Private Money Lender On Real Estate
There are four main benefits of becoming a private money lender. The first benefit is that the real estate mortgage company or deed of trust will provide the seller with the tools that the person would not be able to get from any other investment like help whenever they need it. The second benefit is that there will be added layers of protection for the seller. This is because of how the investor is going to buy the house and the investor will have some recourse available to them in case they happen to default on the loan.
The third benefit is the predictable income that does not fluctuate that often. This is something else that will be determined by the shape of how the house stays in when it is being sold to other real estate lenders. The interest in the repayment process can range from 4 to 6 times the rates of the traditional bank, credit union, and IRA accounts. The last benefit is that the investor is going to have an income stream that is pretty predictable. This income should not fluctuate that much as long as you keep the house in good shape. Therefore, this is when the investor is going to rent out the property to someone.
There are seven steps of becoming a private money lender. The first step is the private lender will fund the deal though savings, IRA account, divorce settlement, inheritance, and severance payment. This just means that the private lender is going to give the seller the money that they need in order to buy the house. The second step is that the lender will receive all of the documents that help to secure the loan. All of these documents will prove that the investor will be able to pay the money back to the lender like a promissory note. The third step is that the person is going to purchase the home. This means that the seller will have to come up with the price that they are going to buy the house for.
The fourth step is the person is going to have the home renovated. This is a big step especially if the house was not in the best condition when it was bought. The fifth step is that the person is going to have the home sold to someone else. Once the house has been renovated, someone else should want to buy the house. The sixth step is that the lender is going to receive the principal and the interest from the sale of the home. The seventh step is that the process is going to be repeated.