The attraction is that the majority of failed real estate deals don’t see the guarantor being sued by the lender for the balance of the loan unless there was fraud. Typically the lender will just take the project back, sell it to the servicer, etc. So in essence you’re getting paid 1% of the balance for the risk that something happens, but that something is unlikely both because the deal has to fail and that the lender would need to choose to go after the guarantor instead of just taking the project back. I’m leaving out the fact that they can do both, I know.
Also, asking someone to guaranty a loan doesn’t require a cash investment. So you can do both, you can invest in the deals you’re describing and guarantee.