So just what is private lending? Trust Deed Investing, also called Private Lending, is an arrangement by which private investors loan their money in order to obtain a fair return, commensurate with risk.
For the purpose of this post, we will focus on loans that are made on real estate secured transactions.
These private money loans are usually short to medium term, ranging from 6 – 18 months, and can be used for any type of real estate financing, such as single family homes, multi-family, rehab and commercial buildings.
WHY SHOULD YOU CONSIDER PRIVATE LENDING?
Here are just a few of the benefits of becoming a private lender:
Private lending is truly a hands-free, passive investment. Unlike rental property investments, with the never-ending inconveniences that come along with them – from toilets to finding new tenants – you never have to worry about troublesome phone calls from problem renters again … But you can still receive similar monthly payments.
Private lending requires very little effort but boasts big returns. Why? Because with private lending, most of the legwork will be handled for you by your team, including loan documentation, recording, closing the transaction, and servicing the loan. That means private lending is truly a smart, passive means to achieving positive cash flow.
Private lending is a very safe investment when structured correctly. We’ll dedicate an entire post on this benefit in our next month’s blog.
Private lending allows you to make more cash flow, much faster than a typical rental property investment transaction and MUCH LESS HANDS ON ! There are simply less hurdles to jump with private lending. Consider the steps required before buying a new investment property: a market survey, building a local investment team, narrowing the investment area, determining potential rental income, search for and find several possible investment properties that fit your criteria, make and negotiate offers and counter offers, ratify the contract, obtain appraisals and inspections, start the loan process, manage the tenants … and the list goes on.
Private lending is not as time consuming. The loan can start and finish in a matter of days and you, as the private lender, can start collecting profits directly after the loan has been funded.
If done properly, Private Lending makes an excellent addition to any other stream of income you already have, such as multi-unit apartment investments, condos, etc. We are not suggesting you give up your real estate investment portfolio, rather, we are suggesting that you consider private lending as an additional stream of income.