If you’ve been watching the news lately, you may have heard some of the breaking headlines about our current housing and financial markets. Actually, it’s kind of hard to miss. I know, because I don’t normally watch the news and I’m having a hard time avoiding all the doom and gloom. So what does it mean for us as real estate investors now that money is getting tight for both our buyers and us as investors to buy homes?
Well, it opens up an amazing opportunity for those who are willing to roll up their sleeves and get to work raising private money.
Private money, unlike institutional money, is slow money from people looking to get a better and/or more stable return on their money rather than deposit it in a bank or invest it in the stock market. Typically, a bank will accept deposits at a low interest rate and then turn around and lend that money at a higher rate of return and profit on the difference. With private money, the private lender bypasses the bank as the middleman and becomes the direct lender.
With the stock market crashing and investors looking for a safe place to put their money where it’s not likely to lose half its value in a year, well-secured real estate loans have become even more attractive. For investors who buy at deep discounts and make a profit by buying and reselling or buying and holding, these private loans present a great opportunity. They make it easy to invest in this buyer’s market that has forced many other investors to sit on the sidelines because they are unwilling to do the necessary work to raise private money.
So in the future, I predict that investors who become adept at raising private money will see great rewards and also help their private lenders in this unstable economic time.
