The safety of traditional investments such as stocks, bonds and mutual funds has been called into question following the history of the stock market and the economic downturn. As a result, many investors are looking for a reliable way to earn good returns without taking too much risk. One appealing option that should be considered is private lending for the real estate market. When you work with a proven real estate investment professional and/or company, you can be sure that you’re getting a safe, profitable investment opportunity.
Expected Return
Private lenders lend money to individuals and organizations in much the same way that banks do, but they are not professional lending institutions. This investment method offers a higher rate of return than the traditional 4-7 percent that you can expect from a conventional retirement account. You can become a co-lending partner and consistently make a 7 to 10 percent return depending on the dollar amount you lend out.
Investment Security
This method also offers considerably more security than stocks and bonds, which have recently proven to be very unpredictable. The market has proven to be volatile throughout its history. As a private co-lender working with an experienced investor and/or company, your funds can be protected by way of a first lien holder position, secured by the first mortgage on the property.
A good investment company will use your money carefully, lending only about 65-75% of the collateral property after repair value (ARV). This ensures that you are not at a significant risk of losing your money due to bad choices on the part of the lending company you choose to work with.
GL&L Holdings, LLC co-lending partner’s funds come in as a loan and the funds are always guaranteed an interest rate/payment. All of the loan transactions are handled through a professional title company. This guarantees that the GL&L holdings, LLC is in 1st lien position. This allows you to feel comfortable that everything is managed correctly, that all liens will be properly released and that you’ll get your money back when the property finally sells or the original loan is paid off. Since real estate is a physical asset, it’s much safer than other investment strategies, which frequently rely on intangibles or global political events that we have no control over. After all, even though the real estate market has been up and down, over the past century and a half, it has consistently grown at a rate of about 6 percent or higher per year.
Control Over Investments
Private lending also gives you more control over your investments than traditional methods. When you invest in a traditional IRA, CD or 401K, you don’t really control your money. Instead, your employer, a bank or a brokerage firm handles it, reducing your control over the investments. If you choose to invest via private lending, you make the decision each time you lend, not your broker or your bank. GL&L Holdings always presents you the information necessary to make a solid decision. Information like: Appraisal, Survey, Title Commitment, Borrower’s Info, etc.
This investment method offers a much faster turnaround than many of the other options. You can expect a return time of 6 to 9 months on many loans. Others take longer but you can always request your money back through a written notification.
Once the loan has been repaid by the borrower, it’s up to you to decide whether or not you’d like to re-lend the money in another direct lending situation. You can choose another real estate loan or put your money back into a conventional investment if you prefer. Compare this to CDs or other investment options where your money is tied up for years or even decades. Some short-term options actually involve lending money for only a week or month. Even though you maintain good control over your investments with private lending, you won’t feel like you’re drowning in paperwork. When you work with GL&L Holdings, we handle ALL of the underwriting, the processing and the paperwork necessary to close the loan. You are provided all the forms you need to sign.
You should always expect the investment professionals you work with to explain all the paperwork for you. You want to totally understand the process and this should help you be able to make a smart decision about your money.
Increase in Demand
As lending regulations tighten, it becomes more difficult for professional real estate investors to acquire the money they need for their businesses. Many real estate investors, especially those new to the business, are having trouble finding the capital required to rehab old properties or to do ground up construction. Even when they have a sound business plan and good prospects, new rules and their lack of investment history can keep them from borrowing from traditional banks.
Because of this situation, the demand for private lending has increased significantly. Within just a few years, real estate investors have begun to rely heavily on private individuals or companies like GL&L Holdings for the capital they require. These companies need money to grow, but can’t get it from most banks and lending institutions. They’re increasingly turning to private investors or companies like GL&L Holdings that can lend money fast (typically within 15 business days). These companies are also called Bridge, Alternative, or Hard Money Lenders.
Types of Private Lending Situations
Private real estate lending can be beneficial in a range of different situations. Each one offers a slightly different return and loan period. For instance, you could be part of a loan to an investor that wishes to buy a rental property. You’ll receive paperwork defining the interest rate and time frame of the loan. Returns for this kind of private lending are usually about 7 to 10% over the course of 1 year.
GL&L Holdings lends to investors who wish to set up a back-to-back closing for short sales. These investors buy the property from the original owner using the money borrowed, then sell it again almost immediately, making a small but comfortable profit. In these cases, you could get a return of several percent in just a few days. The loan could last just 24-72 hours in some cases.
Other real estate investors wish to refurbish properties with some damage and with prices well under market value. This kind of property has been readily available since the aftermath of the 2008 real estate crash. Many can be sold for a profit after only a little bit of rehab work. In these cases, the investor accrues interest over the course of the loan, then pays back the full amount plus the interest as soon as the property sells.
These and many other private lending situations allow you and GL&L Holdings, LLC to make a profit without having to deal with arduous rules and regulations. These loans are low risk, and can allow you to make money more safely and rapidly than your current investment options, as long as we do our homework beforehand.
GL&L Holdings has been in business since 2010 so we have the experience and the know-how to make the right loans and mitigate risks. However, you must realize that your loan payments are fully guaranteed by a Promissory Note and a Company Guarantee. This in addition to the funds being protected by the actual 1st lien position on the collateral property.
Choosing an Investor
Not every real estate lender is a good choice for a private co-lending partner. We recommend that you look for an established lender with a pre-existing history of working with private co-lending partners and a strong portfolio of previous loans that have been totally successful. Less experienced real estate investment firms may still provide a good low risk transaction, but can be harder to assess due to their lack of previous experience. Ask any private lender to which you intend to lend money to about their references and their very own real estate investment portfolio.
GL&L Holdings has co-lending partnerships that are longer than 10yrs old. GL&L Holdings’ real estate portfolio includes successful real estate development projects, fix and flips, custom house new construction and a rental property portfolio that adds to over $50 million dollars.
Look for lenders who can discuss their property plans or loan criteria clearly and without confusion. If a potential borrower can’t answer your questions, that business may not be the best choice. Be willing to discuss lending with a number of different investors. This allows you to sift through the bad risks and choose one that will help your money grow. If an investor offers terms you don’t feel comfortable with, feel free to negotiate different ones or not do any business deals with them.. After all, private lending frees both you and your borrowers from the cookie- cutter forms and regulations associated with banks and conventional lending.
Using Existing Investments
If you already have much of your money invested in more traditional areas, you can still engage in private lending. Lenders who have a pre-existing IRA or 401K plan can choose to transfer the funds to a self-directed IRA and then direct those funds into a private real estate loan. One benefit of this technique is that the interest you earn will go directly into your retirement fund, enabling you to avoid paying taxes on the interest income.
It’s also possible to borrow some money against an existing 401K. Most people can borrow up to about $50,000 for investment in short-term private lending. If you’re earning more interest than you must pay out for the loan, this can be an effective way to put your money to work.
If you’re not sure your current investments are making the kind of money you need, it may be time to investigate the world of private real estate lending. You could put your money to work, receive a much higher return on your investments and help another business owner get the money required to keep on growing. You’ll enjoy control over your investments, greater latitude to set the terms of your investment and surprisingly good returns. Smart investors can safely make a lot more as private lenders in the real estate market.
Legal Waiver
While attempts have been made to verify information provided in this publication, GL&L Holdings, LLC assumes no responsibility for errors, omissions, or contradictory information contained in this document. This document is not intended as legal, investment, or accounting advice. The reader of this document assumes all responsibility for the confirmation of the information provided and for the due diligence that it’s recommended by the author.
