While your bank account may be earning 0.1% to 0.3% per year, there are individuals who are earning 8.0%, 10.0% or more on their money by working with or becoming private real estate lenders.

An intentional private real estate lender is anyone who is willing to loan money to someone else who, usually, is going to buy a house, repair it and sell it to a homeowner at a profit. More cautious lenders, or inexperienced lenders, often work with experienced private lenders, like Bill Worsley at Bridge Source Capital. He helps find a deal suitable to the new lender, answers questions along the way and helps educate the lender. Naturally, since Worsley gets a little piece of the pie in exchange for his help, the lender does not receive as large a return as those going it alone.

More experienced individuals, especially if they have significant amounts in an IRA, might work with individuals like Sean McKay at American IRA to convert their IRA into a self-directed IRA. Once they do that, then they can direct how their money is invested, either doing it on their own or in conjunction with someone like Bill Worsley.

Sometimes, we become unintentional private real estate lenders. When you agree to loan money to help your child buy a house, you should document this transaction just like you intended to be a lender. Having a note and deed of trust or mortgage securing the note puts the transaction on a business footing, removing much of the emotion when it comes time to repay the loan. Should your child ever have to file bankruptcy, having properly documented the transaction also means you are a secured creditor, with a much better chance of collecting some or all of your loan balance.

And, of course, in all of these situations, you need to ensure that your will and power of attorney are current. Doing so can save your family much more money and create much less distress than any of these other investments will ever cause.