Private lending has been surging in popularity with investors of all types since 2010. It is now viewed as one of the best channels for business and real estate borrowers, as well as individual investors and family owned offices seeking to enhance their portfolios. Private lending can be ideal for those looking to finance real estate investments, or to improve investment performance with high yields, great collateral, and consistent cash flow. How does it work? What advantages have been driving the trend in the private lending space?
What is Private Lending?
Often referred to as Trust Deed Investing, Private Mortgage Lending, or Private Money Lending, or sometimes mortgage note investing; Private Lending is an alternative investment option and source of capital for investing in real estate. Private lenders and loan brokers put individual investor money to work by lending it to investors who buy real estate or own real estate businesses. This may be working capital, financing to acquire new assets, equity release from existing properties to expand portfolios, rehab or transactional funding. Lenders invest for a predetermined rate of return for cash flow, and in some cases equity participation. Lenders may receive monthly payments, balloon payments, and enjoy the security of tangible real estate assets as collateral for their capital.
The Rise of Private Money Lending
Private money lending has always been there, but opportunities were less accessible and visible than they have become in recent years. Private lending has grown in part thanks to praise from notable publications such as the Wall St. Journal, as well as out of necessity. When the crises of 2008 came, borrowers had to find alternative sources of capital. Since then we have suffered ongoing scandals with major banks such as Bank of America and Wells Fargo. Together with a negative rate environment for savings and bank deposits, as well as uncertainty and poor performance in the stock market, more individuals have turned to lending their money to real estate investors directly. This enables them to maximize returns, cut out the middleman and heavy management fees, and enjoy more confidence in their retirement planning.
The Benefits of Private Lending for Borrowers Include:
- Avoiding traditional big bank hassles
- Common sense lending
- Flexible and negotiable terms
- Speed of funding
- Less paperwork
- Supporting other individuals versus big banks
The Benefits of Private Lending for Investors Include:
- Higher rates of return
- Consistent cash flow
- Safety for investment funds
- Aiding the community, economy, and individual investors
- Ability to invest through self-directed IRAs to save on taxes
- Hands free investments with the benefits of real estate investing
Contact Real Estate Simplified today to learn more about private lending and trust deed investing…