 Looking For Higher Returns – Real Estate Notes May Be An Answer Author: Ultimate eBook Store It is important for all private lenders to make sure they have their attorney or reputable escrow company prepare the loan document and to have the borrower secure insurance and title insurance before completing any transaction with real estate. In the case of a default by a borrower, the lender can take back the house and rent it out or sell their interest. Private money lenders can expect anywhere from 7% return on their money up to 17% depending on state laws. The biggest benefit is that the investor’s money is secured by a house or building that you can see and lent to a person that you know. Lenders receive monthly, quarterly, or accrued interest payments on the houses while the borrower fixes the place up and rents or sells the property. Individuals looking to get a good deal on a house are receiving money from investors to buy properties at 50-80% of value. The most common place private money lenders are putting their money is lending against foreclosed real estate. They are basically doing the due diligence that bankers over the last decade did not do. They know the borrower and have made very clear the terms under which they will be paid back. They are requiring the collateral to be worth the amount of the loan. These investors are actually inspecting the assets that they are lending against and earning a handsome return doing so. Individual investors are now advertising in papers loaning qualified individuals money to purchase homes, cars, funding small business ventures, capital projects, etc. Private lenders have stepped in to the vacuum created by banks pull back in lending. A savvy investor that was looking to earn a return on their investment that invested their money in Bank of America, or Washington Mutual 20 years ago would find that they had not earned any return on their money, in fact they would have lost an arm and a leg. However, when the economy weakens and loans go bad, the capital base is reduced and shareholders in the banks are wiped out first. Borrowers put more money in the bank, giving banks the opportunity to lend out more and more money, increasing their capital base for shareholders. Everything is great for bank shareholders and depositors in periods of rapidly increasing economic activity. When you hear the government is "injecting capital" they are basically diluting the value of all existing shares in the bank. The banks' capital is what shareholders derive the value of their ownership stake from. The spread or difference between money lent out and money paid to depositors is gross profit to the bank and used to increase the banks capital base. Banks then loan money out at higher interest rate (4-12%) to borrowers for a promise to pay that money back. Banks market to depositors offering a small rate of interest (0-3%) in return for depositors parking their money with the bank. This was a lesson on how banks lend money and why they are earning returns at the detriment of depositors and shareholders. For investors that have simply had enough of banker’s lying through their teeth to shareholders, and want to actually have control of the returns they receive this is a great alternative. Private lending is one of the fastest growing and lucrative investment options available for investors today. About the Author: Ultimate eBook Store making a descent return on your money is important and finding ways to make money at higher than what banks return is important. Article Source: Ultimate eBook Store - Looking For Higher Returns – Real Estate Notes May Be An Answer |
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