Taking the Next Steps
GETTING STARTED WITH US
If we haven’t already, it’s important to sit down and discuss all these details in person. We will need a clear definition of what your goals are, i.e. long term investment or short term, and the amount you are comfortable initially investing. At that point, we will present you with any current opportunities that fit that criteria or contact you as soon as we have one that fits.
Word of mouth is typically how we are able to work with private lenders like you. It would be greatly appreciated if you passed our information on to anyone that may be interested in the opportunity to be a lender. In our business, it’s always important that we have a steady stream of lenders. Once you’ve done a few deals with us and you’ve learned how we’re purchasing so low, you may attempt to do it on your own. If that’s your goal, we’re happy to help you any way we can.
HOW THE PROCESS WORKS
The process is simple. We find an extremely undervalued property we want to purchase - and once you give us the green light, we borrow the funds from you to purchase and renovate the property. At closing, you receive a mortgage on the home along with other important documents. Next stage is the property renovation. Once the renovations are complete (typically 3-6 months depending on the size of the project), we’ll list and sell the property.
When it’s time for closing, you’ll receive your principle plus 10% interest payment. It’s just that simple! The goal is to keep turning that money for you and keep you making substantial profits so you keep coming back to us – building a long term mutually beneficial relationship.
HOW YOU BENEFIT FROM PRIVATE LENDING
You, as the private money lender can benefit greatly from investing your capital. A real estate mortgage/ deed of trust provides you with security instruments you would not get with other investments. You also have added layers of protection because of how we buy, and because you have recourse available to you in case we were to default on the loan.
HOW PRIVATE MONEY HELPS OUR COMPANY
Private money lenders bring speed and efficiency to our transactions, and our leverage is far greater when we purchase using private cash funds . Many of the homes we are purchasing are in need of quick sale within 10-14 days. A traditional bank requires 30-45 days to close a loan. Many traditional home sales fall out of contract because of financing issues.
Using quick cash as leverage allows us to negotiate a much lower purchase price and reduce our risk.
Being able to offer a fast closing with private funds motivates sellers to take our offer over the competition, and entices them to take a much lower price than they would from a conventional buyer. Also, lending guidelines are also continually changing and are requiring applications, approvals, junk fees and strict investor guidelines. They also limit the number of investment properties that can be purchased by one company.
On a new home purchase requiring renovations, private lender funds will be allocated to the purchase price, renovations, carrying costs, cost to resell and a small buffer for unexpected expenses.
WE PROTECT OUR LENDERS
Mortgages offer the banks solid, long-term, fixed returns. You can put yourself in the position of the bank by directing your investment capital, including retirement funds to well-secured real estate mortgages. Mortgages have ultimate safety because if default occurs, the bank can recover its investment as the first lien holder on the property.
Each property we acquire is put through a rigorous evaluation process in order to assess the profitability before the property is ever purchased. “Integrity" is an essential part of our business, and we only make sound investment decisions. Also, for your protection, you are also provided these documents to secure your investment capital:
Promissory Note: This is your collateral for your investment capital
Deed of Trust/Mortgage: This is the document that is recorded with the county clerk and recorder to publicly secure your investment against the real property that we are providing as collateral
Hazard Insurance Policy: This is where you as the private lender would be listed as the “Mortgagee” for your protection in case of fire or natural disaster, etc.
We do pay for a title search as well as a title policy on the home just as we would in a typical transaction. For a rental investment with a long-term note, we always keep a valid hazard insurance policy on the property to protect against causalities. You’ll be named as a mortgagee and notified if the insurance was not kept current. In the event of any damage to the property, insurance distributions would be used to rebuild or repair the property, or used to repay you.
Cash held in most types of bank accounts can be accessed quickly and can fund your deals in minutes, instead of hours or days. Fees are generally minimal for wire transfers and cashier’s checks.
Home Equity Line of Credit
A home equity line of credit is a very powerful source of funding that many people have and don’t even think of. Unleveraged equity is dead money and it’s not making any interest. You can easily tap into that money. It’s a way to make sure you’re in first position when we’re ready to pull the trigger and buy a property.
Personal & Business Lines of Credit
Personal loans and “signature lines of credit” can be obtained from most banks or credit unions by anyone with good credit and a stable income.
More and more private money lenders are using their IRA funds to invest in real estate. A self-directed IRA is essentially the same as a traditional IRA, but allows you to purchase a broader range of investments, including real estate.
Liquidated Securities & Investments
Investments are a way to put your savings to work earning more money. However, if your stocks and investments have not performed as you had expected, it might be time to consider other investments. As you know, stocks can be liquidated as and when you wish. Sometimes you need to liquidate your investments because you need the money for something you want to purchase such as real estate.
Investment Terms & Conditions
TERMS & CONDITIONS
When working with private lenders, $25,000 is our minimum standard investment. When first investing with us, a lower initial investment amount may be agreed upon to ensure you’re confident when working with our company.
The majority of our loans are set up on an 4-12 month note; however, it depends on the size of the project. If we are doing a teardown and rebuild, we will have to wait on the county inspectors for many approvals - thus causing delays. We account for all of those details upfront and will give you estimated time frame for the return on your investment. Also, we do not pool funds - your funding will be tied to one piece of property secured by a deed of trust.
1st or 2nd Lien Position:
The Investor, as “mortgagor,” has the right of first lien holder and Power of Sale on the property. The 1st lien position is placed behind a senior mortgage. You are probably used to hearing the term first and second mortgage. The second mortgage is a junior lien because it’s in 2nd position. The senior lien or first mortgage must be paid prior to the 2nd lien.