The Leading Web Directory of Real Estate Investing Resources that will teach you how to Make Money by Investing in Real Estate.
The World's Largest Directory of Resources for Real Estate Investors
Home Courses Books Tapes Software Services Gurus
Subscribe to our "What's New" newsletter!
Learn how to make a Fortune Investing in Real Estate
Visit Real Estate Investing Depot Shop

Private Mortgage Lending
   by Matt Bowman   

  How would you like to learn an investment secret that big banks and financial institutions use? It's called mortgage lending! Wait a minute, how is that a big secret? The secret part of this is that YOU can make this same type of investment AND make far more than a regular bank does!

  If you have funds to invest but are afraid to try your hand at the stock market because of all the massive losses that have been experienced by so many, private mortgage lending may be the investment tool for you! As a private mortgage lender, you can make a HIGH rate of return on your investment. How high are we talking? Try 10, 12, 15% and sometimes even higher!

  So how does it work? Many times, real estate investors come across great deals and need to get them funded fast in order to get the great deal. Typically, we are referring to investors who buy a run down property for pennies on the dollar, fix it up and then sell it at a great profit. Well, how can you get in on this without having to pick up a hammer and with no construction knowledge? By becoming a private mortgage lender.

  Basically, you become the bank in a real estate purchase. You lend your money on a piece of property the same way that a bank does. The difference is that you can make a LOT more than a bank AND have your investment is much safer! How can you do this? You can often lend your money at up to 15% and sometimes more because these "rehabbers" need access to money FAST in order to do their deal. They can't wait for the 2, 3, or 4 months that it takes a bank to slowly wade through paperwork, especially because they have so many other loans to review!

  Since you have the funds ready and waiting to be invested, you are a rehabber's dream come true! They are willing to pay high interest rates for quick access to money when they need it to pick up a great deal. Not only that, but typically these rehabbers only need 65% of the house's value or less in order to buy and fix it up!

  How is that possible??? These investors know how to spot properties that need work. They know how to find sellers who just want to dump their property! These sellers just want someone to take their old junker off their hands, and are willing to take a STEEPLY discounted price just to get rid of it!

  What this means to you is that your money is secured against a piece of property for only 65% or less of what it's worth! If you should ever have to recover your funds, you are able to take back a piece of property worth far more than the amount that you put into it! Even banks aren't that secure in their investments.

  Most of these rehabbers only need the money for a short period of time. Since they are buying the property to fix up and resell, they do not need a 30 year mortgage as a regular home buyer would. This means that you get your investment capital back in a short period of time at a much higher rate of return than a CD held for the same amount of time!

  Now you do need to be sure that the transaction is set up with an attorney. Don't just hand some investor a check! Make sure that you are provided an appraisal, so you know for a fact what the property is worth. Be sure that the investor gets title insurance, as well as property insurance, with YOU named as the "loss payee" to protect YOUR investment. Make sure you know what you are getting into and what the investor intends to do with the property. This MUST be handled by an attorney!

  After providing the funds, you should get a mortgage or trust deed in first position recorded against the property. You then have used the same investment technique that banks use EXCEPT you are making a much better return!

Matt Bowman, www.reitoolbox.com, is a full time investor who started investing in 1997. After several attempts to get started in creative real estate investing, he found his niche in sandwich lease options.
Back to Real Estate Investing Articles

[ What's New | What's Popular | Our Forums | Links to REI Forums | Real Estate News | Free Resources | Links ]


© 2001, 2002 The Real Estate Investing Depot