What Is Private Money Lending?

Investing in real estate is essentially one of the smartest and safest strategies to promote wealth building. With the proper foundation and knowledge, investing in real estate can be highly lucrative for anyone. Let’s be honest, you already knew that. Most high level earners think what an investor can do with the money they make from a profitable career. While a portion of profits will support the lifestyle of their choice, investors are advised to be smart with their money. Of course you can reinvest into another property, but if you are looking for an alternative there may be one option you haven’t considered yet: private money lending. Investors who might have money in an 401k, equity, IRA, or just laying around should consider private money lending. Investing in private mortgages for real estate offers a tremendous amount of underlying security and profit potential as who you are lending to is rehabbing, buying rentals or wholesaling. All without getting your hands dirty.

What Is Private Money Lending?

Private money lending is when individuals lend their own capital to other investors with a mortgage against real estate. Essentially, private money lending serves as an alternative to traditional lending institutions, like big banks.

At the end of the day, private money lending allows you to secure earnings on the money you have at a higher rate than a standard retirement account. In some ways, this process can be less risky than owning real estate. That’s why it’s important to familiarize yourself with the best real estate financing options available to today’s investors.

In the past, real estate financing typically came from banks, government agencies, insurance companies, and pension funds. However, with a list of strict requirements and a timeline not conducive to the average real estate investor, a need for alternative lending sources quickly developed. At the same time it became obvious to those with appropriate funds that their money could better serve investors than large institutions. Now, private money lending is a critical component to the real estate investment industry. In fact, its presence makes it more possible for the average investor to run and maintain a sustainable career.

In case you were unaware, there are several benefits involved for those who choose to lend private money as well. If done correctly, offering alternative real estate financing options can mitigate risk while simultaneously establishing wealth. Of course, this is not a path for everyone. You need to ask yourself if you can afford to do so. Having a little extra money in the bank does not necessarily mean you should throw it at the first investor who comes your way. If you are equipped to mitigate potential risks and take advantage of the opportunities that present themselves, private money lending may warrant your consideration.

You may want to consider private money lending if one of the following applies to you:

  • You are a doctor, lawyer, CEO, or professional of another kind who has a great income or a surplus of cash.
  • You have a sizable retirement savings account.
  • You are a retiree looking for a passive income investment.
  • You are owner of an estate or other trust fund.
  • You are a tech entrepreneur who owns a successful start up.
  • You are a lottery winner.
  • You want to and are able to help out a friend or family member.

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