Real Estate Investor versus Private Money Mortgage Lender – Part 4

This is the forth of six articles in a series to discuss the Pro’s and Con’s of Real Estate Investing and Private Money Mortgage Lending.

The series consists of
Part 1 – The Introduction
Part 2 – The Pro’s of Real Estate Investing
Part 3 – The Con’s of Real Estate Investing
Part 4 – The Pro’s of Private Money Mortgage Lending
Part 5 – The Con’s of Private Money Mortgage Lending
Part 6 – Putting it All Together

Private Money Mortgage Lending is a little known investment option that provides numerous Pros. Some of the Pro’s are shared with the Pro’s of Real Estate Investing, and they include:

Business Tax Deductions – This Pro only applies if you establish a business to make a Private Money Mortgage Loan (which I recommend for many reasons). Consult with a certified CPA or tax attorney about business related tax deductions.

Passive Income – Once your money is placed as a Private Money Mortgage, you will receive mortgage payments as detailed in the promissory note. This is truly passive income. A Private Money Mortgage Lending business does not require active management.

Income Source - Yes, Real Estate Investing and Private Money Mortgage Lending both provide an income source, but there is one very big difference. Private Money Mortgages provide a FIXED return.

Several Pro’s of Private Money Mortgage Lending only apply to Private Money Mortgage Lending, and they include:

Secured Investment – Private Money Mortgages are secured by the real estate the mortgage is placed on. If the Real Estate Investor who received the Private Money Mortgage is not able to pay the mortgage, then the Private Money Mortgage Lender receives ownership of the property (aka an asset).

High Returns – Private Money Mortgages provide higher returns than other secured investments.

No Tenants – A Private Money Mortgage Lender is able to benefit from investing in Real Estate without dealing with tenants. Many Real Estate Investors say dealing with and managing tenants is their biggest challenge.

Customized to Meet Your Investment Needs – Private Money Mortgages can be short or long term. They can be interest only or amortized. Private Money Mortgages are completely customizable.

An Asset Without the Associated Liability – We live in a litigation society. Owning a property with tenants presents many liability issues from properly marketing to tenant selection to property maintenance to tenants living in the property to the tenant’s friends. Private Money Mortgages provide a Real Estate backed asset without the liability of Real Estate Investing.

Private Money Mortgage Lending is a way to benefit from Real Estate without the need to buy, remodel, maintain and rent/sell a property.

Is it right for you?

Only you can answer that question. If you have not done so, you need to answer the questions posed in Part 1 before you move onto Part 5.

The next article is Part 5 – The Con’s of Private Money Mortgage Lending.

Aaron