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No Investment Is "Risk-Free"If that’s what you’re looking for, you can’t even find it in a U.S. government investment! Why? Because often those investments provide a rate of return that doesn’t even keep up with inflation. Though treasury bonds and other government investments are the safest around, you’re still taking a purchasing-power risk with them.
Certainly there are no guarantees when investing in real estate. What you should be after is a solid return for a given amount of risk.
"What if the investor doesn’t stay current with the interest payments?"
That’s a good question, and it’s the same one the banks deal with. If an investor cannot keep up with the interest payments, then you as a mortgage note holder are able to foreclose on the property. Because we only deal in situations where the property is worth substantially more than any loans, there typically is way more equity in the property to cover the loans, once the property is sold.
"How do I know I can trust you?"
The good news is that you don’t have to take a "leap of faith" in this program! Everything’s visible: You get to learn about the property you’ll be loaning on. You are given all the facts about the property’s value, comparable properties in the area, the proposed use of the loan proceeds, etc. Only when you have all the facts do you decide on investing.
You know exactly which property you’re loaning against. Compare that to buying a mutual fund, where you have only a vague idea about what the investment manager has put your money in.
Who’s NOT right for these investments:
1. You’re looking to score a "grand slam". We’re shooting for a generous return for a reasonable risk, and not for some "snake oil" story of instant riches.
2. You can’t bear the thought of "risk". As we explain elsewhere, your investment is covered with ample collateral. But of course that does not make it totally risk free. Should a foreclosure occur, the good news is you now may potentially receive much more than your investment back; the bad news is you may have to wait through part of a market cycle to receive it.
3. You need the money REAL soon. If your kid is going to college in the fall, then this is not your investment. You should be able to put this money aside and forget about it until the renovation project ends.
4. You haven’t invested before. "First timers" are more nervous than most. They typically should invest in things like mutual funds that have a daily value in the newspaper, and come with plenty of letters and website information from the fund manager. It may take a bit of time to "graduate" to these private investments.
Who IS right for these investments:
1. You’re looking to diversify. If you already own other types of investments, then private lending is definitely worth looking into. That’s because having all your investments in one type (growth mutual funds, for example) often means you have your "eggs in one basket". Risky. Having some of that money spread out in very different investment types can actually reduce your overall risk.
2. You have your primary investment needs taken care of already. This is money you can invest without drawing upon it soon. That will help you, because the longer you can have your money off and working for you, typically the higher returns you can generate.
3. You’re not the nervous type. Let the "nervous Nellies" own stocks and sweat what the news will be each night. If you’re satisfied with only periodic updates on how your investment is doing, not only will you sleep better, but your investment choices will be much broader.
Do these last points describe you? If so, we invite you to click here to find out more about the opportunities no one probably ever told you about.
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