Private Mortgage Lending (or Private Lending) is a very safe investment, especially when you consider the high interest rates you can earn and the use of other people’s money (private money). Nonetheless, no investment is completely worry-free. That is why it is essential to do everything possible to make your investment as safe as possible.

Private Lending is one of the fastest ways to generate passive income, and for those savvy private lenders, you do not need to use your own money or credit.

First, there are some insurance policies you will want to consider. There are two insurances that you should require when you loan money on a property: Title insurance and property insurance. These policies will protect your investment and are paid for by the real estate investor.

Next you will want to be sure that your loans are recorded properly.

And finally, there are ways to structure a loan that can assure even more safety.

In this article we will cover Property Insurance.

Property Insurance

Property insurance protects the property against physical damage to, or loss of your assets. In other words, against the loss of your investment capital. In the case of catastrophes like fire, explosion, theft, or vandalism, property insurance helps cover your costs – whether it’s to repair damaged property or replace what you’ve lost.

Events that do damage are known as perils or causes of loss, and include weather-related events such as lightning strikes or hail, or human causes such as robbery or a car crashing onto your property.

Policies can be named-peril or all risk policies. Named policies or specified peril policies specify which events will be covered. Remember, named peril policies will state exactly what is covered. If a particular coverage is not listed on your policy, it is NOT covered.

Here is a list of a few perils commonly EXCLUDED from named peril policies:

1. Damage caused by a flood

2. Damage caused by an earthquake

3. Damage caused by war or nuclear accident

4. Damage caused by an earth movement

All risk policies include any possible peril, unless otherwise named. Even these policies often do not include flood or earthquake insurance without an extra rider. Often, the terms “comprehensive” or “open peril” are also used to describe all-risk coverage.

All risk policies are, understandably, more expensive, however, they are the best policy for a private mortgage lender. Although all-risk policies are far superior, some properties will not qualify. Locations, property type, value, as well as your personal Insurance Credit Score all goes into determining the type of insurance package a company may have or offer.

NOTE: If the property is in a flood plain, you should demand that the real estate investor also get Federal Flood Insurance.

Before buying homeowner’s insurance, you need to understand the difference between “replacement cost” and “actual cash value.” Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation.

Do not confuse replacement cost with market value. Market value is a real estate term that describes what the current value of your home would be if you were to sell it, including the price of the land.

Actual cash value (ACV) is the value of your property when it is damaged or destroyed. This is usually figured out by taking the replacement cost and subtracting depreciation.

Although the cost for replacement value is higher, the extra protection is worth it.

Remember that a private lender’s main focus is to make money securely. Savvy private lenders take it a step further by creating “spreads” and making nice streams of passive income without using their money.

Fore more information, http://www.privatelenderssecrets.com.

There are some savvy private lenders who have not realized they do not need to use their own money or credit. These are some of the many reasons private lending is so attractive!

Private lending is the quickest way for a person to make passive income. No investment is completely free of worry, yet there are methods to making your investment as safe as possible.

Private Mortgage Lending (or Private Lending) allows you to earn high interest rates by using other peoples’ money (private money).

You can keep your investment safe by considering some insurance policies.
Title insurance and property insurance are two insurances you should require when you lend money on a property. These policies will be paid for by the real estate investor and will additionally protect your investment!

Another detail you need to make sure of is your loans. They must be recorded properly.

There are ways to structure a loan which assures further safety.

This article will cover Title Insurance.

Title Insurance

Title insurance is an insurance policy that protects the lender against loss due to disputes over the ownership of a property and defects in the title that were not found in the search of the public record. For your protection, you will want to get a lender’s title insurance policy or loan policy.

This policy will only cover the amount you loaned to the borrower and not the amount the property is worth unless you specify otherwise. Therefore, if you provide a $50,000 loan on a $100,000 piece of property, traditional title insurance would only cover your $50,000 loan. If severe title problems occur, the cost of your settlement may be more than your loan amount, so it is in your best interest to have the policy cover the appraised property value instead.

Title insurance guarantees that the property belongs to the person on the title, that there are no undisclosed liens or encumbrances, and that there are no undisclosed payments on taxes due. If this is not true, the title insurance policy will take care of the mistakes at no cost to you.

The cost of title insurance varies, but generally amounts to about one percent or less, of the purchase price of the property. The premium is a one-time fee that is paid in full at closing.

The coverage is limited to defects that are already in existence when the policy is issued. It does not include those that occur after you purchase the property. Some policies also exclude problems related to easements, boundary line disputes, and mineral and/or water rights. Be sure to ask what coverage exceptions are in your policy and discuss these items of concern with your attorney or escrow agent before you close.

More than one-third of all residential real estate transactions in 2005 had title problems that required corrective action, according to a survey by the American Land Title Association (ALTA), Washington, D.C. If you don’t have title insurance, you will pay for these problems yourself. If you have title insurance, however, the title company will pay the claims, legal fees, and negotiate settlements. You won’t have to do a thing!

We know the main focus of private lenders, is to make money securely. Experienced private lenders go above and beyond by creating “spreads”, and are able to make nice streams of passive income without using their own money.

Being a Private Lender can be very profitable for individuals, especially when they know how to do it without using any of their own money.

However, there are some things beginner investors should be aware of. Here is a list of 7 things:

1) NEVER ever give borrower money directly!

This should be obvious for most private lenders. Whenever lending money, always go through a reputable title company. Title companies are there to protect you and protect the borrower. Worried about fees? Borrower pays for these! You have nothing to lose when you work with a Title company. Remember, one of the main things private lenders always seek is security. Secure loans and great profits!

2) NEVER ever loan money without asking for an appraisal & preliminary title report!

