For conservative investors, real estate may not seem like something that meets their goals. However, lending to those who are looking to buy homes, fix them and flip for a profit may help increase returns without increasing risk. In general, someone who invests in bonds or other safe assets may see a 3 percent return per year, which may not be satisfactory even for a conservative investor.
However, by lending to a real estate investor, it may be possible to get an annualized return of 12 percent. This is comprised of a $1,000 origination fee plus anywhere between 8 and 12 percent interest over a period of three months. The investor is interested in the deal because he or she generally pays $1,500 plus an interest rate of 12 percent.
In a typical deal, the investor could pay up to $4,500 in interest and origination fees. Getting a deal through a typical saver could result in a savings of up to $1,500 between lower fees and the potential for a lower interest rate. Therefore, it is a win-win as the saver gets a higher return for his or her portfolio while the person buying the home saves as he or she pays less to finance the purchase and rehab.
An individual who is interested in investing in commercial or residential real estate may wish to consult an attorney before closing any deal, regardless of prior experience. These types of transactions are often complex, and legal counsel can often help with title disputes or other issues that may arise before or during the closing.
