Historically, investing in real estate and stocks has been two of the more popular choices in the marketplace. Both investment vehicles can help you achieve your investment goals. In either case you should analyze the inherent risks versus the potential reward of each investment to determine which is appropriate for your portfolio. Although stock investing tends to garner the bulk of the media attention, you may find that investing in real estate as a Private Lender actually provides better return with less risk.
Here are the three salient reasons why Private Lending should be considered as a viable investment option.
1. A Secured Asset
Real estate is a physical asset unlike shares of a publically traded company. You can see and feel a property and this tangibility makes for peace of mind as a Private Lender. Real estate has intrinsic value because people use property for a specific purpose (i.e. a home to live). It is this inherent value that causes real estate to retain its value. Rarely will a property be considered worthless, although this is not necessarily the case with stocks (i.e. Enron/Lehman Brothers).
2. A Necessity
Owning real property is a necessity. People need a place to live and locations to operate their businesses. This need is ongoing, in every town and city in the United States regardless of economic highs or lows.
3. Allows for More Control
You generally have more control investing in real estate as a Private Lender as opposed to directly investing in the stock market. You are able to approve or disapprove any deal that is presented to you. Always require an investing professional to show you their plan for generating revenue with a particular property. Make sure they detail, and you understand and approve, their buying, repairing, and exit strategies for each property. Look at the numbers, if you don’t like what you see – walk away.
This is not typical with the stock market. An individual investor has no control over how a company operates; therefore you will never be able to directly affect the profitability of the company and maximize the return on your investment.
Overall, investing in stocks or private mortgages can be profitable when proper due diligence is applied. As a Private Lender, it is critical that you evaluate the After Repaired Value (ARV) of the properties in which you are thinking of investing and rely on your real estate professional for current data. Compare the risk versus reward profile on this type of investment with that of the markets in general and you may conclude that Private Lending should be part of your portfolio.
David Scheuring is President of Pembroke Property Solutions, Inc., a professional real estate investment organization. More information is available at www.privatemortgagenow.com. Please send any comments or requests for more information to: info@privatemortgagesnow.com
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