Investing in Notes Or Getting The Most Returns On Your Money

Everyone always wants the highest return on their savings. Currently with interest rates being on the rise, the rate the banks offer are on the rise. INGDirect offers just over 4% for their regular savings.

For better returns, people invest in notes, both secured and unsecured. Places like Prosper.com let you lend money to people you've never met via the internet. Current rates are between 5.25% and 22% depending on the borrowers credit.

There's also another company cpsnotes.com that will lend money from you to buy repossed cars and resell them. The company is listed on NASDAQ and offers 1 year terms of 8%. This is also unsecured.

Then there are the secured variety, backed by real estate. These notes offer between 6% and 18%. You can either become a hard money lender yourself and charge various points, but you're stuck with doing the research and if something goes wrong, you need to know how to recoup your investment. You can also lend money to hard money lenders at around 10-12%. They relend to investors and make a decent spread on the money.

I've currently lent out some money to an investor who's doing a condo conversion at 24%. Its been 8-9 months and so far he's paying out regularly. I also lent a very small amount to another investor in Texas on a commercial property at 18%. He's having a tough time making the payments. I'd go and file a case on the property, but the amount is so small, its just not worth the effort. It is secured by the real estate, so if it ever gets sold or refinanced, I'll get my cash-back. I'd say there's probably a 50% chance of getting my money back.

I've also lent some money to a developer/builder. This too is backed by real estate but the payments are on the backend. Because they're are no payments due monthly, its structured like a partnership with me getting 75% return after 20 months.[As some of the properties are sold after 15 months, I start getting some money back]. So far its been around 10 months. Lets see how this works out.

If any of you have invested in notes or prosper.com, let me know how its worked out for you.