Private Lending vs Rental Property

Updated: Feb 14, 2019

Many people believe buying and holding rental property is a good investment strategy, and it is. But there are better, safer ways to invest your money with higher returns on investment. Have you considered Private Lending??

My name is Kevin Aubart of Aubart & Associates, A Private Lenders Group in Hawaii. I have over 18 years of buying and renting single family homes as rental properties. And yes, I made money from my rental properties. But as I'm about to show you, you can double and triple your return on investment by investing the money in secure, short-term real estate investments, more commonly known as "flips."


Let's take an average single family property I own in the great state of MN. I bought the house for $165,000 and I paid a management company to rent It out for the last 18 years. I received rent income of $1,500 per month so my gross income is $18,000 per year.

But I had to pay the management company one month's rent ($1,500) and $100 per month to manage it, which is actually very fair compared to others. I had to pay $650 per year to insure the property and $3,000 a year in property taxes. I also had to pay an average of $1,000 a year in misc expenses such as repairs, maintenance, etc. I was left with a NET INCOME of $9,650 which, with tax deductions, was roughly $10,000 per year for the rental property.

Did you notice I didn't mention a mortgage payment or Association fee? Most people aren't so lucky. If you are paying a mortgage payment on top of it, then you should factor that in as well. Same with any Association fee. But even without paying any mortgage or association fee, I still only net a return of about $10,000 per year on the rental property.


(or $180,000 over 18 years)


Now let's look at what it would look like if I could have invested the month in short-term real estate investments instead. If I took my original amount of $165,000 and invested it in private lending at $12% APR for 12 months I would have received a NET INCOME of $19,800 per year. DOUBLE THE NET PROFIT!

PRIVATE LENDING = $19,800 per year

(or $356,400 over 18 years)

It is easy to see that you will make much more money, two to five times more, with far less work & stress, by investing it as a Private Lender. And you don't have to worry about mortgage payments, months without renters, damage from renters, property taxes, insurance, management fees, county fees, replacing appliances, repairing the roof, association fees, county fines, etc.

1. But won't you have more tax deductions with rental property?

YES, but tax deductions are not income or profit. A tax deduction is simply a relief from paying taxes to the government for money you spent on operating a rental property. The large bulk of that money is still in someone else's bank account, not yours. AND, you CAN deduct expenses you pay for private lending, such as visiting Hawaii to physically "inspect" your investment property ... before hitting the beaches of Waikiki! That is what rich people have been doing for years!!

2. But the property value increases with the market so you gain value on your rental property over the years.

TRUE, my property increased in value from $165,000 to $230,000 over 18 years, which is $65,000 in appreciation. Of course, I spent about $30,000 in improvements & upkeep over the 18 years and when I sell the property I will pay capital gains (taxes) on the profit, real estate fees and closing costs, which will eat up all of it.

3. But in Hawaii, properties are much more valuable.

TRUE, a lot of people talk about the tens and even hundreds of thousands of dollars in profits they get from buying and later selling houses in Hawaii. What they don't talk about is how much money they spent on an enormous mortgage, interest, property taxes, insurance, repairs, maintenance and ridiculously high association fees.

I make almost the same amount of rent on my house in MN compared to properties in Hawaii and it cost me much less (1/5 the cost) then what the average house costs in Hawaii. Plus all costs and expenses to maintain a property are much higher in Hawaii.

I would love the opportunity to meet with you and run the numbers for your particular situation. Please contact me if you would like me to do a free, no obligation analysis of your situation. If you prove to me you make more money from your rental property than you would by private lending, I will buy you lunch.

4. But isn't rental property a more secure investment?

My rental property analogy above is the absolute best case scenario based on the presumption that the rental property is continuously rented every month at top dollar for 18 years. That is extremely unlikely in the real world.

In my first year as a landlord I tried to save money by managing my property myself. It cost me over $8,000 and a lot of misery when my tenants divorced, destroyed the place, filed bankruptcy and absconded. I filed a lawsuit in small claims and learned the important lesson that it doesn't pay to sue a person who has no money because ... you can't suck blood out of turnip! I took the loss and now use it to illustrate an important lesson.


Aubart & Associates can help you through the Private Lending process at absolutely no cost to you. And we guarantee your investment funds will be secured by a mortgage lien against the property and properly recorded at the Hawaii office of Conveyances. This means the property simply cannot be sold until you're lien is satisfied. And since we make sure the property value is always worth more than the money you invest, your investment is very secure.

Maybe its time to "Think Outside the Bank" by becoming your own bank by private lending your money in short-term, real estate flips here in Hawaii. And you do not have to live here to invest here.

Please feel free to contact me for a no pressure, no obligation consultation. It won't cost you anything, but it may change your life.

Kevin T. Aubart, Private Lending Consultant

Aubart & Associates, LLC ("Private Lenders Group of Hawaii")

(808) 426-0816

Please click HERE to few our Frequently Asked Questions (FAQ) page

Comments and questions are encouraged.