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#1
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Re: Conservative High Yield Investments
Well, I was going to suggest buying some RE paper, but since you're already doing that...
You could get into hard money lending. Your experience with RE paper will help a lot. The HMLs that I know generally make about a 20% return on invested funds. Normally you're still getting a strong equity position on the property (i.e., 65% or so LTV). |
#2
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Re: Conservative High Yield Investments
What other forms of hard money lending are there that are secured by collateral? The Trust Deeds I do generally involve land development, commercial land improvements, or personal mortgage swing loans.
I've also dabbled in stuff like prosper.com, but from my short experience there lending money unsecured over the internet is a bad idea no matter what the interest rate is. I've actually only had one loan out of nearly 100 default so far but I'm counting on there to be more before the loans are paid off. The idea of lending money and "being the bank" seems to interest me more than throwing money in the stock market and watching the dice roll on a daily basis though. I have a friend that has almost 3mil invested in trust deeds and is earning an extremely healthy salary at 13%, but even he wonders if he should be involved in other things to diversify. |
#3
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Re: Conservative High Yield Investments
I share a lot of the same views as you so I'm interested to see how this thread turns out.
Regarding prosper, I don't think it's a good choice. I've got about 6k in there and thought i was doing great, until I realized that the ROI's prosper advertises and displays aren't really accurate at all. There are sites out there that will show you the real numbers (e.g. prosperlenders.com has a lot of links) and the overall avg return is something like 4%. I myself am averaging under 3% roi. |
#4
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Re: Conservative High Yield Investments
[ QUOTE ]
What other forms of hard money lending are there that are secured by collateral? The Trust Deeds I do generally involve land development, commercial land improvements, or personal mortgage swing loans. [/ QUOTE ] Oh jeez, when you said that you were working in trust deeds, I assumed you were buying discounted paper. I guess that explains the relatively (IMO) lower yield. One way to expand your trust deed business is to buy discounted paper. Usually you need to find seller-carried notes and buy the cash flow for a reasonable discount. Basically the note holder will sell the note to you at a discount off the face value of the note. So if I sold a property and had a note for $50k paying 8%, $605/month for 120 months, I could sell that note to you for $38,000 cash. Your yield on $50,000 would be 14% in that case. I've found it to be pretty common to get about a 12-14% return on decent discounted paper. Now, another thing that you could do is hard money lending. HMLs are generally used by people that want to acquire a property, add significant value to that property in a short period, then resell or refinance. Mostly HMLs are used by flippers, but not always. HMLs generally charge between 10-14%+ and up to 5 points up front for invested funds. 4 points and 12% is pretty standard in my experience. Generally the borrower makes no payments during rehab. Normally HMLs will lend only 65 or 70% of the after repair value of a property. so that is pretty safe, IMO. |
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