Investing in real estate can be an excellent way to use your money. You might think that the only way to successfully invest in real estate is to "get your hands dirty" and buy rehab properties. However, you can also invest in real estate without ever buying a piece of property yourself.
Investing in Real Estate Properties
Traditional real estate investing remains an excellent opportunity. While some investors take a long-term view, buying property to enjoy yearly cash flow, others look to create equity more quickly. Given the large supply of distressed properties, investors who are willing to do a little bit of work can purchase a property, improve it and then resell it. While some properties need extensive work, some can be turned around with simple cosmetic tweaks.
The one potential problem with a "buy, fix, sell" strategy is finding a lender that can provide financing. Many traditional mortgage lenders have walked away from lending on one to four unit residential investment properties. Investors that have cash reserves, though, can take advantage of the private lending market. Private lenders provide short term financing that, although a bit more expensive than a bank loan, still leaves the opportunity for significant profit. In fact, investors who are willing to do some work themselves can often earn 50 to 100 percent leveraged returns over a 12 to 18 month holding period on properties that they fix up.
Investing in Real Estate Loans
If you don't want to do the work of finding property, fixing it up and reselling it, you have another option. You can be the private lender for people that are interested in investing in real estate. These loans typically require large down payments in the neighborhood of 40 to 50 percent of the purchase price and give you a chance to carefully review the borrower, the property and their strategy for selling it. Their high down payment reduces the risk of them defaulting. They will typically pay you an interest rate that is in the very high single digits or low double digits -- much better than you can get from a bank or even from many bonds.
Whether you want to just invest your money, or invest money and effort, private lending is an excellent tool for investing in real estate. Today's real estate properties are excellent opportunities for many types of investors.