Once again, most private lenders should know this. An appraisal (paid for by the borrower) gives you the value of the property. The value is the most important number in private lending. All your decisions are based on that, so make sure you have it right. I would like to also add that in this economy, I would suggest you also get a “BPO” (Broker Price Opinion) from a local real estate agent familiar with the area (where the property is located). One again, the borrower pays for both. I will not bore you with the reasons for now why to get a BPO in addition to an appraisal, just suffice to say that appraisals are done in specific ways and can be used in court against the appraiser, and BPO’s are “opinions” that are not.

3) ALWAYS use a QUALIFIED Loan Broker

Always use a mortgage broker used to brokering private funds. They will make sure all the loan paperwork and disclosures are in place and correct.

4) ALWAYS get lender’s title insurance

ALWAYS get lender’s title insurance. This should protect you from any title issues. Guess who pays for that? Yep, borrower does. In fact, as a private lender, you realize the borrower pays for almost everything! What a concept!

5) ALWAYS be on the borrower’s hazard insurance as loss payee

This makes sure that in case the collateral (the property) is damaged due to fire for example, the insurance company will pay you. The title company will add you as loss payee to the borrower’s hazard insurance.

6) ALWAYS know which lien position you are

This is pretty basic, but I am surprised how many people walk into my private lending boot camp and have no idea what position they are in (they had tried their hand at private lending before attending my 3-day intensive class). Make sure you know what position you are. 1st or 2nd loan positions are best; avoid 3rd or anything junior to that.

7) ALWAYS know your “LTV” (Loan to Value)

This is a VERY important ratio. As a private lender, stick to a maximum LTV you are comfortable with. Keep in mind that the LTV‘s vary by property type. For example, with residential 1 to 4 units, you never want to go beyond 65%. For land, 50% is absolute highest. In fact, as a beginner private lender, stick to 1 to 4-units residential properties, and preferably, single family homes in your area (30-minute drive radius from your home).

There are more things one should look out for, but this is a starting list of 7 things to look out for.

Being a Private Lender can be very profitable for individuals, especially when they know how to do it without using any of their own money. I can tell you that a savvy private lender can make more money, with less hassle, and with less money than the real estate investor.

Everyone out there should consider real-estate backed private money lending.

…And if you would like more information on creating passive income without buying properties, without using your money, and without having good credit, click here for more information>>>

If there was an incredible secret that has been around for centuries that can make you very wealthy, would you want to know it?

Well, there has, and I will reveal it here. But just because I am offering it for free in this article, please do not undermine its value.

It truly can make you wealthy.

The secret has been staring us right in the face the whole time. It is on every corner.

It is banking! Banks have existed for centuries for a good reason – they are profitable.

Individuals can do this and participate in some of the same benefits through something called “private lending.”

So what is private lending?

Private lending, also known as Trust Deed Investing, is a process whereby private individuals lend money to property owners secured by their real estate, with the desire to receive a fair return on their investment.

It is NOT a “get rich quick scheme.”

There are a few keywords one needs to know about lending; “Arbitrage” and “Leverage.”

“ARBITRAGE” at a basic level means making money off of spreads! i.e. borrowing money at a lower rate and lending at a higher rate.

“LEVERAGE” is controlling a larger asset with a smaller amount of money. Leverage is simply the use of borrowed money.

So here are some things people can do with private lending:

1) One can lend money at a higher interest rate, and borrow at a lower rate creating a nice spread.

One might think, “Isn’t that how banks got into trouble?” – The answer is no. Banks got into this because of greed! They were making 100% loans and taking on all the risk. Any savvy bankers or private lender will tell you that banks shifted the risk to them by doing so.

2) One can leverage money 3 times or more and lend that money out. So if you can take $10,000 and leverage it 3 times, now you have $30,000 in leveraged money that you can play with, PLUS the additional $10,000 (in most cases), giving you a total of $40,000 to lend out.

3) If you combine the above two, here is where you get “magic” in private lending – what most private lenders don’t even know how to do. Use a certain amount of OPM, leverage it 3 or more times, and lend it out.

Now here is the kicker. All that can be done in certain cases WITHOUT much risk to the lender. What does that mean? If things went south, you are not liable.

Read that again!

Ultimately, this results in generating a nice income every month, while being in a safer position than the property owner, and with limited downside!

So if there was an incredible secret that has been around for centuries that can make people very wealthy, would you want to know it? This is it, and it is just the tip of the iceberg!

http://www.privatelenderssecrets.com/

So you want passive income?

Are you tired of your job or swapping time for money?

Then you ought to consider Private Lending.

So what is private lending?

Private lending, also known as Trust Deed Investing, is a process whereby private individuals lend money to property owners secured by their real estate, with the desire to receive a fair return (commensurate with risk) on their investment.

Oftentimes, private money loans are generally short to medium term in nature (1-5 years) and are used for all types of real estate financing: commercial retail, restaurants, hotels/motels, marinas, elder care facilities, industrial, agricultural, raw land, land development, construction, rehab, multi-family, and single family homes.

The words “private lending” invoke certain assumptions.

- Private lenders must have money. Not true!

- Private lending seems risky. Not true!

- Private lending requires decades of experience to do. Not true!

- Private lenders must dedicate full time to do this. Not true!

- Private lenders must have good credit. Not true!

So what is the truth?

It turns out that private lending is very similar to banking. They make money the same way.

Banks are in the business of lending money safely. The same with private lending.

In fact, a private lender is in a safer position than the property owner, with better cash flow. In fact it can be done without having much money or credit. Also, it is a relatively easy strategy to learn than learning about investing in real estate.

And the best part of this is that it can be done with a couple of hours a week!

So want passive income? You are missing out on a LOT if you do not consider private lending! 

http://www.privatelenderssecrets.com