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All You Need To Know About Private Lending

About Private Lending

Everyone dreams of being the owner of their dream house, but not everyone could see their dream come true. With constant ups and downs in the real estate market along with the country’s economy, it is a tough job to buy the house you want, especially in your desired budget. If you already own a house, then you must be aware of the trouble one has to go through in buying a house. Investing in real estate is probably one of the smartest and safest financial plans that promise huge returns.

If you’ve lately looked at house prices, then you’ll know that a good-looking modern house will break your bank. First-time buyers usually don’t have few millions lying around; neither do they have such savings. This is where you have two options – either you apply for a mortgage loan at a bank or consult a private lending firm.

What Will It Be – Bank Loan or Private Lending?

People who can’t get a bank loan usually turn towards private lenders. These individuals or private lending firms will invest their capital in your real estate investment or business so that you could get what you want, but they aren’t just good Samaritans – there is a price, usually in the form of interest rates.

When you borrow money from such firms or private lenders, you are liable to pay them within a fixed time period along with an interest rate.

Individuals who usually go for private lending are rejected from banks because of various reasons, like bad credit scores, employment issues, or low income.

The Advantages of Private Lending

No One’s Checking Under the Hood

When you opt for private lending, no one is going to check whether you have a job or not, what is your credit score, your monthly income and other things like that. Even if you’re turned down by a bank, you could still qualify for private lending.

Hassle-Free Process

When you apply for a bank loan, you have to sign like a million papers while a hundred other “formalities” are also involved. Private lending in comparison is hassle-free, you can qualify in a few minutes and get the money in a few days (depending on the amount of money.) Paperwork will still be required even in private lending, but there the approval, along with the funding, will be swift.

Individualized Plans

A bank loan as one size fit for all plan for every individual who applies for a loan, but a private lending entity will let you decide the time and plan of paying back the money.

Disadvantages of Private Lending

High-Interest Rates

This is probably the only drawback of private lending. People who opt for private lending have to pay high-interest rates, which could as much as 15% or higher. These people are usually rejected by banks, and the only way for them to get the required capital is by private lending. Therefore, it leaves them no choice but to agree to such interest rates.

Although this might seem like a major blowback of private lending, a bank wasn’t providing you a loan for free as well. It would’ve charged you just as well in the form of interest rates. They might be less than private lending, but there are other “hidden” expenses as well like credit card bills, etc. Therefore, at the end of the day, private lending is still somewhat better than applying for bank loans.    

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Understanding Self Directed IRA For Real Estate

Self Directed IRA For Real Estate

Individual Retirement account (IRA) allows individuals to save money for their retirement in a tax-advantaged way. When there is saving, there is the idea of investment as well, and one of the most misunderstood and least discussed is the self-directed IRA. People usually confuse self-directed IRA with other types of IRA, like SEP IRA and Roth IRA. But self-directed IRA is a category of its own and is completely different from other IRAs.

Before we dive deep into the technicalities of the IRA, let us first understand what does Self-directed IRA means.

What is the Self-Directed IRA?

The self-directed IRA is basically an “individual retirement account” in which the investor, which is you, will have complete control and responsibility for all the investments in your account. While typical IRAs that are offered through different financial institutions tend to limit your investment options – we are talking about bonds, mutual funds, and stocks. With a self-directed IRA, you can easily invest in a huge range of investment opportunities, such as real estate.  

Self-Directed IRA For Real Estate

Planning to invest in real estate? Wise move – but before you do that, we need to know a few things. First things first, you need to set up a self-directed IRA. Some reputable companies and firms offer individual investors the ability to set up their own self-directed retirement account. Because of the complex nature of the IRAs, we recommend that you have a custodian that will take care and provide you with all the information and guidance as you navigate yourself through the uncharted territory of the IRS tax code.

What Do You Need To Know About IRA Custodians?

Just like real estate agents, IRA custodians could also have complicated fee structures. Therefore, we advise you to do your research and understand all there is to (potential fees and expenses) before you contact a custodian as it could heavily impact your overall return on investment.

Benefits of Self-Directed IRA investment in Real Estate

You’re the one in-charge

The name says it’s all, “Self-directed” IRA makes you the one who is running the show. You’ll be solely responsible for handling your financial future. With some help from a trusted accountant and a real estate IRA, you will be able to make the right decision that will keep you happy in the later part of your life.

Higher ROI potential

When you invest in real estate through Self-directed IRA, you’ll have more flexibility regarding the overall amount that you want to invest, which means there is the potential for higher ROI.

Investing in real estate is a dream for everyone, and the self-directed IRA is the perfect route to do so. With financial freedom, you’ll be the one making decisions and controlling your own financial future so you could see a happy ever after.    

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What to Know Before Investing in Multi-Family Properties?

Investing in Multi-Family Properties

People often believe that investing in real estate and the stock market will reap the same benefits, but that isn’t the case. Make no mistake; the stock market is infamous for its volatility while the real estate market is known for its lucrative cash returns. People who like to have a role in growing their capital are ideal for the real estate market – they are the ones in charge of cash flows and investments, and best of all, they can come up with their own marketing strategy to give them an edge over their competition.

Investing in rental property is the preferred investment for investors who like to have an additional source of monthly income while also growing the value of their property. If you are planning to invest in residential property, then there are two types of properties you should know about; single-family (typical houses for rent) and multi-family properties (large residential complexes.)

Investors who are looking to take their real estate business to the next level could invest in multi-family properties as it’ll allow them to produce more income while building net worth much faster.

If you are planning to invest in multi-family properties, then these are the things you should know before you step into the market.

Location Matters

Like any other real estate investment, the location of the property matters, in fact, it is of the prime importance in multi-family properties. How is the neighborhood? Is the area close to the freeway or the subway? Does it provide quick access to downtown areas? It the area in itself popular? Is it close to educational institutions? Is it close to a park?

Also consider other demographics like the size of average houses, age of the residents, local economic activity (availability of new jobs in the area), and, most importantly, the crime rate of the area. All this should be taken into consideration before investing in multi-family properties, as tenants will make sure to consider everything mentioned above before moving into the building.  

Condition Of The Property

The physical condition of the multi-family property must also be assessed before investing in it as it can affect your tenants – becoming a liability for you in the future. If you’re planning to invest in an apartment building, then you should inspect a few things. Like the roof and its condition, the building’s central heating and air conditioning system, the plumbing and electrical works, the condition of the elevator, and most importantly, is the foundation of the building concrete?

You should also calculate the expected future repairs or renovations that you might incur in the long run. Everything should be considered before investing in a multi-family property as it can help you in negotiating the right deal when acquiring the property and also when you’re planning it for further investment.

Along with these factors, you should also consider the competition in the area along with the vacancy rates. Investing in multi-family properties could have huge monetary benefits if the planning is done flawlessly – making it the investment to take your real estate business to the next level.