PRIVATE MONEY LENDING

A comprehensive overview of the benefits and drawbacks to an investment strategy.

In this business book, Gomez guides readers through the fundamentals of private mortgage lending and recommends it as less volatile and risky than equity investing for properly educated investors who are interested in actively managing their finances. The book opens with a general overview of liquidity and ways to save and invest money, from checking accounts to equities to annuities. It then moves to an explanation of private mortgage lending—higher-rate loans made by nonbanks to property owners in circumstances for which traditional loans are unavailable or not the best fit—and why investors who are looking for a less volatile option than the stock market may benefit from the relatively high returns and comparatively low risk of private lending. The book goes into detail as it explains how private lending works, including which laws and regulations govern the sector; the mechanics of issuing, servicing, and profiting from a loan; potential areas of concern and reasons for caution; and the corporate ownership structures available to investors, followed by a framework for assessing the potential value of an investment. Appendices provide further information on state-level foreclosure law, sample mortgage-related documents, and an exploration of the relationship between interest rates and bond prices.

The guide is an extremely detailed introduction to a complex topic, and throughout the text, Gomez reminds the reader that private lending is an effective strategy only for those who thoroughly educate themselves on the topic, find a solid mentor (“associating oneself with individuals who possess experience in the field the investor wants to participate in is in itself a risk-mitigating strategy”), and have a competent attorney available for all contracts and transactions, making it clear that the book and its recommendations are more applicable to a self-selected group than a general readership. At the same time, the book does not oversell the possibilities of private mortgage lending and provides tools for assessing the potential returns of the investment, adding to its credibility. While the information is often understandably complicated, Gomez does a good job of using clear, simple language in most places (“A good and safe rule to follow is to lend only on properties the lender would not mind owning, and only in areas in which the lender would not mind living”), making it highly accessible to readers without an advanced understanding of finance and investment. At the same time, Gomez does have a tendency to frequently reference and return to topics like the “unintended consequences” of Dodd-Frank and other regulations and the “artificially” low interest rates currently maintained by the Federal Reserve, which can make the text feel somewhat repetitive. On the whole, though, the amount of information conveyed more than justifies the book’s length, making it a worthwhile tool for readers interested in expanding their investment portfolios in a new direction.

A dense but informative introduction to an unfamiliar investment vehicle.