Investing for cash flow, should you be a landlord or lender? It depends. Yes, it really depends on your goal, risk appetite, and return expectation. You can be both since it works perfectly well with one and another.
Real estate rental naturally comes to mind when one thinks about passive income and cash flow. I am no exception. Imagine the tenants pay off your mortgages month after month, after 30 years, the house is yours forever as long as you don’t forget to pay your property taxes!
Next, I am under the task to identify the rental property that meets 1% rule and can bring me the positive cash flow. Coincidentally, the real estate in my own back yard is very expensive; breaking even can be tough, if not possible.
So the research continues….
One day the light bulb went on, who says landlord is the only way to generate cash flow, how about being a lender? OK, that was not my idea. I just came across to that concept and I like that concept!
That’s how I learned about private money lending. Private money lender is the individual with private cash capital that lends cash to another private party to help or complete the real estate transactions. It’s a form of P2P lending but such private money lending in real estate is asset backed. In another word, the real estate is your collateral.
Here’s the comparison on the perspectives between investing as a landlord and lender.
Are you landlord or lender now? I am sure there must be other great pros and cons either being a landlord or lender, feel free to share your insights!