Invest in Phoenix Real Estate Indirectly: Be a Money Lender With 8-12% Annual Return
January 14, 2010
Get A Guaranteed Return on a Secured Assett By Being A Money Wo/Man
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There are many ways to invest in real estate. I won't go over all of them, but one way to get a specified return on your money is to become a money lender in a real estate transaction: you become the lender for the buyer. In this case you receive a defined return -interest- on your money secured by a hard asset. You do not however own the real estate, but your loan is secured by it.
What you get is a high cash on cash return fully secured by real estate
and a deed of trust or in some cases an agreement for sale. What kind of
return can you expect? 8-12% annualized return on a loan made for a
duration of 3-5+ years. You are full secured by an asset which is being
purchased below market price and often improved so the loan to value is
often 50-90%.
An Example: a fourplex purchased by the buyer for $150,000 with $15,000 input and your $135,000 loan. The owner/buyer will pay out $13,500 in interest only payments over the first year providing you with a clean return of 10% on your money. The asset is worth $200,000 after the buyer has improved the property and the market stabilizes. The owner did all the work, you have security and a very high return with very little risk. Over a 3 year period your $135,000 investment has made you $40,500 and you had to do nothing but collect the checks.
The properties can be small multifamily: ie. triplex or fourplex: or on a limited basis single family homes.
The loan is like a normal loan with a note and deed. The transaction is handled by a title company and payment processing is done by a third party. The payments are made to the third party then paid accordingly to the lender(you). It's a very secure process.
What happens if the buyer defaults? We'll there are different ways to go about this depending on how the transaction is structured and also depending on how much equity is in the property. It can be a short as 30 days to a normal 100 day Arizona foreclosure process. There is some risk, which is why the interest is higher.
The key is the have an experienced buyer who purchases a good property to mitigate the risk.
Why would a borrower not just get a regular mortgage? There are restrictions on how many properties an investor can own and receive conventional financing. Many savvy investors are over the 10 limit and have to seek financing in other creative ways such as owner-carry or private lenders.
The faults are that you don't own the property. You receive the return on the loan, but you don't get a return on the actual property or any cash flows generated by the property, although these are options as well. You do, in a way, participate in the cash flow via the interest rate, but you don't get any appreciation if it comes along plus your income is fixed.
We know the properties, we know the process and the market and how to make it work with little risk. We're looking for partners or money lenders to grow along with us and take advantage of this market for the short and long term.
If you have an interest is discussing this further please call Artur at 602.628.4349 or via the contact form.
An Example: a fourplex purchased by the buyer for $150,000 with $15,000 input and your $135,000 loan. The owner/buyer will pay out $13,500 in interest only payments over the first year providing you with a clean return of 10% on your money. The asset is worth $200,000 after the buyer has improved the property and the market stabilizes. The owner did all the work, you have security and a very high return with very little risk. Over a 3 year period your $135,000 investment has made you $40,500 and you had to do nothing but collect the checks.
The properties can be small multifamily: ie. triplex or fourplex: or on a limited basis single family homes.
The loan is like a normal loan with a note and deed. The transaction is handled by a title company and payment processing is done by a third party. The payments are made to the third party then paid accordingly to the lender(you). It's a very secure process.
What happens if the buyer defaults? We'll there are different ways to go about this depending on how the transaction is structured and also depending on how much equity is in the property. It can be a short as 30 days to a normal 100 day Arizona foreclosure process. There is some risk, which is why the interest is higher.
The key is the have an experienced buyer who purchases a good property to mitigate the risk.
Why would a borrower not just get a regular mortgage? There are restrictions on how many properties an investor can own and receive conventional financing. Many savvy investors are over the 10 limit and have to seek financing in other creative ways such as owner-carry or private lenders.
The faults are that you don't own the property. You receive the return on the loan, but you don't get a return on the actual property or any cash flows generated by the property, although these are options as well. You do, in a way, participate in the cash flow via the interest rate, but you don't get any appreciation if it comes along plus your income is fixed.
We know the properties, we know the process and the market and how to make it work with little risk. We're looking for partners or money lenders to grow along with us and take advantage of this market for the short and long term.
If you have an interest is discussing this further please call Artur at 602.628.4349 or via the contact form.
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