Private Lending ED

Private Funding Concerns: Are we seeing a false bottom to the real estate market ?

The many new private lenders out there who want to fund projects with me always ask: Are we there yet? and I reply: Where? After a little chuckle they yell: the bottom! A report by Deutsche Bank last week shows still more price drops to come. All the statistics in the world will never predict a true bottom. That's because there are too many unknowns and secrets.

The first and most important one is: What will the banks do? No one knows. All we can do is use all the information we do have and make an intelligent plan. The key piece you need to know is what are your exit strategies? Do you have a plan A, B and C? You should evaluate each real estate investment with plans in hand.

If your plan is to buy and hold for the long term, how will you get out if you need to sell short term? Will the property have enough equity? What is your cushion or safety net? Answer these questions and others and you will have a secure, profitable real estate transaction. To find out how download our free report www.PrivateLendingED.com - All the best!

When a private lender funds a private money loan does the transaction close with an attorney or a title company?

As a private money lender secure profitable real estate deals are your primary concerns. When funding a real estate transaction it is wise to use a professional. Even seasoned real estate brokers who could fill out the paperwork in their sleep, would not close without one. Why? Because they know the paperwork will be handled by people who are knowledgeable and trained to keep your transaction secure.

One very important factor in keeping your investment safe, which a title company or attorney will suggest, is a lender's title insurance policy. This is often missed by private lenders because they buy with cash so it isn't always obvious that it is needed, unless you use a proffessional to close the deal! 

Where the transaction is being completed will determine whether you use an attorney or a title company. In California we close with title companies. In Georgia, the title company is a law firm. Check with your real estate investor to learn which you will be using. If they don't know, find another person to work with. A successful real estate investor should have the correct information.

I'll explain title insurance and the benfits of having it in my next post. Until then, all the best.

How do I evaluate whether a private money loan is a good investment or not?

As a private money investor it is crucial to be able to evaluate whether your real estate investor has brought you a viable, profitable opportunity. Of course private equity investments all have particular exit strategies designed to make money. Being able to properly identify the specific plan that works for the property being invested in is vital to your success as a private banker. Let's go over some fundamental rules of thumb.

Real estate investors buy properties at a discount and borrow funds below the market value of the property securing the loan. Equity and your maximum loan to value (LTV) is your buffer and your primary detail to calculate for every transaction. Here's how you do that:

First, determine the after repair value (ARV) of the property being considered. The ARV is what the property would sell for in 30 days, fixed up, to a nice family with pets.

The next thing we consider are the repair costs. What needs to be done to get the house in salable shape. Obviously each property will have need different levels of repairs. An experienced real estate investor will have his construction team estimate the work to be done and provide the private money lender with those numbers.

The third number we must know is the purchase price of the investment. Once we know all three numbers we will be able to properly evaluate the total loan to value. An acceptable LTV should not exceed 80%. In terms we can see numerically: If a property has an ARV of $200,000, the repairs are $15,000 and the purchase price is $125,000, your loan to value is calculated by adding the repairs to the purchase price ($125,000 + $15,000 = $140,000) and dividing by the ARV ($140,000/$200,000) your result is a loan to value of 70% making this a more secure, profitable deal.

Evaluating The Opportunity: Part 2

Last February we talked about investment property loans and holding the property for 5 maybe even 10 years in order to realize long term profits. But what if you want to turn your capital twice or even three times a year? Are there opportunites for those kinds of deals? Of course there are!

It's true the real estate market has changed in the Riverside, California area. Banks have been reducing inventory on forclosed properties, which in turn has produced a mini-sellers market. Unless banks start releasing more foreclosed properties, this should continue for a while. That is good, because that increases the ability of private money lenders in California to find those distressed under valued houses which real estate investors love to buy, fix up and re-sell at very high profits.

It's also good for private lendors who want to see high returns on their investments. There are many of these risk adjusted opportunities all over the Southern California area. As buyers are bidding up prices on foreclosed properties, the market is stabilizing.

