look forward to offering funding to buyers looking to invest in real estate. These buyers might typically have tried getting loans from banks and have been rejected. Or, they find that the loan processing too lengthy. Either way, you can wait for these investors to approach you for a loan and get the best returns on your investment. There are many reasons investors will approach you. You typically consider the value of the property, and not just the credit record of the borrower, which can be encouraging to the borrower. Also, by offering funding for purchasing lucrative properties, you and the borrower can both make a profit.

High interest rate

If you are looking to make a profit on the basis of the revenue generated on your loan, the high interest should be motivation enough. Private lenders can typically charge up to 20% as interest rate, much higher than bank loans. This makes this a good option should you be looking to invest in real estate. The higher interest can be put down to the greater risk that the lender is open to, since they are less likely to look at the borrower credit record. However, this is not to say that your investment is at risk, as will be explained next.

Secured with property

As a private lender, you will consider the security on your loan. The property is the most likely security on the loan. As such, you need to look at the condition of the property. You also need to look at factors such as the property value after renovation, so as to calculate the profitability. If you are sure that the property will bring in solid returns, investing here is a good idea.

Down payment

Typically, lenders insist on 30% or more as down payment. This helps make the loan more secure, and this is one reason private investors are buffered against risks on the loan. The lenders can thus earn high monthly revenue through the loan.