Someone once said real estate investing is all about the money. Were they right? Well, let’s face it, the bottom line when it comes to this business, and every other business, is money. Money doesn’t just make the world go ’round, it also clarifies our thinking as we try to fit the pieces of the property investing game together.
There is a side to the property flipping business that is rarely discussed, and that’s the money-lending side. Whether you’re talking to a conventional bank to get your financing ducks lined up, or a private lender, you should understand how the financing game works. You might even find it’s what you’d rather do instead of flipping houses.
Lending money is a great way to make money flipping houses
It turns out there are a lot of folks making good money by providing private lending services to property investors. The fact is, you can make just as much money, and in many cases a lot more, by acting as a bank for other investors.
The 6 Secrets of Lending That Bankers Don’t Want You to Know
1. Banker’s vertical stacking strategy. This is simply a way to leverage money to increase your yield beyond a simple interest rate return on investment. There are several lending techniques that, when stacked together, multiply your yield.
2. Shifting the risk. This is a game all banks play with borrowers. The idea is to shift the risk. Lending is all about safety, so it’s important to shift the risk to the borrower.
3. Shifting the work. As a lender we want to make as much money as possible with as little risk as possible, and have as much free time as possible. What could possibly be wrong with that?
4. It’s a financing game. When you invest in properties you have a physical asset like a rental home that pays about 10%, and you’ve got a mortgage and other expenses that amount to about 7%, so you end up with a 3% spread. When you’re the lender you have no physical asset like a rental property and none of the accompanying headaches like evictions or damaged property to deal with. Being a private lender is the most efficient way to generate passive income and continuous cash flow.
5. The ultimate secret. The ultimate lending secret really consists of several components:
· You can become a private lender without using any of your own money.
· You can do it without having any credit, and without ever having your credit checked.
· Anyone can do this.
6. Re-Hypothecation is the most powerful word in banking. When a borrower signs on a piece of paper, called a mortgage, that piece of paper can be used as collateral for a loan.
Now that you know about the other side of real estate investing, the lending side, perhaps you should consider it as an alternative. Not worrying about physical assets, bad tenants and repairing damaged property can be a blessing. It’s something to think about as you make your mark and build your business.