Why Passive Investors Love Private Lending

Posted By Ryan Young

There’s no question that real estate is one of the best investments available. The problem is, these investments are expensive and can be difficult to manage if you do not have the experience.

Private lending investing is the solution to this problem. Private lending allows people to invest in real estate deals with little risk and no involvement in the operation or servicing.

What is Private Lending?

A private lending loan on an investment property is a financial transaction where as a private individual or firm lends money to a real estate investor in the form of a mortgage. The private lender is in essence the bank. The loan is secured by a first place mortgage on the subject property to which the funds will be used for its acquisition and/or construction.

Private Lending Structure

Private lending can be structured in many ways, but the two most common methods are as follows.

1. A private lender can issue the funds directly to the borrow. This will put the burden of due diligence and filings directly on the lender. This method is not for most people since they typically are owners and professional who have a daily commitment to their business.

2. Private placement. This method of private lending is where an investor wishes to have their funds invested in real estate as a mortgage on a specific property or properties, but the transaction is derived and serviced by a professional lending firm.

The private lending firm preforms all due diligence on the applicant and the property. If the deal meets all criteria, the firm then presents the pre-vetted package to the investors with all terms set fourth.

Once they sign the deal, the firm prepares all final paperwork, which includes the mortgage, note, and various other legal forms required to secure the interests of the firm and the investors. The deal is then clear to close and funded.

The Main Benefits of Private Lending with a Professional Firm

Private lending investments can be very time consuming and tedious if you do not have the correct team in place and deal flow to keep the funds properly used. When it comes to returns, this option holds more advantages. An investor who chooses this model has the following benefits:

• Passive investors do not have to originate loans

• Passive investors do not have to conduct property due diligence and inspection.

• Passive investors do not have to prepare the proper legal paperwork needed for closing.

• Passive investors do not have to service the loan (i.e. accounting, receivables, closing, discharges, & more).

• Passive investors continue with their day to day business and personal obligations while their investment is earning high interest and secured by an equity filled property by way of a first position mortgage

Lending with the right firm

As an investor in a private loan secured by a first position mortgage, your investment is very secure, but it is only as good as the company underwriting and managing the loan. It’s essential to look at the knowledge, experience, and success of the lending partner you’re considering.

The lending firm and their management is the most important piece of the deal. No matter how great the investment looks, an inexperienced lending partner can expose you to unnecessary risk.

Real Estate Capital Group was founded by investors for investors. We have a proven track record and over 50 years of combined real estate investing experience which allows us to properly underwrite all loans to make sure that deal is positioned for success from day one. Our goal is simple, to help investors on both sides of the transaction by actually helping them. We are fully transparent throughout the process and do not proceed with the loan if OUR underwriting does not fully fit our criteria.

Through major technological enhancements, we have simplified the application and vetting process so that we can focus on the deals that are most secure and match the goals of our partners…Deliver high quality deals that are secure and fair for all involved.

We thrive on providing custom lending solutions for real estate investors on both sides of the transaction. If you would like to find out more about our private lending solutions, please contact us to schedule a call. You may reach us via email at Info@RecGrp.com.