Investing 101: Passive Investments = Active Earning
Are you looking for ways to diversify your income? Have you considered passive investing?
Well you should be!
There are a lot of different ways to invest your money. The most yielding and historically stable way to invest is in real estate! This doesn’t mean you have to go flip houses and invest your time and effort into physically demanding work. Some people like being more hands-on with their investments, but it’s not for everyone. If you want a more passive, hands-off way to make money, investing might be for you! The most common forms of investing in real estate are either through Private funds or through purchasing trust deeds/notes.
When a mortgage is originated and sold off to an investor it is referred to as a ‘note’. An investor can purchase the note and immediately be in first lien position on the deed. The borrower’s mortgage payment will be paid to the note holder similar to acting as the ‘bank’. Notes can range widely in interest rate however, 5-15% is fairly standard depending on the type of loan, borrower, and property. When investing in notes it’s important to understand the risks involved in regard to default. If the borrower defaults on their mortgage the note holder “investor” has the option to foreclose on that borrower and take possession of the property. Some note buyers only purchase notes on properties that they’re willing to own themselves. In the event of foreclosure, you’ll want to know what your exit strategy will be on that property, i.e. hold, rent or sell.
Private Equity Funds
Like any fund structure, the advantage is diversification. The “fund” would be the owner of hundreds or in some cases thousands of notes, therefore substantially reducing one’s default risk. The other advantage to a fund is professional management. Typically, there will be fund managers that do due-diligence on the notes that the fund purchases or doesn’t purchase. The fund environment would be more of a passive strategy, where investing in notes can be quite active. Again, when deciding between the two, you have to ask yourself if going through the foreclosure process is something that you’re comfortable with. Many note investors are extremely comfortable with the process and in some cases increase their return on investment substantially through that process.
It’s up to YOU!
With these two investing options outlined all you have to do is decide how involved you want to be with your investing and pursue the most reasonable option. Passive investing is a great way to diversify your wealth and we offer the options to pursue notes and funds through Secured Investment Corp. If you’d like to learn more about investing and entering the circle of wealth through Secured Investment Corp visit www.securedinvestmentcorp.com or call our Director of Funding at 800.971.5988 today.