When one hears the term “alternative investment” automatically the guard goes up. The skeptic-o-meter tilts to the red line and anything after the term, “alternative” is relegated to noise and ignored. And this is all completely understandaprivate money investingble. It’s not news that investment returns over the previous few years have been tepid. And that’s in a good year.

Yes, the equity markets have rebounded recently but has anyone really taken a look at their mutual fund performance lately? Some are afraid to and others would really rather not.

A lot of investors are sitting on cash or simply parked in some safe, barely breathing money market fund and as investors age they realize they have little time to explore investment options that provide higher returns. Returns such as 12, 20 or even 30 percent or more. But those returns are out there, there just not in their stock broker’s book of business.

It comes in the form of private lending. Individual investors can provide working capital for developers to acquire, rehabilitate and flip or hold. Such properties require this type of financing because banks won’t lend on projects that need a considerable amount of work but wait until the property is brought up to code. This puts many developers in a potential “Catch 22” scenario: they need financing to buy a property but can’t get the financing until the property is rehabilitated. Private lending fills that much-needed niche.

An investor can finance an individual project or pool their funds with others. A pool not only provides investor liquidity but helps spread certain risks in real estate investing with among several properties. Private lending provides double digit returns and while some consider it “alternative” the investment is secured by real estate; far from any multi-level marketing scheme.

The downside with private investing is evaluating each project as it is presented. If an individual investor is approached by a contractor to provide funds to buy, fix and flip a property, how can the opportunity truly be evaluated? If the contractor says there’s a strong market for four-unit properties, who says that’s actually the case? And what is the projected rental income compared to a current market rent analysis for the area where the project is located? How long will it take to sell the four-unit project and at what price?

Such questions must be answered before jumping into any real estate investment opportunity. Yes, you can finance the project on your own, but you must fully understand all aspects of the project. If you don’t, you’ll lose.