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Private Investor Loans


Private investor loans can offer double digit returns on your money, and can be structured to minimize risk associated with your investment.

Private investor loans, or trust deed investing, is basically making loans secured by real estate.  As the private investor, you become the bank and earn the interest on the loan you make.

There are a couple basic ways to participate in private investor loans.  You can invest in individual loans, where you are the only investor, you can fractionalize individual loans, or you can invest in a private money pool.  We will take a look at each of these methods.

Investing in individual loans has both pros and cons.  Typically being the sole investor requires more capital than if you participated in a private money pool or a fractionalized loan.  This is because you are funding the full loan amount.  The benefits to this, however, are that you choose the loan you want to invest in, and you are the only investor on that loan.  If something should go wrong and foreclosure becomes necessary, you control the process and eventually the property.

Fractionalized private investor loans offer some benefits, but also come with some disadvantages.  The main benefit is the barrier of entry.  If you are fractionalizing, you do not need to have the money to make the full loan amount.  You can lend in smaller chunks, which can allow you to diversify more.  You still get to look at every loan in which you participate, but you are combining your money with other private investors money, so you don't own the full investment, but a percentage based on how much you invest.

The downside to participating in these types of loans comes about if something goes wrong with the loan.  Should the property need to be foreclosed on, you effectively become business partners with the other investors on the loan.  Oftentimes, these are people you may not know.

The third way getting into private investor loans is through a mortgage pool.  This is the most hands off approach, and can be considered the safest.  In this scenario, you invest in a private money pool.  A manager for the pool makes loans from the funds available, and the investors realize a return loosely based on the total return of the fund.

The upside to this is that you do not have to make decisions on individual loans.  Also, you do not live or die by one loan, instead realizing an averaged return based on all the loans in the portfolio.  The downside is that the returns are typically less than what you would realize by investing in individual trust deeds, and you have much less control over how your money is invested.

If you would like more information about getting into private investor loans, feel free to call us directly.  We are always happy to answer any questions that you may have.








Chris Goulart, agent, DRE Lic. # 01458390 NMLS Lic. # 298819 CA broker Lic. # 01180522

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