Investing in real estate with private funds can be beneficial to both the private Lender and the investor. This guide defines private money lending, who can be a private lender, and the benefits and drawbacks.

Private money lending is the alternative method of financing an investment property in real estate. It occurs when an individual or small business gives a loan (from their personal funds) to an investor or an investment company for the purpose of investment. So long as the property is used for investment purposes, it is exempted from the Dodd-Frank Act, allowing the investor the power to determine the loan terms and interest rates agreed upon by both parties.

These loans typically have interest rates that are several percentage points higher than a traditional mortgage. Engaging in private money lending is good for you if you:

  • Have idle money yielding no return
  • Have a big retirement savings package you wish to grow
  • Have the desire to grow passive income or are interested in the less engaging aspect of the real estate market

Being a private money lender is not all rosy; it has its pros and cons. For instance, one of the biggest pros beyond the above-listed is that you get a higher return rate than most savings accounts offer, between 6-15%. A notable con, however, is the possibility of having a defaulting borrower. While legal action is always an option, it could prove very costly and time-consuming.

If you aspire to be a private money lender, click this link to learn everything you need to know.

About Note Servicing Center

Note Servicing Center provides professional, fully compliant loan servicing for private mortgage investors so they can avoid the aggravation of servicing their own loans and just relax and get paid.

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