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To be an Investor or a Lender? That is the Question written.

To be an Investor or a Lender? That is the Question written.

Investing in land is one of the oldest forms of moneymaking that there is. It dates all the way back to ancient times, when those who had the wherewithal snapped up parcels of land and then either sold them at a profit or charged people for the privilege of living on that land. In modern times, investing in real estate is one of the more secure ways to bring in a healthy return on your money. It is true that such dramatic downturns as the explosion of the real estate bubble in 2008 and 2009 was not a time when investors could turn a profit in property or land, but no one was making money in any other investment sector either. Now that the economy is beginning to sputter its way back to life, property values are beginning to creep upward again. While you are not likely to make the same returns that you would if a dream stock just happened to vault up in price at the right time, real estate is much more stable than stocks or commodities, but it provides much higher returns than such investment vehicles as savings accounts and certificates of deposit.Investor vs lender

If you are going to invest in real estate, there are several different ways to get involved, but the central question to ask is whether or not you want to be an investor or a lender. People who want to invest in real estate do so in one of three ways: acting as a landlord, flipping properties, and acting as the seller in lease option purchases.

Acting as a landlord is one of the oldest forms of real estate investment. Basically, you buy a house and then rent it out to a tenant. If you haven’t already paid off the house, you use the rent to fund the mortgage payments, the insurance, property taxes, as well as to funnel a profit to you each month. Part of this profit, though, has to go into savings in case you need to make some repairs to the property. Also, you have to save some of the profits in case your tenant moves out at the end of the lease and you have to go a few months before you find another one. Also, if the tenant turns out to be chronically late (or simply stops paying rent), you have to deal with the eviction process. So if you have the right tenant, this can be easy money. If you don’t, though, it can be a real hassle.

Flipping properties can be a way to bring in quick profits. You buy a house at a certain price, hoping to sell it at a higher price later. Of course, you often have to sink money into repairs and improvements on the property, thinking that those changes that you make will improve the appearance and condition of the property enough to bring in the price that you plan to ask. There is a certain amount of risk to this, but in a time period of rising home prices (such as the current one), you can bring in some quick profits this way.

If you are selling a house and agree to a lease option purchase contract with the buyer/tenant, you have basically agreed to sell the house at a particular price at a set date in the future. Between now and then, the buyer/tenant pays you rent, some of which will act as a credit toward the purchase price of the house. If he can’t complete the purchase at that point in time, all of the money you have received turns into pure rent in your pocket, and you can decide whether or not to extend a lease to that person or to sign another lease option purchase agreement. With a lease purchase option, he handles the repair bills, making this a more attractive option.

But what if you could be a lender? You might think that it’s just the big banks who are raking in interest by lending money to people in the form of mortgages. However, there are many individuals in Canada who are using their registered or non-registered retirement funds in order to provide mortgages to people who cannot qualify through traditional sources. Maybe they have a checkered credit history, or maybe they don’t have a verifiable income history because they started their own business. It’s doing well, which is why they have 30 percent saved up as a down payment, but they can’t verify regular income because monthly revenues are still up and down.

Amansad Financial has connected many individuals with money to invest with potential borrowers who are looking for a mortgage. You’ll get a higher rate of return than the banks do, because these borrowers represent a greater level of risk. You’ll get all your money back within two or three years, because private loans don’t go any further than that with their terms. You don’t have to pay for repairs. The only risk is default, but if a borrower can put away 30 percent to put down, it’s likely that he’s making enough to pay for his mortgage.

If you are interested, call one of our private lending specialists at Amansad Financial. We have brought many individual lenders together with borrowers, and we can do the same for you.

Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
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