If you’re just getting started in real estate (and you have the necessary resources), I truly think private lending is the best way to invest money in real estate, and I’ll explain why.
Here’s a quick video I made on how to smartly invest as a private lender, so you safeguard your money and MAXIMIZE profits:
What is Private Lending for Real Estate?
In the context of what I’m talking about today, private lending involves you receiving above-average interest rates on your money by lending money to real estate investors.
Related: How to Make Money by Lending Money for Real Estate Flips
The real estate investor uses the money you loaned them to acquire and renovate the property.
In-return, you’re able to make six, to as much as 20% returns on the money you invested, which is way more than what you can make from a bank account, mutual fund, or CD.
You Benefit from “Being the Bank”
Private lending on real estate deals gives you a rare opportunity to make money how banks do.
In my opinion, banks have an awesome business model.
They’re able to take your money, and sell it for a profit. Not only that, but they can lend more money than they actually have.
It doesn’t get much better than that.
How Banks View Real Estate
Banks hate holding onto properties. That’s why they get rid of foreclosures for what at least “appears” to be a loss.
(Discussing what I mean by that is a whole ‘nother subject, and I promised myself I was going to stay on track.)
See, banks would rather control and profit from the FINANCING of properties.
That’s because it’s way more lucrative to control the financing of a property, than holding it.
It’s a lot of work that goes into managing a rental property, even if you screen tenants properly and do everything else “right” that comes along with holding a property long term.
There’s Demand for What You’re Providing
I’ve been involved in a few businesses in my lifetime. One thing is for sure, if you’re going in-business, you want to be in a business where there’s demand for your product.
And there’s ALWAYS demand for money.
Let me explain.
The reason you’re able to make these ridiculously high interest returns on your money, is because of the demand.
You see, real estate investors can’t go to banks to get financing for rehab projects. Banks don’t lend on those kinds of homes.
You help them get hard-to-find financing, and in-return, you make more short-term returns than you would with a bank account, stock, or certificate of deposit (CD).