A private money loan is a loan that is given to a real estate investor, secured by real estate. Private money investors are given a first or second mortgage that secures their legal interest in the property and secures their investment. When we have isolated a home that is well under market value, we give our private lenders an opportunity to fund the purchase and rehab of the home. Through that process, the lender can yield extremely high interest rates – 4 or 5 times the rates you can get on bank CD’s and other traditional investment plans.
Essentially, private money lending is your opportunity to become the bank, reaping the profits just like a bank would. It’s a great way to generate cash flow and produce a predictable income stream – while at the same time, provide excellent security and safety for your principle investment. You can do what the banks have been doing for years…make a profitable return on investments backed by real estate. There is no other investment vehicle like it.
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.
We currently pay 4-5 times what a typical bank CD is paying. Our rates will fluctuate very little all depending on the purchase price and rehab involved. The lower the price we pay for a home, we can pay a little higher rate to make sure our lenders make it worth their time. Private lending means you can relax while the money is in a truly safe place, working for you.
Our equity is built in the purchase of the home, where we are buying 30-40% below a retail buyer – that creates instant equity at purchase. Also, in a typical transaction, we cut out the middleman cost, such as: commissions, mortgage broker fees, loan fees; and our attorney costs are also lower because there is less work for them to review.
Because of our buying strategy, we are able to offer our buyers a fully renovated home at or below everything else in the neighborhood. We walk away from hundreds of “close” deals that do not meet our specific buying criteria, and simply won’t buy unless it makes sense for everyone involved.
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.
On a new home purchase requiring renovations. The cost will be allocated to the purchase price, renovations, carrying costs, cost to resell, and also a small buffer for unexpected expenses.
There are many reasons, but the primary reason is, time and negotiation leverage. Many of the homes we are purchasing are in need of a quick sale within 10-14 days. A traditional bank requires 30-45 days to close a loan. Also, our leverage is far greater when we purchase using cash funds. Many traditional home sales fall out of contract because of financing issues, and this allows us to negotiate a much lower purchase price and reduce our risk. Lending guidelines are also continually changing. New requirements include applications, approvals, junk fees, and strict investor guidelines. They also limit the number of investment properties that can be purchased by one company.
We make our money on the purchase. We may pay very high returns, but it allows us purchase 20-30% below a retail purchaser. That instantly creates thousands of dollars in equity. Also, typically we cut out the middleman in transactions, such as: commissions, mortgage broker fees, loan fees; and our attorney costs are lower because there is less work for them to review.
Absolutely. With your cash funding we can offer something very few buyers can. We are buying on their timeline in as little as 10-14 days. Knowing that we’re going to renovate the home and buying in as-Is condition is a very important factor to most sellers of distressed property. They also won’t have to pay any additional fees.
This is a great question and valid concern. However, our strategy is not to speculate 3 years down the road. Our goal is to purchase quickly and sell even faster. Most of our projects are complete in 3-6 months and will be sold in 4-5 months. The market doesn’t tend to shift that dramatically in a matter of months – it’s typically a longer process for an area to decline. Remember, we’re buying in strategic areas where inventory is already low and demand is high; this greater minimizes our risk.
We currently pay 4-5 times what a typical bank CD, 401K or Roth are paying. Our rates will fluctuate very little, all depending on the purchase price and rehab involved. Most of our lenders are paid from 10%-12%. The lower the purchase price, the more room we have to pay a little higher rate to make sure our lenders make it worth their time.
The majority of our loans are set up on an 8-12 month note, but it depends on the size of the project. If we are doing a teardown and rebuild, there are some factors that may extend this time frame. For instance, waiting on the county inspectors for approvals and permits . However, we account for all of those details upfront and will give you estimated time frame for the return on your investment.
It’s extremely important to us that we do not waste your time. However, occasionally, situations may occur where we find a buyer immediately. In this scenario, we provide you with two options: we can either move the note to another property, or provide you with a minimum of 3 months interest. Most investors see the strength of our purchase ability at that point, and simply move the note to another property.
We pay one large lump sum at closing on a short-term note. For a longer note such as a rental property, we will pay monthly, just like a typical mortgage.
No. There is no government backed guarantee on these privately held real estate notes. You’re deriving protection from the equity in the real estate. If at any time we were to default on the note, you have legal right to take the home (essentially foreclose on us). Many investors laugh about this one and say, “I hope you’re a day behind on payments I’d gladly take this one off your hands”. You have to remember we plan for the worst, and our homes have thousands of dollars of equity in them; and worse case scenario, often times is we don’t make “as much” as we hoped for.
Yes, these are established tax guidelines, and it is completely legal. However, we always recommend the services of a custodian to invest retirement funds tax deferred or tax-free.
We do. We pay for a title search and also a title policy on the home, just as we would in a typical transaction.
If we purchase a renovation, we purchase a builders risk policy (Vacant Dwelling Policy). In case of any damage, insurance distributions would be used to rebuild or repair the property, or used to pay you off.
It is our policy to pay for all the closing costs so that your entire investment goes to work for you. We will pay for the closing agent, document preparation fees, notary fees, overnight mail fees, bank wire fees and recording costs. We do not charge any fees or commissions to our private lenders.
No, we do not pool funds. Your funding will be tied to one piece of property secured by a deed of trust.
In this unlikely scenario, we would simply transfer ownership of the property to you, if possible. If for any reason we did not (or could not), then you have all the legal rights of a secured lender. The best way to legally protect your interest in case of a default would be to hire an attorney. They normally would seek to get your investment back, any unpaid interest, any collection costs, all your attorney fees and maybe even more. A legal representative could advise you if it makes sense to foreclose or seek ownership the property to protect or recoup your investment.
At B2 Property Solutions, we have created a marketing machine that produces a consistent flow of high quality leads. We are very different from our competitors because we don’t just put in offers on MLS properties – we take it to the next level. Our creative marketing strategies allow us to reach the homeowner directly, before the property even goes to a Realtor to be listed on the MLS; whereas, the purchase price would escalate.
These are some of the marketing strategies we use to locate great deals way below market value: