Those that know me intimately know that I rarely ever watch television.  I typically work from about 6:30 AM til I retire - whether that is 8 PM, or 4 AM, or anytime in between.  I do read papers, and I do subscribe to certain internet resources, but seldom turn to TV as a source of either education or entertainment.  So, last night as I found myself returning to my hotel room with a desire to be mindlessly entertained while finishing my burger and shake, I turned the TV on. 

I was in "shock and awe" as I saw that infomercials had changed gears completely.  I remember years ago when a moderate few was the count of thirty-minute real estate investment programs.  But, wow.  Last night I discovered that every channel except cartoons and a Spanish-speaking drama channel were dedicated to either exercise equipment or real estate investing opportunities.  No wonder I am seeing so much confusion among new investors that inquire with our company.

In response to this new epiphany, and the questions I keep receiving from people craving to increase their ROI and exploit the current real estate market, I've decided - in my somewhat limited capacity - to comment on the difference in investing into hard money lending and that of actual hard real assets (real estate).

First, allow me to say that real estate is a safe bet almost every time - providing the price is right and you are willing to allow it to mature in value (either organically or through strategic improvement) before liquidating.  In fact, I am familiar with a young couple who just became millionaires overnight because their remaining parent died and left them with hundreds of acres of developed land in the center of L.A. - This land was purchased for a song in the 1940's and has been held by the family since.  THIS IS REAL - REAL ESTATE INVESTING.

But let's be realistic.  In this day of quickie burgers and microwaves, it is difficult for any new investor to imagine buying a piece of investment real estate with the vision of it being in the family for generations to come.  WE are a quick-in, quick-out, make-that-money, generation.  So, with that said, I would like to comment about the pros and cons of real estate investing as a SOLE investment option - As I see it.

The pro's of buying foreclosures, preforeclosures, short sales and other discounted real property:

1)  If the price is right the profit on a transaction can be substantial upon liquidation
2)  You might be helping to rescue someone from certain financial collapse
3)  There are certain tax breaks for real estate ownership
4)  It just plain feels good to be a property owner
5)  Donald Trump made his billions in real estate

The Cons:

1)  If the price is wrong, or the market is wrong, or the geographic area is wrong - you could have just bought an albatross.
2)  You better love being a landlord
3)  With today's gas prices, the cost of property improvement is probably 50% higher than it was just -4- years ago.
4)  There are tax responsibilities for property ownership
5)  Donald Trump is more of a skilled negotiator and overall jerk than most real estate investors are willing to become.

Now, let's look at what kind of pros and cons that Hard Money (trust deed / private mortgage) investing presents:

1)  Trust Deed investing is an investment secured by a Real asset but does not require direct ownership
2)  Hard Money investments are held against low Loan-to-Value ratios, giving the investor the opportunity to liquidate and retrieve investment funds if borrower defaults.
3)  Investor receives immediate monthly returns in the form of payments from the borrower.
4) No property taxes, management or transaction fees
5) Strong, fixed-rate returns for determinable and pre-stated periods of time.
6) Investor chooses where their money goes based on investment opportunity presentations.
7) Investor can earn additional income through occasional late payment fees
8) Hard money investing represents a relatively passive income - unlike real estate investing which demands hands-on involvement.

The Cons:

1)  Cash remains in investment until end of term (typically 3-60 mos.)
2)  Borrower can default resulting in foreclosure of property, which means the property is either put into the investor's personal ownership portfolio or liquidated at below-value price to recapture investment funds and costs.
3)  Foreclosure may cost the investor until property is sold or acquired by investor.

Another thing to consider in Trust Deed / Private Mortgage / Hard Money / Private Equity investing is that unlike a purchased property that typically holds a debt for the investor, a hard money investment holds no debt for the investor (unless the investor were to incur such a debt in order to participate - this would not a suggested practice.)  As a result of this lack of debt, the investor is making 100% profit on their return.

Now, don't take me wrong.  I believe, if there is an appetite and a will, real estate is an excellent component to a well rounded high-return portfolio.  Yet, I will confess that 80% of my investment funds are in hard money investments rather than real asset investments - it just makes more sense.  I hate being a landlord, and I hate paying property taxes, so this is the right choice for me.

If you are interested in learning more about hard money / trust deed / private mortgage / private equity investing, please visit one of our sites:  HTTP://www.TheEquityExperts.com or HTTP://www.ASafeWay2Invest.com

Til next time!
Brandon Thienes, Hard Money Specialist