Private Money Investing
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Private Money Investing
Private money investing is a type of financing in which a borrower receives funds, from a private investor, secured by real estate and or a personal guarantee from the borrower. This type of investing typically produces a regular, predictable income stream. A private money investor is the private source of funding for real estate investors. When an individual lends money to another individual on mutually agreeable terms, it is considered a Private Money loan.
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Many people equate private money investing with hard money loans. Hard money refers to a short term financed loan that is secured by real estate and often a personal guarantee from the borrower, adding another layer of protection for the investor/lender. Additionally, a private money investor is also known as a private money lender, a hard money lender or a hard money investor. They are essentially the same thing; private individuals lending their money directly to the borrower with interest rates, points and a promissory note secured by real estate.
Why would anyone consider becoming a Private Money Investor? Investing in loans secured by real estate offer a higher rate of return and lower risks. Private lending offers the investor more investment control. Anyone with money, stocks, IRA or just really good credit to invest, can become a Private Money Investor. Countless stock investors who grew tired of inconsistent returns and losses have become private money investors. Most of all you can invest in real estate without the hassles of being a landlord, dealing with contractors or tenants.
There are great advantages to being a Private Money Investor. There is no commission to invest your money. A private money investor can receive a relatively high yield from their investment; in most cases double digit returns. Despite the “bailouts”, banks are not making real estate investor loans. RE investors are desperate for funds. Private investors and hard Money Lenders have no competition and they are “cleaning up!” It’s time for you to seize the opportunity.
Flexibility is another advantage of being a Private Money Investor. As a PMI you have the option to invest in short or long term investments. Typically, a loan can mature as soon as 6 months or as long as 5 years. You enjoy the same benefits as the bank. The typical interest rate for a private money investment ranges from 6% – 18% depending upon the time frame, the purpose and other factors.
A common concern with any investment is that you may lose the money you invest. Smart investing includes risk management. Anyone offering a risk free investment is probably not being up front with you. Do your own due diligence.
It is the best interest of a private money investor to minimize risk and maximize return. Low loan-to-value ratio (LTV) increases the security of the loan. Furthermore, Private Money Investor loans are secured by real estate.
James Bullock of JDB Financial LLC is an investment advisor with over a decade of experience in real estate and residential / commercial financing.
