What Is Private Lending?
Private lending is where you basically act as a bank. Don't worry, you don't need to sit at a desk all day (unless you want to, of course). You can take your cash that would normally be put into CDs, money market accounts, or even just a plain old savings account, and earn far more interest, secured by real estate.
Why Private Lending?
The best way to answer this question is with another: What is your money earning right now?
- Interest Checking 1.61%
- Money Market Account: 2.42%
- $10K Money Market: 2.70%
- Jumbo Money Market IRA: 3.51%
- 1 Year Bank CD: 3.68%
- 5 Year Bank CD: 4.16%
The highest amount that you can earn on your money is about 4%, AND you have to tie up your cash for 5 whole years! Wouldn't it be better to earn over twice that amount?
"But my bank CD's are FDIC insured!" you say. That is true. In the event that the bank goes under, your money is insured. You have to wonder though, with all the banks filing for bankruptcy lately, how much money can the FDIC insure? Most likely any money you have at a bankrupt bank will be transferred to another bank. Does that bank have your best interests at heart? Do you even know who they are?
What Makes Private Lending a Safe Investment For Me?
There are several advantages to lend on real estate, and here are a few:
Your investment is secured by a physical asset: Real estate.
Unlike with stocks, bonds, CDs and such, you can actually touch the real estate property.Your return on your investment (the interest rate) outpaces inflation.
Inflation eats away at your money. If you had your money in a 3% CD, while inflation is at 4%, are you making any money? Plus, inflation is FAR greater than anyone will lead you to believe. See for yourself: Shadowstats.If worse comes to worse, you get the house!
Don't want the house? Well, you can sell for what you are owed (plus the interest) and it will sell quickly because your mortgage will still be much less than what the house is really worth!
How Our Private Lending System Works
When you invest with us, your money is used to purchase homes and properties from people facing foreclosure, because what is the most important thing for people in this situation? Is it getting top dollar for their house? Of course not! The bank will take it anyway! What is important is getting the cash that they need to get the lenders to stop breathing down their necks, (which is made worse when the lender has bad breath!). Using your money, you can provide a service to save people's credit and help them move on. Not only are you earning more money, you are actually helping out your community. It's win-win!
After the purchase, the house is either held as a rental property, or promptly renovated for our pool of able buyers, and sold at a higher price. We hold your funds for a minimum of 60 days in order to sufficiently complete a deal. If the deal completes early, you have the option of getting your money back early or rolling it into another deal, earning even more money in the process.
Private Lending Rates
First Lien
We offer 10% simple on a first lien. Yes, double digit interest is possible. We prefer monthly interest-only payments supported by the income on the property, but can pay principle and interest if desired. However, interest only payments keep your entire investment working and you end up with more money in the end.
Secondary Lien
We offer 11% simple on smaller, secondary liens. For these, we prefer to have your interest accrue with no monthly payments. This way, we can avoid a negative monthly cash flow, (which certainly wouldn't help you, either).
Private Lending Rules and Procedures
We will never pool funds together. If extra funds are needed to fund a deal then one lender will be given a senior (first) and the other will be given a junior (second) lien.
The minimum investment is $20,000.
We prefer to make no payments on a first or second lien when rehabbing properties that expect to be sold and cashed out within 6 months. These would essentially be the same as bank CDs (though with much higher rates).
Note payments are paid on the 15th of each month, allowing the properties' income to help cover the payment.
In the rare case that we pay you back in less than 6 months, (and you want to keep your money working), we will attempt to reinvest the payoff into another property.
Any requests for early payoff must be submitted in writing and we are given 60 days to return your funds. This is so we have enough time to acquire other funds in order to cover your investment. We really do depend on you! No penalty will be given, however, no interest will be given either.
Interest begins on the day your cleared funds are received by the closing agent.
We will purchase for you title insurance on newly acquired properties. We may not do so if we are borrowing against a property that we already own.
We always keep valid hazard insurance on all of our properties and every lender on the property will be added to the policy as a mortgagee.
Private money will never be accepted until you have received an original promissory note and the security instrument (deed of trust) has been sent off for recording.
We will never pressure you into doing a deal. Doing something that you are not comfortable with is never a good idea and never leads to positive results, whether you make money or not.
We cannot legally "guarantee" any investment that you make, as that could violate state and/or federal regulations regarding securities. We do, however, make certain to follow state and federal rules and regulations related to offering securities and will seek expert legal advice as needed.