In this scenario you are ‘lending’ capital to the property project. Your cash is secure because the loan is covered by the value of the property itself; but your returns will be capped by the loan’s interest rate.
You’ll receive a regular fixed rate return based on how much cash you have provided in the first place, along with the agreed interest rate. The good news is you will have priority over an equity funder for payment.
Most development projects offer short hold-time debt investments of between six months to two years, allowing your cash to be freed reasonably quickly to reinvest in another property project. Another advantage of debt funding is that there is less risk since you can insist on the property being sold in the event of payments defaulting.
