Buy Mortgages - Be a lender.

Where do rich people put their money?

How do you get a 10% to 20% return on your cash?

Where do insurance companies put the premium dollars they collect?

The answer in part is that some of the money they have to invest is invested in mortgages that were purchased on the secondary market. You can do the same thing the big insurance companies do.

If you have a lot of cash to invest, and seek high returns, buying mortgages may be for you. There is a very large market dealing in first and second mortgage notes.

The advantage to this type of investment is that the rate of return is rather high with minimal risk. The disadvantage is that your money is tied up long term and the payments to you include principal as well as interest, requiring you to reinvest the principal part of the payments.

There are brokers who can find mortgages for you to purchase, and some even manage the whole process. You can find your notes to purchase by searching the county records for first mortgage lien fillings, and offer to buy the notes directly from the holders. You could try advertising in the classifieds. You will find mortgage brokers listed in the phone book, and then there are those signs "we buy houses" - someone has to finance the deals, call them, they will love you.

It is possible to get better than a 20% return by buying notes at a discount.

For example: you find a note where the home seller carried back a first lien on his/her home for $40,000 at 8% interest for twenty years. You offer them 90% of the balance owed in cash. The note holder gets $36,000 now and you get the payments with interest on the full $40,000 greatly increasing your return on the $36,000 you actually paid out. That would give you an annual return of over 14% on your $36,000.

More on this at alternative investing, mortgage lending.