STOCK MARKET ALTERNATIVE

Given the short-term nature of private loans, their higher interest rate is usually not a critical factor to most borrowers. Clearly no one would want a 12% interest rate for 30 years, but for 8 or 10 months, with a viable exit strategy and a winning property, it is often deemed not to be a problem, especially if rapid and dependable execution makes the difference in a buyer/borrower’s ability to acquire or add value to a key asset.

What, then, is the vehicle of choice for an investor interested in earning the higher interest rates generated by private mortgage loans? Clearly, a well-run Fund has numerous advantages over other investment vehicles. Accredited investors (defined in Rule 501 by the SEC as those who have a total net worth that exceeds $1,000,000 inclusive of homes, automobiles and spouse’s net worth) willing and able to park at least $100,000 for five years may decide to choose a vehicle like our W Financial which primarily makes renovation and bridge loans within clearly defined parameters on Metro area properties.

Private mortgage investments are both tangible and comprehensible to most investors. The properties have addresses, the mortgage documents specify interest rates and repayment terms, and specific people often personally guarantee the loans. The same cannot be said of many, if not most, stock market investments, which are often many, many degrees of separation removed from the individual investor.

© 2008. Gregg Winter. All Rights Reserved.
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By Gregg Winter, Managing Member