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Real Estate Investor Mortgage Loan

Connecting Real Estate Investors with Mortgage Loans

Creating a solid investment portfolio requires a commitment to diversity among your investments. You definitely want your emergency cash stashed in the most liquid forms available — a combination of savings, money market and certificate of deposit options. The interest rates on these investment vehicles are not much at all, but the money is secure — and it’s there if you need it. If you have to take it out, you’re not assuming any fees for early withdrawal, and you’re not missing out on a lot of interest income while you pay yourself back.

At the other end of your risk spectrum, you want mutual funds that pursue aggressive returns as well as some stocks. However, you also want some items in the middle, when it comes to risk and reward. This type of investment beats the pants off the returns from a savings account but does not come with the same risk as the stock market. This is where real estate investment comes into play. You might think that real estate investment isn’t that great a deal — after all, being a landlord is almost like taking on a second job at times — but if you decide to invest in real estate as a lender, then things change dramatically.

Why should you fund someone else’s mortgage? Aren’t mortgage rates rock-bottom too? That’s true, but you aren’t going to make 3, 4 or 5 percent on these notes. You might make 8, 10 or 12 percent. The people whose mortgages you would be funding can’t qualify through bank financing. The banks want a hefty down payment (which you would want as well), but they also look at income verification and credit history. People who don’t have third-party verification of a solid level of income or a credit score that meets the bank’s approval don’t get the loans they want.

But why would you want to lend to people whom the banks won’t touch? Well, in a lot of situations you wouldn’t. If someone only has 5 percent to put down, has a terrible credit score and has bounced around from job to job, that person is going to be renting for a long time. He hasn’t put together a track record that shows he is worthy of a loan of the size that would allow him to purchase a house.

However, consider the example of a dentist who opened his own practice a year ago. Before that, he was a partner in successful practice, but he decided to go on his own. He moved to a new city, so he didn’t take patients with him to form a base for operation. Instead, he relied on marketing to build a new clientele, and he relied on his savings to cover his living expenses until the practice became profitable enough to fund itself and start bringing him income.

If he goes to the bank and wants a mortgage, even if he has the expected 20 percent to put down for a conventional loan, and even if he has a stellar credit score, his income over the past year is spotty at best. He may not have taken any salary at all for the first six to nine months, living off his savings and pouring all of the business revenue back into marketing and bringing in customers. He will have a difficult time convincing the bank to lend him money. But if his financials are secure and his patient rolls are full, why wouldn’t you lend to him? He’s a solid bet to pay you that higher interest rate for a couple of years as he establishes an income history from his practice and lines up a bank loan to replace yours. You get your principal back, as well as a couple years’ worth of returns between 8 and 12 percent.

This type of borrower is the client that Amansad Financial helps frequently with finding a home loan. As an investor, you can profit handsomely over the short term from clients like this one, but it’s also a “win” for him, because he can go ahead and start building equity instead of sinking money for two more years into rent. Amansad Financial specializes in linking potential investors and borrowers, so that both parties benefit. There are many potential borrowers like this dentist out there, and if you are an investor who can fund a mortgage, Amansad Financial is looking to work with you as well.

Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
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