Whether you are just now considering investment in the real estate market or are a seasoned investor in the property market, there are new ways to take part in the market that you may not have considered. After all, being an owner/landlord is not for everyone, because the burdens of property management are often more than some investors are willing to take on. Many of the people who rent homes have to do so because they cannot qualify for financing, even with the more liberal guidelines that private mortgage lending provides — generally because the larger down payment requirement is a hurdle.
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However, there are multiple real estate investment solutions that have nothing to do with property management. Instead, they have to do with serving as a lender for a new homeowner. The borrower takes on the tasks of property management, while you collect payments on the home. Instead of taking in rent that you are likely to have to spend on maintenance issues (and sometimes go without when your unreliable renters don’t pay the rent on time), you get a return on the investment you made by extending the loan. The fact that your borrower can come up with the high down payment that you are requiring gives you a much lower level of risk, but the fact that the borrower can’t qualify with a traditional bank means that you can charge a higher interest rate than the bank would get. The irony is that if a borrower can put together $75,000 or more for the purchase of a $250,000 home, that borrower should also be able to keep consistent payments up over time. The banks may not recognize this, because past credit mistakes have led to a low score, or the fact that the borrower set up a dental practice six months ago that is only now starting to bring in serious money may scare the bank away because income verification becomes problematic.
The good news it that Amansad Financial Services has a number of real estate investment solutions that you can use to improve the returns on your portfolio. There are a number of different ways to invest in the real estate market without having to take on the burdens of property management, and there are a number of different structures in which the investment can take place. Some of our investors are looking for urban or rural properties, while others want to focus exclusively on commercial or residential properties. Some want to focus on opportunities on land that is not yet receiving services, while others want to invest in properties on land that is already serviced.
In addition to the location and type of properties, there are also several different choices when it comes to the structuring of the loan itself. As a private lender, no matter which type of structure you opt to use, you can ask for a higher rate of interest than a bank would charge, and you can ask for a shorter loan term than the banks offer. Many times, borrowers use private lenders to go ahead and get into their homes and use the term of that private loan to improve their credit and refinance the balance through a traditional loan. While investing in a first mortgage gives you the security of senior loan status, if you are willing to take on a little more risk, you can make more from the interest rate levels that you can ask for when you invest in a second or third mortgage. Amansad Financial Services vets all of our potential borrowers so that when we match them with a potential investor, the risk is as low as possible. It isn’t possible to get rid of all of the risk, but by helping our investors with the due diligence on each potential borrower, we aim to make each loan as successful as possible.
Another choice for you to consider as an investor involves the matter of the principal. If you have some flexibility as far as the principal you want to lend, you might consider the option of an open mortgage. This allows the borrower to ask for more principal later without taking out a new loan, and it allows you as the investor to ask for a higher rate of interest. If you have less flexibility, then you’ll want to focus on closed mortgages, in which the principal cannot change.
To start the process, get in touch with one of our real estate investment solutions professionals at Amansad Financial Services. We can start connecting you with potential borrowers the same day you call.