eder@ssc-vax.UUCP (Dani Eder) (04/30/85)
> > I would be interested in anyone elses comments on equity sharing. I am > currently considering this as an option for some future investments. > > Ken Hodor > hodor!hplabs If you are considering real estate investments, don't overlook the one that has by far the most money invested in anything: mortgages. Banks are not the only people who lend money on real estate. There are mortgage brokers who make a business of matching up investors and borrowers. The returns and risks vary according to the type of lending you do. Going from least risky to most risky: Government backed mortgage pools, such as 'Government National Mortgage Association Modified Pass Through Certificates'(Ginnie Mae's) Here a number of home loans have been packaged together and resold to investors with government guarantee of payment. Current yield: about 12.25%, amount: Certificates start at $25K and increments of $5K thereafter. risk: almost non-existant. There are mutual funds which yield slightly less, but allow smaller initial investment. Direct lending on home mortgage. Yield about 13%. Amount 50-100K. Risk: foreclosure rate is around 1/4%. Second mortgages on homes: Yield 14-15%. Amounts from 5-20K typically. Risk: foreclosure rate is around 2%. The hardest thing about second mortgages is finding them, since there is no regular market like there is for first mortgages. Nowadays, they tend to get created when a seller provides financing to make the sale. The mortgage becomes available when the seller decides he wants cash rather than monthly payments. Construction financing. Somebody wants to build, for example, a shopping mall. He (or she) needs to raise money during construction. When the mall is complete, it can be refinanced through a bank. Yield: up to 16% (short term, up to 2 years). Risk: that the completed property is not worth enough, refinancing can't be done, or any other screw up that prevents getting your money back when you expected. Amounts start high and go into megadollars. Some brokers package these type of loans (such as 100 units at $10k each, you buy one or more units). I invest in real estate myself. Loaning money is a lot less hassle than being a landlord, provided your borrower is in good financial shape and has a substantial stake in the property. Since the chunks for investing are too large for most people to diversify, one of the things I do is look for partners to share in mortgage notes. It is better to have one-third ownership in three mortgages than owning one outright, since the chances of all three going bad simultaneously are 1% cubed, or one in a million. If you want to find out more about these type investments, netmail at me. I'll try to answer questions or at least point you at a reference book. Dani Eder / Boeing / uw-beaver!ssc-vax!eder / (206)773-6054