What is collateral and how can it make your real estate investment risk-free

If you have ever taken out a loan, you probably already know what collateral is. As the definition goes, it’s basically an asset that you offer to the lender for lending you money. In case of a mortgage, the collateral is the property itself. Until you pay off the loan, your lender will be the first lien holder on the property’s title. What it basically means is that if you fail to pay the loan, the lender will be able to seize the property to recoup their money.

When there is no collateral, the loan is unsecured. A credit card debt is a good example of an unsecured loan because it is not protected by any collateral. That’s why lenders charge a very high interest rate on credit card debts. For a loan to be considered secure, the value of the collateral must meet or exceed the amount remaining on loan.

The concept of collateral can be used to make your real estate investment risk-free to a great extent. Under our Mailbox Money program, we work with investors who owner finance homes to people at a slightly higher interest rate than that offered by conventional lenders. As a result, our investors are able to make predictable returns on their investment on a consistent basis.

How collateral works in Mailbox Money program

We work with buyers who can’t qualify for a conventional mortgage for a verity of reasons such as identity theft, lack of social security number and unverifiable income. We have certain criteria that buyers have to meet in order to qualify for a loan under our program. For example, a buyer has to put a minimum of 15% down. As an investor, you need to leverage your credit score and buy the house of the buyer’s choice and then immediately owner finance it to the buyer. You are now a lender and the buyer secure the loan with property acting as the collateral (Related article: Why it is better to be the lender than the landlord).

The monthly payments including the interest are handled by a third-party note servicing company, so you get the money wired to your bank account without you having to even drive to the bank.

Unlike other real estate programs such as fix-and-flip and buy-and-hold, you don’t have to spend money and time on property management and renovation projects. You don’t have to worry about holding costs, vacancy rates, maintenance and insurances. You are just a lender protected by collateral and you receive Mailbox Money – month after month, year after year.

Do you want to know more about our Mailbox Money program? Well, just fill out the form below. You will receive an e-book explaining how it works and whether you qualify for the program: