There have been tremendous developments in the investment market and as a result, more people are looking for options that will meet their needs. Many investors are looking for opportunities to invest as private lenders. These options provide them with a lot more control of what they are investing in than the traditional investments available in the market. With a private money lender, what is issued out is their individual capital to an investor in the real estate who will use it either for a commercial, rehab or construction project. The borrower then gets to pay the private lender over time with the accrued interest.
An investment with a private money lender is totally different from those made with big banks in many aspects. Most of these differences are of great benefit to the lender. Private lending to real estate investors is a suitable option in the market today. Conventional banks have continued with their view of money lending as an act of taking advantage of spreads in interest rates but private lending has now focused on investment properties in a similar way like borrowers do. Ideally, the objectives of private money lenders are well-aligned with those of the investors. Here are the unique benefits of engaging in private lending with real estate investors compared to other options of investment:
You Have Full Control over the Process
As a private lender, the terms of the load to be applied depend entirely on you. Ideally, you get to control the process to a bigger extent. In this form of investment, the lender decides on the interest rate to charge along with making decisions on other terms that will apply for the loan facility. This is a perfect way to develop a better portfolio for personal financial goals.
Guarantee over ROI
In some other types of investments such as the stock market, your returns are based on how such markets will perform. Therefore, you have no assurance on whether you will get returns on your investment or not. In this case, you will know how much you will get from a real estate investor on a monthly basis. Rather than looking at the investment to profit in the future, you are sure to get a specific return since you came up with the loan terms.
Good Returns in a Short Time Period
Private lending to real estate investors provides an opportunity for you to get higher returns within a shorter time compared to other forms of investment. Beyond these high returns on the investment made, the time taken to repay private money loans is usually short. Short terms of loans imply that the investment will be paid back with accrued interest in a much shorter timeframe than with conventional investments.
Real Estate as Collateral
Nothing gives a private lender more peace than knowing that there will be something to fall back on should things turn out negatively. However, borrowers make an effort to establish a good reputation with their private lenders and therefore, it is unlikely that they won’t pay you back. However, if the worst happens, there will be nothing to worry about because you will have a valuable asset. The property can be seized via a foreclosure, ensuring that there will not be any loss to be suffered.
The process of issuing loan facilities to real estate investors is very simple and is upon the consent of the two parties involved. While the borrower gets a better access to these facilities with room to keep conventional loan benefits, it is much easier on your part because there is nothing to delay the issuance of money now that the property can be used as collateral. Traditional processes take longer because of the need to establish securities for the lending and that involves a lot of paperwork and time to wait for proof. The beauty of hard money loan processes is that they move a lot faster and are by nature more flexible than traditional financing methods.
As private real estate lenders, there is not much to be worried about and it is definitely an appealing investment for many entrepreneurs. The most important thing is to understand what the borrower will be doing with the money and assess the risks involved. Based on that, one can decide whether it’s a good deal for them. Investments should never be made beyond a person’s knowledge base. Therefore, take time to research before jumping into any investment of this nature.
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