A private loan is a loan that is made to a real estate investor that is secured by real estate. Private Loan Investors are given a first or second mortgage that secures their legal interest in the property and secures their investment. We are not talking about high Loan-To-Value (LTV) ratios the banks and savings and loan institutions make on homes. We offer very low LTV ratios to our Private Lenders to increase security of the loan. Our standard LTV ratios are under 75% of the value of the property securing the loan and frequently as low as 60% to 68%. This means additional security on the investment.
When you loan money you will always receive the following documents.
We do and in fact, that is our job! We try and make your life as easy as possible. It’s our job to get you proper documentation and protect your interest. All of this costs you nothing. I pay all the costs and work directly with the attorney/title company. If you make a $100,000 loan, you send a check for $100,000 to the closing attorney/title company and they will notify you that they received the wire and before releasing any funds you will have a note and mortgage sent back to you on the property you are lending your capital on.
Our minimum investment is $10,000 dollars although we would prefer to be in the $50,000 dollar range. We would rather deal with one investor as opposed to 2 or 3 on one deal because it is a lot easier logistically. If you are looking to loan anything less than $50,000 then you would most likely be put in a 2nd position note
Generally, your investment is tied to a specific project with a timeline ranging from 3 to 12 months. Most of our projects that we rehab take 5 to 7 months so we usually write the mortgage with a 9 month balloon. We also have longer term holds of one year and longer which is very advantageous to you, however the interest rate is a little lower because we keep you money in play for a much longer period of time. You can pick a term that suits your strategy. I would be more than happy to discuss both options with you.
If you want out, a 60 day written notice is required, because we will need to replace your funds with another investor’s money. You really shouldn’t make mortgage loans if you feel you will liquidate this shortly, but the option is always available. Also, unlike with a bank CD, there is no penalty for early withdrawal. Just call us, with 60 days’ notice and we will handle all of the details.
Making real estate loans is a widely accepted use for IRA’s and other Retirement Plans. Most people do not know that you can make private mortgage loans using the funds which are already in your IRA’s and other retirement plans. Think of the power of loaning out funds at high interest rates that are Tax free or Tax Deferred!
In order for you to use retirement accounts for loans they must first be administered by a third party custodian. One custodian we commonly work with is Equity Trust Company. You can visit them on the web at www.trustetc.com or simply talk to us and we’ll help you with the setup of your account.
After selecting your custodian, you simply send a transfer form to them and they’ll do all of the work for you. Once you’ve done that you are ready to make private mortgage loans.
From there, you simply notify your custodian about the investment you are looking to make and send the check for the gross amount of the loan. Even better, we can do all the work for you and you just sign few documents, sit back, relax and wait for your money to grow tax free or deferred.
Yes, However, the reason we are doing so well is because we are literally buying properties at 65 cents on the dollar or less. Even if the market dropped another 20% this year we would still have a huge equity cushion based on what we are paying for these properties. The mere fact that we are acquiring properties at such a deep discount and that your money will be backed by real estate makes this one of the safest investments around.
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