Investors have always searched for secure places to invest their money. The most secure investments have always been in government guaranteed, financial vehicles such as CDs and traditional savings accounts. Unfortunately, the yields on these investments are at near record lows and, more importantly, they trail cost of living increases, leaving the investor susceptible to inflation risk. The question is, “How do high net worth investors avoid these risks?”

Private money lending allows them a secure and high yielding way to avoid all of these risks. Many of the wealthiest investors have private money advisors to find and vet these deals. However, accredited investors, with more modest means, can also avail themselves of these priceless opportunities.

The Secret Investor Strategy

Private money lending is often viewed to be a haphazard affair between relatives or friends that involves minimal paperwork and a handshake. These types of deals are not for the faint of heart and should be avoided by the prudent investor. Instead, third party private money lenders bring together private borrowers and lenders and manage the entire process.

The Private Money Lending Advantage

Transactions brokered by private lending companies involve the use of first trust deeds. The deeds are used to secure any monies loaned by the investor. All pertinent documentation and processes such as inspections, appraisals and title insurance are performed as in any bank financed real estate transaction.

As an extra measure of security, the loan value is always significantly discounted against the total value of the property. In most cases, only 60 -70 % of the value is loaned. In the event of a default, the investor can foreclose and sell the property in a timely, yet, lucrative manner.

Secondly, first deed trusts offer higher rates of return for a guaranteed period of time. Depending on the circumstances of the deal including the borrowers financial health and real estate experience, the rates can vary from 7- 11%.

The last advantage of private money lending is the convenience and service provided by the brokers. These companies provide the resources to find the properties, vet the borrowers and ensure that all the necessary paperwork is completed. They can also provide reputable third party resources who will service the loan.  Lastly, the investor may choose to review the exact details of the deal with his financial advisor or accountant and make a decision.