Real Estate is Safe Investment Strategy

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The security of our investments is becoming more and more important these days. Investors want to be able to anticipate decent returns in the stock market, but the market takes them on a roller coaster ride that would be the envy of any amusement park. One day it's a 200 points rise and setting a new record high, then the next 300 points tumble that takes six weeks to shake off.

The series of highs and lows can leave you with a feeling of hopelessness. How can you know if a company is cooking the books? How can you predict if there will be another terrorist attack that will cripple our Country for months? Who has a crystal ball that can reveal when the next financial market meltdown will wash over us? Whenever these cycles hit personal fortunes are wiped out in a blink of an eye. So what else can I invest in?

The answer is to invest in real estate but maybe not in the way the first comes to mind. Real estate is an asset that you see and touch, is insured, and produces monthly income. Historically it is one of the safest investments available and there are several ways to get started like;

1) The "Speculator" Approach - you could become a real estate "speculator" and buy properties with the hope that they will go up in value and allow you to reap windfall profits when you sell. Of course, this type of approach has a large amount of risk that has left large numbers of speculators who were consumed with "Flipping Frenzy" over the last few years in a very tough place when the market turned and did not favor their investment approach.

2) The Landlord Approach - on a more traditional level, you could buy a home, duplex, or small apartment building and rent the property out. Over time as you collect rent your tenants will pay off your mortgage. This does take some time, work, and experience. This approach is rather safe and can result in a good return in both the short and long term. The downside is that there can be a large amount of time required to make this work.

Now what if you find yourself in large group of over 200 Million Americans who want the benefits of real estate investing but don't have the spare time or hard-nosed demeanor needed to be a successful landlord? While not as well known as the first two methods, there is a third approach.

3) The Passive Method - this style of investing is known as making "Private Mortgage Loans". Private Mortgage Loans, when set up properly, can provide your portfolio with a great return in any real estate market. Up, down, flat. it doesn't really matter.

The investment model is simple. You directly loan money, at a very low loan-to-value, against a piece of real estate. The borrower is typically a tried-and-true veteran landlord that has a portfolio of equity-rich properties and also is familiar with the ins-and-outs of finding tenants and managing rental property.

Your return comes in the form of interest payments from your borrower and because you establish the loan terms together you can have the payments come regularly or have them rolled into the loan and paid out in one lump sum when the loan term is over.

To provide you with the safety you want, your investment is secured by a first mortgage. As long as you follow common-sense lending practices then you can enjoy a level of confidence in your investments that the stock market cannot provide.

Failure to take action puts you in jeopardy of letting it slide to the bottom of your to-do list. If that happens, in a year you'll wonder why things have not changed for you financially.

Feroz Ahmed Bawany goal is to increase my knowledge and to understand the only civilized creations of Almighty Lord are HUMAN. He is a regular contributer to TRCB.com.

 

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