As we invest in real estate, we need cash to buy houses. Even if we have a full bank account and great credit, we’ll eventually run short on funds – or short on time to obtain a loan – for the next deal. Real Estate Private lending has been our answer for years.
It is a bottomless pool of readily accessible funds: whether our company has great credit or poor; whether we have cash reserves or not. “Private Lending” refers to the process of borrowing real estate investment funds from private individuals (money partners) at rates higher than these lenders can normally achieve in the marketplace. The attraction of private lending for us a real estate buying company is the speed and ease of funding a deal.
Every month we come in contact with individuals interested in earning 7-10% interest on investments secured with the single family houses that we purchase. We find these potential partners everywhere. In fact, they search us out.
As potential partners express interest we sit down and explain that the investments are secured by homes and do not exceed 75% loan-to-value (LTV) of the after repaired value of the home. Each investment is based on a specific property, and they can decline any property with which they are not comfortable. All we require is that they approve quickly (within 48 hours), and can fund within 7-10 days or less. Once they have approved the investment, the funds are wired to the closing attorney to be held in escrow. After the closing, the lender will receive a Promissory Note from us, a courthouse recorded Deed To Secure Debt (mortgage) on the property, lenders’ title insurance, and will be listed as a mortgagee on the hazard insurance policy.
Now you may be wondering how many people you know really have $75k -$100k -$150,000 just lying around ready to invest. More than you think – and most of them don’t even realize it! That’s because the money is tied up in their IRA’s which they believe can’t be accessed until retirement. That’s only half true. They can’t personally withdraw the money without suffering penalties; but they can invest their funds (and receive interest tax-free! If it’s a ROTH IRA) if they rollover into a self-directing IRA.
A self-directed IRA is administered by a third party institution and allows the IRA owner to make decisions relative to the investment of the funds. In other words, the IRA owner can decide to use his IRA funds to make a real estate investment in one of our properties. Most people do not even realize this as a possibility. They believe their money must stay tied up in an IRA until retirement earning nominal interest. Imagine how thrilled they are when we provide this alternative! Our preferred self-directed IRA custodian is Equity Trust, headquartered in Elyria, Ohio.
We ensure that making a loan is as simple as possible for our private lender partners. We prepare all of the required documents so all they have to do is sign and fax it. From that point on, the private lender has nothing else to do. Simple. Easy. Their next task is approving the payoff when the loan is re-paid. Because the loan process is so simple, and the interest rate so favorable, our partners are always begging to re-invest.
Request your FREE Education Kit today!…to learn more about Real Estate Private Lending.