How to Investment Mortgage Loans

It is difficult to find a safe investment which will give you a decent return without undue risk. The stock market is often volatile and you can lose your money very quickly. Putting your money in the bank or in a CD is safer but you will only earn a very low rate and may be losing out to inflation. An alternative is investing in mortgage loans, which can get you double-digit returns without sacrificing safety.

Instructions

1. Find out what investing in mortgages is about. It means you are making a loan to individuals with real property as collateral. If done correctly you can earn a very good return safely on your money.

2. Seek a loan broker to help you find borrowers. They will also help make sure everything you do is legal and help you screen for borrowers who meet your criteria for lending.

3. Make sure their is enough collateral to secure your loan. Get an appraisal and make sure there is enough equity in the property in case you need to foreclose. For example, if the value of the property is appraised at $100,000 don't lend more than $70,000 or 70% loan to value. That way even if the market declines you can still quickly sell the property to recover your investment.

4. Examine the credit worthiness of the borrower. Unlike banks the main criteria private lenders look for is the property as collateral. Still, take a look at the borrower's financial statements.

5. Use a good attorney to make sure the note and legal documents are legal and that your interests are protected.

Tips & Warnings

• You may also use your IRA money to invest in mortgages and get a higher return on your retirement funds. Use a self-directed IRA to invest in private mortgages.

• Be careful that you do not violate your state's usury laws. There is a maximum interest rate that you are allowed to charge. If you violate this you will liable for penalties and the loan will be void. Have your attorney make sure you are in compliance.