Although there are lots of methods to make money in real estate speculation, few real estate investors have a better, less risky method of making money with almost no work than lenders for real estate investors.
Let’s say you buy and hold a lovely home on a piece of real estate property for $200,000. You then wait for the property value to go up and sell it five years later for $220,000. You made $20,000, right? Wrong, you might have lost monetary value considering just a 2.2% inflation rate. Inflation ate up $4,400 value per year, times five equals $22,000.
Lenders for Real Estate Investors Lend Short-Term
Lenders for real estate investors make money by charging interest on the money they lend on short-term loans, most notably to contractors or speculators that buy a depressed building and fix it up to resell. These lenders take a lien on the property and accept an interest-only payment monthly, waiting for the building to get renovated and sold before taking back their principal.
There are others that borrow money to fix up a house or apartment building they intend to hold long-term as a rental. Most often these speculators can’t get a mortgage from a traditional lender because of a shortcoming in the structure that needs to get repaired before a traditional banking institution will approve their loan.
Therefore, on that same $200,000 property, say they lend 70% of the after repair value, which is $179,200 so that the investor can buy the house and refurbish it. These lenders for real estate investors charge 12% interest and lend it for six months.
The contractor figures the renovation can get done in about six or seven weeks and then it will take some time to resell; so six months is perfect. The lender makes $1,792 each of the six months on the loan or $10,752. Of course, the real estate investor doesn’t mind because they know they can’t get the money from a traditional lender and they can likely write it off as a business expense.
Much better than the person who bought the house at $200,000 and held it for five years waiting for the property value to go up. Plus, it only took six months to get the principal back and make another loan.
Contact Red Door Funding one of Houston’s Best Lenders for Real Estate Investors
If you’re interested in becoming partner lenders for real estate investors with Red Door Funding and realize an excellent ROI, call for (832) 539-1099 for more details.