The private lending space has become one of the fastest growing sectors in the commercial finance sector following the recession between 2008 and 2010. Noble’s own portfolio has doubled consistently in year over year comparisons to its current value of $120 million. As we court potential lenders, we frequently field questions about transitioning from real estate investing to private money lending. Here is our general guidance in a nutshell.
When someone starts investing in real estate, they are often seeking quick pays offs versus predictability and security. Real estate markets are an area that can yield significant returns over a short period of time. Earning active returns as a traditional real estate investor can be taxing. While landlording can be profitable, many landlords spend consistent hours and dollars on investment properties. Having a lending portfolio can both expand your assets and eliminate the dirty work. Many of the investors who transition into our Private Lender Network are looking for a more simple option. Seasoned real estate investors often find themselves accumulating significant returns and, as they grow weary of expelling the energy demanded by traditional real estate investing, they often seek a back seat approach i.e. lending. If attractive, predictable returns with little time commitment interest you – private lending might be the best place to put your money.
The other individual that we often see is a real estate investor who has acquired a large capital infusion. They frequently want to know is “what does smart money do – do I put it all on one property or do I divest funds?” Savvy investors stash some cash and play with the rest. If you have a major capital event want to parlay part of the cash into stable and secure returns (i.e. re-invest smartly), becoming a lender is the safest position for a real estate investor. This approach allows you to continue using some funds for direct real estate (or other) investment opportunities, but positions you for continual earnings while diversifying your portfolio and protecting your assets. With the right advisors, private money lending in real estate is as safe as putting money in the bank with a potential for 7 to 9 percent returns annually.