It’s hard to say, definitively, what any one individual’s investment strategy should look like. After all, each person has a different set of circumstances and goals. That said, investing in DC real estate (or any hot market, really) is a great way to add diversity to your portfolio and see great returns, and is something that should at least be considered by most investors.
What Types of Real Estate Investing Are There?
When someone mentions real estate investing, three things generally come to mind: buying a property and becoming a landlord; purchasing a property, fixing it up and selling it for a profit (flipping); or using your money to fund the development projects of those involved in the fix and flip industry. While all three of these options are absolutely valid and vital to the health of the real estate industry, we’re obviously huge proponents of investing in development. After all, becoming a landlord or a flipper means that there’s work to do on your end (chasing rent checks, managing construction budgets and renovation crews!) – but investing your funds in the fully vetted development projects of others means that you can sit back and see your returns grow.
How Has Funding Developers Evolved?
Previously, the behind-the-scenes world of investing in DC real estate - or just in general - was a little bit shady. Developers who were seeking funding outside of traditional bank and finance companies were usually working with one or two wealthy individuals and their “associates” who may or may not have employed some questionable tactics for collecting their debts. Even if the lender was an upstanding, chivalrous individual it’s likely that they enforced exorbitantly high interest rates and terms that weren’t necessarily fair to the borrower. Unfortunately for the borrower, if they were working with these individuals it was because they were unable to secure traditional funding – so that’s the way things were… for a while.
Now, however, investing in development is a much more mainstream and reputable way of diversifying your portfolio, and securing financing for development projects has come a long way. Developers have options as to where to get their financing, and securing hard money loans is one of the quickest ways for them to do it. The process is typically simple and quick – the developer/borrower presents their proposed project to their hard money lender of choice. The lender will review the proposal, review market comparables, and decide whether or not the project has a high likelihood of being profitable. If it does, they’ll lend the funds under their standard terms and conditions and could close on the property in as little as a week. If it doesn’t, the two parties part ways.
Why Should You Become a Hard Money Investor?
This is simple. Investing in DC real estate by working with a hard money lender is an excellent way to add diversity to your portfolio in a low-risk manner. You invest your funds in much the same manner that you would a traditional investment, and the lending company does all of the difficult legwork in determining which proposals to accept and which borrowers to lend to. And then you get to happily collect your returns! Companies like Walnut Street Finance also make sure that each investor's capital is going into multiple projects, so that their investment is as risk-adverse as possible and has the highest growth potential.
Are you interested in learning more about becoming an investor with Walnut Street Finance? Get in touch!