So when will it be the right time to become a private money investor? The right time is when the right deal presents itself. Now is the time for wealth building action. Let us show you the secure and profitable way to lend your money. All the best until next time.

The Private Funding Team

Ah, springtime. The baseball season starts. Basketball playoffs! Baseball teams are works in progress whose evolution last for months. Some teams are blossoming now. Some pull it together later in the season. But in the end, it's the two best teams who get the blending and balancing of the talent and use opportunities to their advantage and win!

Basketball teams also play a relatively long season. The blending of talent over the eighty two games and then the playoffs is an art and a science. As a private investor you want to be part of a team who has pulled it all together and has the talent to win.

The real estate investor's team relies on their talent to bring in the inventory of property, rehab the property and then either flip it or rent or lease it out. One of the key components of the business plan includes the financing.

A seasoned real estate investor surveys the entire realm of financing available and chooses the best fit for the available projects. Private banking is always the best type of financing for enabling real estate investors to strike at prospects quickly. It allows them to take advantage of the distressed property market and acquire investments at significantly reduced prices.

There is much more to learn about how to be a good team player in the secure and profitable business of private money lending. Once you see how the whole process unfolds you'll be able to blend your contribution and goals with those of the real estate investor for high yields and wealth building.

What are the private lending documents I need to complete and secure the deal?

Lending your money with a private party loan is quite simple. The most secure and legally acceptable way is with two documents: the promisary note and the mortgage or deed of trust. In our business we use both and here's why.

The promisary note is signed by the real estate investor who promises to pay back your loan. It lays out the precise terms of the loan. What is the length of time of the repayment? Years? Months? The note should reveal the interest rate, payment schedules and the other aspects of the particular deal the private lender is making (such as construction deadlines, etc.).

The mortgage or deed of trust is also signed by the real estate investor and recorded in the county or state public records by the closing attorney or title company. This secures your loan against the real estate. Each state uses either mortgages or deeds of trust. Do not confuse the deed with the deed of trust. They are two separate documents. The deed provides verification of the recorded owner of the property which in this case will be the real estate investor.

The deed of trust shows separate confirmation that you have money invested in and secured against the property. It is your protection if the real estate investor sells the real estate. You have a recorded document that proves you have an investment property loan. It assures you will get paid.

An experienced real estate investor will have these documents available and should know how to craft a secure, profitable, real estate deal. If not, look elsewhere...

What's the difference between Private money loans and Hard money loans ?

Recently it came to my attention that many people confuse private money lending with hard money lending. The term hard money came about during the Great Depression when banks withdrew from loaning their funds. Private individuals started to lend their money for many different reasons, real estate being chief among them. The reason it's called "hard" is either because it was difficult to get, or it was "hard cash" or "hard" to find, no one knows for sure.

Hard money lenders charge much higher interest rates than banks and usually require less money down. You also do not have to qualify for the loan, it is asset based. The more the property is worth the more the lender will lend.

Private lenders loan their money as an investment in real estate and expect a return that is agreed upon in advance. It is a very flexible and simple system to create massive wealth if done properly.

Private lenders may lend money to hard money lenders, however if you do, you should know in advance and have your loan secured by the real estate (preferably in a first position). Secure, profitable, real estate is our goal and our guarantee.

How can I become involved in the highly profitable distressed real estate business?

People always come up to me and ask "Mark, I want to invest in real estate because I know I can make a lot of money, but I don't know what to do, or when to do it. I also don't want to deal with tenants, toilets and trash! What can I do to make money?"

My response is the same no matter who it is: become a private lender!

Lending your money to businesses that make money in real estate for a living, rather than trying to buy, fix up a property and rent it out or sell it yourself. That way you are releived of the burden of hassling with things better left for the experts.

