If you’ve ever thought about investing in real estate but felt overwhelmed by the idea of managing properties, you’re not alone. Many successful professionals want to put their money to work but don’t have the time (or the desire) to deal with things like tenant calls, repairs, or late-night emergencies.
Luckily, there’s a way to invest in Vermont’s real estate market without the hassle of property management: private money lending (PML). This approach allows you to earn passive income while backing real estate projects that help grow our local communities.
Let’s walk through how it works, why it’s especially suited to Vermont’s real estate market, and how you can get started today.
What Is Passive Real Estate Investing?
Passive real estate investing means putting your money into real estate projects without managing the day-to-day operations. One of the most popular ways to do this is by becoming a private money lender.
What Is Private Money Lending?
Private money lending involves providing funding to real estate investors or developers for their projects. In return, you receive a fixed return, often backed by the property itself. It’s a straightforward way to put your money to work while letting others handle the heavy lifting.
Why Private Money Lending Makes Sense in Vermont
Vermont’s real estate market is unique. With tight housing inventory and high demand for multifamily properties, experienced investors are always looking for flexible funding to bring projects to life. This creates opportunities for private lenders like you to help meet those needs while earning a return on your investment.
Here’s why private money lending can be an excellent fit for busy Vermonters:
- Hands-Off Investing: You provide the funding; the investor handles everything else.
- Community Impact: Your capital can help revitalize properties, create affordable housing, or improve Vermont’s neighborhoods.
- Secured by Real Estate: Many loans are collateralized, meaning your investment is backed by the property itself.
An Example of Private Lending
Let’s say you decide to work with an experienced multifamily investor. They’re purchasing a 6-unit building in Burlington that needs light renovations. The property is under contract for $800,000, and they need $200,000 in private funding to cover the down payment and initial rehab costs.
You agree to lend $200,000 at an 8% annual return for 12 months, secured by the property. During this time, the investor stabilizes the property, increasing its value and rental income. At the end of the term, they refinance the property with a traditional lender and repay your loan—plus your 8% return.
How to Get Started as a Private Money Lender
If this sounds intriguing, here’s how to explore private lending opportunities in Vermont:
1. Learn the Basics
Get familiar with key terms like loan-to-value (LTV), interest rates, and how loans are secured. A little education upfront will go a long way in helping you feel confident.
2. Define Your Goals
Think about what you want to achieve with your investment. Are you looking for consistent cash flow? A short-term opportunity? Something long-term?
3. Find the Right Partner
Partnering with trustworthy, experienced real estate operators is essential. Look for teams with a strong track record, a transparent process, and clear communication.
4. Do Your Due Diligence
Before committing to any opportunity, review the details carefully:
- Is the property in a strong market like Burlington or Stowe?
- What’s the borrower’s experience?
- Are the terms clear and fair?
Important Legal Disclosures
This content is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investments involve risk, including the potential loss of principal, and are offered exclusively to accredited investors in compliance with applicable securities laws. Returns are not guaranteed, and past performance is not indicative of future results.