Top Five Things to Always Consider BEFORE You Write That Check
If you’ve thought about getting into real estate investment but don’t have the time or resources to find deals, becoming a private money lender could be just what you are looking for to start your real estate investing career.
Private money lending is a great way to grow your wealth and educate yourself about real estate investments. Your money is secured with real property, and is therefore less likely to be at risk.
But before you write that check, here are the top five things you should always consider:
- How much risk you’re willing to take. All investments come with risk, so be sure you know what your risk tolerance is. Do you depend on the money you will be investing?
- How well you know the person you are lending to. Private money lending is relationship lending. You should know the borrower, their experience with real estate investing, how many deals they’ve completed, whether they can provide you with other lenders they’ve used, and their ability to repay the funds — even if something goes wrong! In other words, how well can they protect your money?
- Never invest in real estate that you don’t want to own. You never know what might happen. If you have to foreclose on a property, you will own that property. So if you are not interested in the type of property or location, make it a rule not to lend in those situations.
- Do your own due diligence when it comes to repairs and “make ready.” Drive by the property and have someone with experience review the scope of work that needs to be done. For example, foundation repairs in Texas can range from $5,000 to $15,000. Know how much things cost, and prepare you own rehab budget.
- Don’t lend on an overpriced property. It’s easy to make this mistake in competitive markets, so tread carefully!
Remember, as a private money lender you control what you lend on, and whom you lend to!
Do you have money sitting in an account that you want to use to invest? Contact us! We’d love to help you build wealth while making neighborhoods great again!