Many people who have relied on traditional IRAs, 401ks and savings accounts are now looking for ways to diversify their plans, especially if they have exclusively invested in the stock market. Its highly volatile nature (both the ups and downs) has people wanting more safety, security and stability while still generating better-than-market returns. These goals are possible.
In fact, there are ways to put idle money to work and help you earn those better-than-market returns with the stability that is so essential. That solution is to consider becoming a private money lender. In our guide, How
to Become a Private Money Lender and Avoid the Pitfalls, we explain what private money lending is, who can be a private lender, the benefits of private money lending when you choose a company that has proven methods, and much, much more.
What Is Private Money Lending?
When a private individual or small business loans their own funds to use for investment purposes in real estate, it is known as private money lending. The individual operates as the bank. It’s an alternative option for financing an investment property outside of a traditional bank or lending institution. Hard money lending, which is often used
for rehab loans, is one example of private money lending, although private real estate loans can be used for other types of loans as well.
In most private money lending arrangements, the private lender’s funds are secured by a note and mortgage and the investor receives a return on investment, equity split, orpossibly a combination of both in return.
Since private money lending is private, it’s up to the lender and the borrower to establish the terms of the loan. Very often investors find private money lending to be a very attractive and safer way to invest their money, especially
now. (Covid19 has caused such uncertainty in the stock market, which has caused many portfolios to downtrend and even plummet).
Here Are a Few Upsides to Being a Private Money Lender:
- A higher rate of return which can help grow retirement accounts faster and safer
- You earn passive income, but this income is secured by real estate.
- At times when the stock market is performing in a volatile manner, your private
money lending investments remain stable and secure.
If you are interested in becoming a private money lender, one of the first things
you’ll need to decide is the amount you will lend and where the funds will come
The common lending sources that private money lenders use are savings accounts,
cash on hand, or IRAs and 401k plans. One thing to know about using an IRA or 401k is that if you have a
traditional plan, you’ll need to convert it to a self-directed plan. That
allows you to participate in private money lending for real estate investments.
Once you have determined the most basic aspect of private money lending as described above, you’re ready
to start looking for the right investment property and company to work
There is much more to know about becoming a private money lender, such as finding the property and
company you want to invest with. Understanding their investment strategies, working through the various documents and agreements, etc.
I explain this information and much more in the eBook that I mentioned above. I hope that you’ll download this eBook and review it. I look forward to hearing from you once you have done that.
To your prosperous future!
CEO, REI Signature Homes