How to Earn 10% the Easy Way

How to Earn 10% the Easy Way

Are you a great saver? If you’ve built yourself a cash stockpile in excess of six months of your expenses, this post is for you. First of all, congratulations! Do something to celebrate, you’ve earned it!

Second, it’s time to use some of that excess to make some PASSIVE INCOME. I put it in bold because passive income is the key to taking yourself out of the rat-race and being able to devote your time to whatever really lights your passions up.

You worked hard for that cash though, so don’t just put it anywhere. Wherever it goes needs to be safe, or you’ll end up working hard for it again! It’s both easier and harder than most people think. If you’re trying to earn a safe 10% by buying the right stock forget about it, the company could go bankrupt in a day. You can buy safe bonds returning 10%, even in today’s market, but you’d have a full-time research job to find them. No, all the conventional investment channels get bid up high enough to wash out almost all the safe returns by institutions that can afford to over-pay and by people who don’t know what else to do.

Fortunately, you’re about to learn.

You can lend money to real estate investors safely, by doing it the same way the banks do! $100,000, depending on where you live, of course, is about the cut-off where you can start lending money and convincing the borrower to give you a first position mortgage on the property. What’s so great about that, you ask? You won’t lend them as much money as the house is worth, so if they don’t pay back the money, you’ll take the house! That gives you a LOT more security. In order for you to not get your money back, the borrower has to default AND the house has to be worth less than your loan. Some careful screening can prevent both from happening.

Now, you’re a busy person, and unless you get really excited about mortgages you probably don’t want to do it yourself, so for most of you’ll need to go to a professional hard money lender instead of doing it yourself and just ask them to help you lend the money. Grand Coast Capital is one such lender. Groundfloor is another, RealtyShares is another. Don’t just take some salesperson’s word for what’s a good deal though. These vendors might polish their websites to a mirror shine, but that doesn’t mean you can just let them take charge of YOUR hard earned cash! You need to know what’s going on.

Hard money lending is a mechanism that allows real estate investors to buy properties that either wouldn’t qualify for conventional financing with banks, or need to sell faster than anyone can get a banker on board. Typically, an investor finds a deal that is distressed in some way, maybe the owner is getting divorced, or maybe a bank is foreclosing on the property, or any of a hundred other things. Whatever the situation is, the property is selling for less than it could. It’s definitely not simple, but it isn’t hard. Here’s how it goes from there:

  1. The investor prepares and presents a plan for resolving the situation to the lender.
  2. The lender decides if the investor is trustworthy and capable of carrying out the plan.
  3. The lender decides if the property is worth enough more than the amount of money the investor wants so that if the lender has to take the property, they will still be able to get all their money back.
  4. The lender and the investor agree on loan terms and write up a promissory note.
  5. The lender has the title company insuring the transaction also ensure the new mortgage and hold the deed to the property in trust.
  6. The title company executes the transaction and records the deed.
  7. The investor makes payments to the lender in accordance with the terms.
  8. Before the investor sells or refinances, the lender sends a payoff request to the title company saying how much is still owed.
  9. When the investor sells or refinances, the lender signs a request for reconveyance and gives it to the title company in exchange for the loan payoff.

A lender who is prepared and knows what’s going on can go through the whole process in a few hours on the front end and about an hour on the back end, making good safe return in the middle.

If you’re investing through a professional hard money lender, you should check in to make sure they’re being safe with the money from time to time and that they aren’t leaving any steps out. If you’re one of those bold few who wants to do it yourself so you know it’s done right, you want to pick projects that will do good in the community, you want to look your borrower in the eye, or see the bricks and mortar of your investment with your own eyes. Write me a letter! DREI is always working on new projects, and if we don’t have something you can participate in, we’ll know where to find someone who does.

Please feel free to leave thoughts, questions, and suggestions in the comments below, and if you haven’t already, find out what’s going on on our facebook page. See you next week!

Leave a Reply

Your email address will not be published. Required fields are marked *