Investment property loans offer you an incredible opportunity to enjoy impressive returns on your investment in a short amount of time. It’s the perfect opportunity for new investors looking to make their way in the world of real estate lending. It offers you the security of investments backed by substantial collateral and of investing in properties where the owners are highly motivated to hang on to the properties they own.
This spells great things for you and your possible return on investment. The average investment property loan has terms ranging from six months to two years. In some cases, the terms go up to five or six years. This is far more favorable to you over offering loans that require up to 30 years to mature and be completely repaid.
The higher value of the properties means that you can expect bigger profits more quickly than you are ever likely to experience working with traditional investment means. This means more money in your pockets and you don’t have to wait decades to enjoy the fruits of your investment.
The best news for you, if you’re considering putting your money in investment property mortgage loans is that you have a nearly endless supply of people looking to borrow.
Why is Demand for Private Investment Property Loans So Great?
You would think that banks would be all too happy to lend money to people looking to make real estate investments. Unfortunately, that isn’t the case. The banks consider many of these types of loans high-risk ventures and want little to do with them.
Are they risky?
They can be. That is why it’s so important to do your homework before agreeing to lend money to specific borrowers and on specific properties.
You need to make sure the property is properly valued, that you can easily liquidate the property if the borrower defaults, that the borrower has experience working with investment properties and making them profitable and that you are the primary lien holder on the property if the deal goes south.
No matter how much due diligence you do to ensure your investment is safe, there are a million or more things that can, and sometimes will go wrong which will cause the borrower to default on the loan. This leaves the property in your hands to deal with. That’s good for you because the property has value, and if you properly evaluated the property, it should exceed the value borrowed allowing you to recover some lost profit without losing your initial investment.
There are many variables in making this type of investment including how you protect your interests. There are a few things you can do for deals that appear to carry slightly greater risks:
- Demand higher investment property loan rates.
- Demand borrowers pay a higher down payment.
- Ask that you be listed as the primary lien holder and ask for visual confirmation.
There is no single right or wrong way to invest in investment property loans. Doing these things, though, can help you protect your investment and reduce your exposure if things d