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 their investment. When we have identified a home that is well under market value, we give our private lenders an opportunity to fund the purchase and rehabilitation of the home. Through that process, the lender can yield extremely high interest rates, up to four or five times the rates you can get on bank CDs 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 providing excellent security and safety for your principal investment. You can do what the banks have been doing for years: make a profitable return on investment backed by real estate. There is no other investment vehicle like it.
Through private money lending, you have the opportunity to become the bank.
Sources of Private Money
- 401k
- Self-directed IRA
- Profit sharing
- Personal savings, trust fund, or any other money sitting around
- Many are TAX-DEFERRED PROFITS
- Whole-life insurance
How You Benefit from Private Lending
You, as the private money lender, can benefit greatly from investing your capital. A real estate mortgage or 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 four to five 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, the higher rate we can pay to make sure our lenders feel the process is worth their time. Private lending means you can relax while your money is in a truly safe place, working for you.
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 and 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.
Retirement Accounts
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 and 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.
Cash
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.