1) Do I really make a return of 10% or more?
It is as simple as this:
a) You fund one of our real estate transactions.
b) We give you a mortgage secured by real property.
c) That mortgage shows the interest rate that you are getting paid. The interest rate will typically be from 10% or more, depending on the property and our negotiated arrangements. We also typically borrow money for a maximum of only one year, and make interest-only payments upon payoff. There it is - in black and white. However, you can make more than a 10% return, because we do pay an additional 3 months' interest to our lenders when we pay the loan off. Think of it as a "Thank you, let's do business again" bonus! (Higher interest rates may apply to special cases where we may need an investor to carry a small 2nd mortgage on one of our projects. Again, though, the TOTAL borrowed amount will never exceed 80%.)
2) What is the risk that I am exposed to as a private lender?
We like to be as up front as possible - that's the only way we do business. Your risk is limited to the amount of investment you make. However, since our goal is to have happy private lenders, we will explain how you are protected. Our lenders don't loan more than 80% of the after-repair, appraised value of the property. So if, for some unforeseen reason, you are not paid back (which should not happen, but if it should), you will own the property. You are in essence the bank. You now own a home at up to 80 cents on the dollar. You can sell the home, live in the home, rent out the home, etc. However, you own the home at a maximum of 80 cents on the dollar. You can sell it for more, or anything else you desire. That really is the worse case scenario.
3) How many deals can I do?
You can do as many real estate loans as you are comfortable with. Some lenders do multiple deals per month. Others do only one or two at a time. It really is a factor of your comfort level and investment capital. We work with you and stay within your comfort level.
4) How am I protected?
Because you have a FIRST mortgage, there are no other mortgages ahead of you. You are the senior - or highest - mortgage holder, and therefore you cannot lose your position to a junior foreclosure, etc. You always are in control, you get the interest and all notifications, etc. You are always free to inspect the property that you are funding at any time. You are the key to the whole transaction and therefore you know everything that is going on.
5) How much money do I need to invest?
Our private lenders typically need a minimum of $10,000 on up to $200,000 to invest. This is because we typically only have ONE lender per deal. (There are special occasions when we might need to use a second mortgage on certain deals, but that is on a case by case basis and you would have first right of refusal on providing the funding.) We do not commingle moneys from more than one party. All moneys are established through escrow with our attorneys or Title Company. $10,000 to $25,000 is typically the MINIMUM that is needed to purchase a property. However, all situations are different, and we may need more for other transactions.
6) Can I do this with money in my IRA or 401k?
It depends. Your retirement plan must be self-directed and must allow you to invest in mortgages and real estate. Many retirement plans will say they are self-directed, but only to the extent that you choose from the list of investments the company wants to offer you. If you don't currently have a self-directed plan, we have some companies we recommend. You can, however, use any firm that you choose that will allow you to invest in real estate and mortgages. The transfer or roll-over process typically takes 2-3 weeks.
7) What do I need to become a private lender?
a) Email us or call us at (716) 358-6648 and we will fax or email you our Private Lender Application.
b) Fill it out completely and fax, email or mail it to us at our contact information above.
c) We will contact you with additional information and to answer any questions. Hopefully we will then work out a borrowing arrangement.
d) You may need to open a self-directed retirement account, but we can help you with that process.
e) You fund your first deal. It's that easy!
If you have questions that we have not answered, please email us at [email protected] or call us at 716-358-6648. We also recommend that you order our FREE report, "Increase the Yield of Your IRA, Pension Plan, Savings or CD's" by emailing, calling, faxing, or mailing us.
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