How to Get a Better Return on Investment in Private Money Lending

December 11, 2016

Articles, Investment Advice

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It goes without saying that finding a real investment opportunity with a significant chance of delivering high returns is the safest bet for private lenders. Generally, buyers seeking the money to purchase real estate with a goal of making a profit in the long run get in touch with private money lenders to ensure ease of borrowing and to secure the financing they need. However, for the private lender’s, or passive real estate investor’s peace of mind, the borrower has to prove the profitability and viability of the investment and generating a better and safer return on investment is the best way to do so. So, how can you go about doing this?

Selecting the Right Property

First off, the easiest way to ensure a better return on investment in private lending is to select the right property. This involves analyzing the property from a number of viewpoints, which include:

The location of the property. If it is located in a good neighborhood, with good solid numbers, there is a good chance it will generate a decent return on investment.
The size of the property. Bigger isn’t always better but sometimes the bigger property may have more margin and make more money, whether sold or used as a rental. This could mean a better probability of a higher return on investment.
The local market and the prices of comparable properties. If the properties in the area are bringing good prices, it could stand to reason the piece of real estate you are planning to invest in could deliver the same.

So, these are some of the factors to look at when it is time to select the right property to invest in. There is another way to get a better return on your investment and that is by investing in properties that require improvements.

Improve the Property

Many real estate properties can be improved upon by spending a little money on enhancing the appearance, curb appeal and viability of the property for potential buyers. In some cases you might add an extra bathroom to a home you are trying to sell to make it more family-friendly while in other cases perhaps extend the garage to accommodate two cars instead of one. You have to analyze the property from all angles and determine which types of improvements can enable you to get a higher return on your investment. This way, paying off the borrowed amount becomes easier and next time you won’t have a hard time convincing a private lender to provide you the money you need for your next project.

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