Private Lenders - Actions to Keep Your Investment Safe (Part 1)
By: George Antone
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.
Copyright (c) 2009 George Antone