What exactly is private investor lending and how can it benefit you? In our case we are going to be talking about private lending in real estate. Regular people like you and me lend our money to a real estate investor to buy a distressed property at a huge discount. The funds to close on the purchase and make repairs (your money) are secured by a 1st mortgage (lien) against the house that you and the real estate investor choose for your investment.

Basically, private lending is you becoming the bank and earning high interest rates and eliminating the middle man. If you want to learn more pick up our free report at http://PrivateLendingED.com or keep coming back here for more information. All the best...

Real Estate Investing: Evaluating The Opportunity

Perfect timing! Last night's speech by President Obama gives us a chance to evaluate our opportunity for investing in distressed real estate. After listening to the speech and after listening to analysis of President Obama's address, I am certain now is the time to take advantage of the lowest prices in nearly a decade.

"But Mark, why now? Don't you think prices will go lower? Aren't you afraid of loosing equity?"

Will prices go lower? By how much? I wish I could know for certain when the exact bottom of the market is. When evaluating opportunity we also look at our individual investing goals. What is our best exit strategy now and what kind of returns are we expecting to yield?

If I could receive a 10% annualized return before taxes and expenses, renting a property out today, would it matter if the property's value dropped by 5%? What about 10% ? Well let's take a look-at an example to study this further. Suppose you have money in a money market account earning 1% interest. Let's say it's $100,000, making $1,000 per year, about $83 a month.

Now instead find private investors who will invest the same money $100,000 in real estate and get a $1,200 per month return in the form of rent. Would it matter if the property's value went down 5%? That would make it worth $95,000. What's the return? The same as before, no change. What about a 10% decrease? No change, because your rent is still $1200 per month. By the way, that's a 14% annualized return.

Of course this is for a buy and hold strategy not a short term flip. You will probably be holding this for at least 5 years but more likely closer to 10 years. I would much rather be holding real estate in 10 years than holding anything else, especially if I don't have to worry about it. Not worry, why not ? We will have more information about that in a future post, stay tuned.

As you can see by evaluating the opportunity it will make it easier to make an intelligent decision. President Obama directly addressed our real estate crisis last night by declaring he would help those who honestly couldn't pay their mortgages and not help the "speculators" or those who knew they weren't going to be able to pay (how will he know this ?).

In either case the banks now know the properties they own or will own, still have to be sold. The government is not going to buy them, smart, educated people will. Will you?

What are the three factors a private lendor must evaluate before making the deal?

Welcome to Private Lending ED. Our goal is to provide clear, logical information concerning the business of private funding. We want to educate you on how to be a safe and successful lendor. With the chaotic, frightening economic crisis reducing our incomes, we want to reveal to you the money making world of the wealthy.

Our step by step system will teach you how to make 9%, 10% or even 12% returns in real estate right now without ever dealing with any of the hassles of owning real estate: tenants and fix ups. We'll show you how, let's get started!

The most important decision an investor makes is where to put ones money. Which vehicles will travel the best and for how long? Especially now in signs of worsening conditions, what can we do? To make the analysis less stressful and create successful results we must consider these three factors: The Opportunity, The Risk and The People.

We will go into those in more detail in the following days. Let's cover a brief outline of some things to consider for each. First, we evaluate The Opportunity. Are there good opportunities in the real estate market today? Do they meet my financial objectives? What will my return on investment be? What will the payback period be? There will be many more we will discuss.

The next factor to consider is The Risk. Can I risk loosing my investment? Is there a track record of the investment model I am considering to confirm that the model works? Do I know whether the investment is secured by assets or not? Another part of this is understanding the legal, tax and other future risks. I will have more information on what to ask later.

Finally, the last evaluation is as important as the other two: The People. Who are they and do I trust them? Having confidence in the company you invest in is key. Who is the team and can they do what they say they will do?

Ultimately the private money investor should know the answers to these and many other questions before they start the lending process. Here at Private Lending ED we will provide you with as much information we can to allow a winning investment strategy to grow and develop.