how to invest in real estate Archives | The Cash Flow Mortgage Company

How to Invest the Ancient Way: Private Lending

Since the beginning of time, people have needed money, and they’ve always needed to borrow it from someone.

Why not you?

You see, when it comes to making money in real estate, most people assume they have to fix and flip or rent properties. But there are other ways that don’t involve picking up a hammer.

And one of those ways is private lending.

https://youtu.be/N4IYdAods3w

What is private lending?

Private lending is exactly what it sounds like: you lend money to someone who needs it.

In the real estate world that means you lend it to someone who’s looking to fix up a property and either flip it or rent it.

It’s just like in the olden days when a person needed a loan and got it from a bank, a business tycoon, or a neighbor. Or just about anyone else who had money to lend.

So, how do you make money in private lending? Well, it’s fairly simple. You:

Find someone you trust
Create a secured, private note
Collect interest payments.

Now, you might be thinking, “What is a private note?”

It’s basically an IOU.

Essentially, a private note is an agreement between you and your borrower, and it outlines things like:

Loan amount
Interest rate
How long you’ll let your borrower use your money (aka, the term)
And the date you expect them to pay you back in full.

And if a borrower can’t pay you back, then fear not. Your money is secured by the property. So, as long as you do your homework and make sure it’s a worthwhile investment, then your money is safe.

And if you’d rather someone else do the homework, including prepping the private note and overseeing the life of the loan, then you can use a licensed and experienced company like ours to handle it. All you have to do is kick back, relax, and watch your interest payments arrive in your bank account.

Ready to talk about investing your money in real estate without picking up a hammer? Great! Our team is always here to chat.

Happy investing!

Private Lender: How to Invest in Real Estate without Flipping or Renting

Did you know you can be a private lender?

That’s right. And today we’re going to show you how to invest in real estate without resorting to fixing and flipping or fixing and renting.

It’s true. Everyone can put their money to work, even if they don’t want to put their muscles to work. If you want, you can skip the hammers, ladders, and paint. No need to groan over dust-covered floors, clothes, and, well, everything. And forget about stressing over contractors and delayed projects.

You can invest in real estate without ever stepping foot inside a property.

How is this possible?

Well, it’s fairly easy.

Rather than rolling up your sleeves and searching, buying, fixing, and selling/renting properties, you can become a private lender.

What does being a private lender mean?

Simply put, you become a bank for fix and flippers or rental owners. Rather than these real estate investors going to a “real” bank or traditional lender, they come to you for money.

And you get to charge them interest for using your money.

Interest rates vary in private lending, but one thing is for sure. You’ll earn WAY more interest in real estate than in your bank account. Because banks pay far less interest than real estate investors.

Now, there are a couple of ways to become a private lender.

The Easy Way

The easiest way to get started is through companies like our sister company, The Note Shop. We connect private lenders with real estate investors (aka, fix and flippers and rental owners).

When you use a company like ours, you don’t need to:

Search for fix and flippers/rental owners that need funding.
Interview flippers/rental owners to determine how much you can trust them with your money.
Review real estate portfolios. Again, to establish trust. How much experience does this real estate investor have? What’s the quality of their work?
Analyze properties to make sure they’re worth the investment.
Prepare loan documents, like deeds of trust and mortgages.
Handle escrow draws.
Oversee the life of the loan, including all payments, extensions, and modifications.

You can skip ALL of that, and let our team do the work for you. That means we handle the entire list above.

Not you.

All you have to do is wait for a call or email from our team to inform you there’s a loan available. If you’re happy with it, then you just have to head to your bank and send a wire to a licensed and trusted title company (First American, Old Republic, Fidelity, etc.).

And then watch the plump interest payments hit your bank account every month.

It’s simple, it’s lucrative, and it’s way easier than fixing or renting a property yourself. Let someone else do the work, right?

Do It Yourself

Now, if you’re experienced and confident in private lending, then you can work directly with real estate investors. This is best known in the business as OPM (Other People’s Money).

We actually encourage our flipper and rental clients to seek out OPM as a funding option because it’s really the cheapest path to buying properties. Because they don’t have to pay a traditional lender multiple fees and points. Instead, they can focus on interest-only loans.

How much interest should you charge? Well, that’s really up to you and your client. When you’re in the driver’s seat, you get decide how big of a risk you’d like to take with your money. And that risk is based trust.

Do you trust them to:

Pay you back?
Buy, fix, and flip a property within your agreed upon timeline? (Or refinance into a traditional loan so you can invest your money elsewhere?)
Sell or rent a property for what they claim it’s worth after they repair it?

In addition to trust, you also need to be willing to tackle the entire to-do list we mentioned above (evaluating investors and deals, preparing documents, overseeing the loan, etc.). This is completely doable! But, again, it comes down to how much risk and work you want to take on.

If you want to make the most money possible while doing the least amount of work, then relying on The Note Shop or a similar company to help you is perfect.

So, there you have it! You can invest in real estate without picking up a hammer or worrying about a bad contractor.

Believe us when we say, private lending is easy, lucrative, and EASY!

Do you want to talk about investing your money in real estate without breaking a sweat? Good! Our team is always here to chat.