A SAFER WAY TO INVEST THROUGH PRIVATE MONEY INVESTING
- Ø If you’re tired of poor performing market investments
- Ø If you’re looking for a double digit ROI
- Ø If you’d like more control over your portfolio
- Ø If you’d like to invest in Real estate but don’t want property management hassles
THEN YOU SHOULD CONSIDER BECOMING A PRIVATE MONEY INVESTOR
Private money investing is a type of financing in which a borrower receives funds, from a private investor, secured by real estate and or a personal guarantee from the borrower. This type of investing typically produces a regular, predictable income stream. A private money investor is the private source of funding for real estate investors. When an individual lends money to another individual on mutually agreeable terms, it is considered a Private Money loan. Many people equate private money investing with hard money loans.
Hard money refers to a short term financed loan that is secured by real estate and often a personal guarantee from the borrower, adding another layer of protection for the investor/lender. Additionally, a private money investor is also known as a private money lender, a hard money lender or a hard money investor. They are essentially the same thing; private individuals lending their money directly to the borrower with interest rates, points and a promissory note secured by real estate.
Why would anyone consider becoming a Private Money Investor? Investing in loans secured by real estate offer a higher rate of return and lower risks. Private lending offers the investor more investment control. Anyone with money, stocks, IRA or just really good credit to invest, can become a Private Money Investor. Countless stock investors who have grown tired of inconsistent returns and losses have become private money investors. Most of all you can invest in real estate without the hassles of being a landlord, dealing with contractors or tenants.
There are great advantages to being a Private Money Investor. There are no commissions to invest you money. A private money investor can receive a relatively high yield from their investment; in most cases double digit returns. Despite the “bailout”, banks are not making real estate investor loans. Real estate investors are desperate for funding. Private investors and hard money lenders have no competition. And they are “cleaning up!” This economy and the banking industry have created the perfect time to become a Private Money Investor. Home prices are low, foreclosures are high. Despite the “bailout,” banks aren’t making real estate investor loans. RE investors are desperate for funds. It’s time for you to seize the opportunity!
Flexibility is another advantage of being a Private Money Investor. As a PMI you have the option to invest in short or long term investments. Typically, a loan can mature as soon as 6 months or as long as 3 years. The typical interest rate for a private money investment ranges from 10% – 18% depending upon the time frame, the purpose and other factors.
A common concern with any investment is that you may lose the money you invest. Smart investing includes risk management. Anyone offering a risk free investment is probably not being up front with you. Do your own due diligence. It is the best interest of a private money investor to minimize risk and maximize return. Low loan-to-value ratio (LTV) increases the security of the loan. Furthermore, Private Money Investor loans are secured by real estate, so in the event of default you still have the ability to recover your investment.
FAQ:
Q: What is a hard money loan or a private loan? Why would I choose to invest in them?
Q: Why would a Borrower seek a comparatively expensive private loan rather than a conventional bank mortgage?
Q: What’s in it for me?
Q: Do I have to have experience in RE investing or finance to invest?
Q: Are there upfront fees or commissions?
Q: With is the minimum I can invest?
Q: Can I invest with my IRA?
Q: What is the length of the investment time on these loans?
Q: How to do I get paid and when?
Q: What happens if the borrower defaults on my loan?
Q: What protections are in place to keep someone from running off with my money?
Q: What other ways am I protected as a Private Money Investor?
Q: How can I learn more about whether private mortgage investments are right for me?
Q: What is a hard money loan or a private loan? Why would I choose to invest in them?
A private loan is a secured debt obligation, which produces a regular, predictable income stream to the investor with all the security, protections and recourse that a mortgage lien can provide. While mortgages do not typically provide any capital appreciation, they do generate a steady stream of interest payments, which, in today’s market, can exceed current money market rates by more than 10%. Unlike stocks, the security is tangible bricks and mortar, where legal protections such as title insurance and many other unique rights and remedies ensure the enforceability of a mortgage lien. Many private mortgage loans are also secured by personal guarantees from the Borrowers, adding another layer of recourse beneficial to the investor.
Q: Why would a Borrower seek a comparatively expensive private loan rather than a conventional bank mortgage?
The answer is frequently time-based. There are many reasons, but for starters, here are two:
1. Time Crunch: The Borrower has applied for a conventional bank loan, but the time-of-the-essence closing date is rapidly approaching, the bank is still completing its due diligence, yet the Buyer/Borrower simply has to close in a timely fashion in order to avoid losing a hefty contract deposit. After closing the bridge loan with a Private Lender, the Borrower can then take as long as necessary to arrange permanent financing.
2. Transitional Property: Another typical case would involve a Borrower purchasing a vacant property that he plans to convert to another use (office to residential, for example). A bank would rather finance the deal AFTER the Borrower has executed his business plan, rented the property and created cash flow. The Private Lender is willing to get more deeply involved than most banks, evaluating the Borrower’s past track record, the viability of the Borrower’s current business plan to convert/improve the property, as well as the value of the Borrower’s personal guarantee or other collateral. The savvy Borrower is also fully aware that he is only going to have the Private Loan outstanding for perhaps 12 months, and that paying 12% – 14% for such a brief period of time is far LESS expensive than bringing in much more expensive equity partners for the long haul. If an owner or developer raises additional equity by bringing in partners, it is certain that he will have to give up a substantial “piece of the pie”.
Q: What’s in it for me?
The typical interest rate for a direct private loan ranges from 10% – 18% depending upon the time frame, the purpose, the loan-to-value ratio, the exit strategy, the quality of the Borrower’s personal guarantee(s) and other factors Low risk high return investment opportunities. More control over your investment dollars Long term and short term investing options
Q: Do I have to have experience in RE investing or finance to invest?
No, although we encourage our clients to become as knowledgeable as possible, your mortgage broker can aid you in evaluating your deal.
Q: Are there upfront fees or commissions?
Absolutely not!
Q: With is the minimum I can invest?
Most deals range from 20K to 450K, the choice is yours.
Q: Can I invest with my IRA?
Yes. There are many IRA custodians across the US that handle self-directed IRA’s and are familiar with this type of investment. Tax-deferred investors (IRA’s, Pension Plans, Keogh’s and the like)
Q: What is the length of the investment time on these loans?
Typically, a loan can mature in as soon as 6 months or as long as 3 years.
Q: How to do I get paid and when?
Distribution of the interest payments are made to investors monthly or quarterly.
Q: What happens if the borrower defaults on my loan?
In the case of default, the investors takes control of the property and can sell the property to regain the funds invested or can retain the property and collect the monthly income that the property is producing. In addition, there are joint venture options available to the investor who doesn’t have the time or interest in the above mentioned options; speak with your mortgage broker for more details.
Q: What protections are in place to keep someone from running off with my money?
Your funds will always be wired directly to the closing attorney or escrow agent. Your mortgage broker will NEVER ask you to wire funds directly to him or the company. Once you receive the closing attorney or escrow agents information, you should due the necessary due diligence to make you feel comfortable with wiring your funds.
Q: What other ways am I protected as a Private Money Investor?
As the mortgage holding you have the personal guarantee of the borrower, the subject property secured as collateral and your name on the insurance policy as well.
Q: How can I learn more about whether private money investments are right for me?
To learn more, you can contact us at 330 832 5253 or email us @ info@jdbfinancialllc.com
