Investment in real estate with no money down – Finalize all your offers with private loans!

If you invest in real estate, you need cash to buy houses. Even if you have a full bank account and excellent credit, you will eventually run out of funds, or time to get a loan, for the next business. Private loans are the answer. It’s a bottomless pool of easily accessible funds: whether you have excellent or poor credit; whether you have cash reserves or not.

“Private Lending” refers to the process of borrowing real estate investment funds from individuals at rates higher than these lenders can normally achieve in the market. The appeal of private loans is the speed and ease of financing a deal.

Here’s how it works… first you find or market to people interested in earning 10-12% interest (or whatever you find affordable to yourself and attractive to others) on real estate secured investments. You will find these leaflets everywhere. They belong to your local investor association, your church, your civic club, they are your friends and family, your next-door neighbor. You will be surprised how easily you will locate them and, soon, they will be looking for you. Just let everyone know that you pay high interest on their loans on your real estate projects.

Since prospects express interest, explain that investments are secured by real estate and do not exceed 75% loan-to-value (LTV) of the home’s repair value. Each investment is based on a specific property and they can reject any property they are not comfortable with. All you need is to get approved quickly (within 48 hours) and be able to fund within 7-10 days or less.

Once they have approved the investment, the funds are transferred to the closing attorney to be held in escrow. After closing, the lender will receive a Promissory Note from you (either personally, your business entity, or both), a Deed to Secure the Debt (Mortgage) on the property, title insurance from the lender, and you will be listed as a mortgagee on risk insurance policy.

If no individual investor can finance the entire investment, pool several loans by providing the largest investor with a first mortgage and each smaller investor with a progressively subordinated (second, third, etc.) mortgage. We typically pay an additional percentage on top of the interest rate to attract investors who take subordinated positions.

The advantages of private loans are that there is a minimal approval process, so the availability of funds is fast. You only pay interest, instead of also incurring a loan origination fee commonly known as “points.” You are never limited by arbitrary rules as to how many mortgages you can have in your name. In fact, none of these mortgages appear on your credit report. In turn, the private lender receives a higher interest rate with a very safe investment. Everyone wins!

Now you may be wondering how many people you know actually have $75k – $100k – $150,000 just ready to invest. More than you think, and most of them don’t even realize it! That’s because the money is tied up in their IRAs which they believe cannot be accessed until retirement. That is only half the truth. They cannot personally withdraw the money without suffering penalties; but they can invest their funds (and receive their interest tax-free! if it’s a ROTH IRA) if they are rolled over to a self-directed IRA.

A self-directed IRA is managed by a third-party institution (we recommend Equity Trust Company in Ohio http://www.trustetc.com) and allows the IRA owner to make decisions regarding the investment of funds. In other words, the owner of the IRA may decide to use his IRA funds to make a real estate investment in his property. Most people don’t even realize this as a possibility. They believe their money should stay tied up in an IRA until retirement and earn nominal interest. Imagine how excited they are when you give them this alternative! Imagine how much money is currently sitting in traditional IRAs that you could tap into. There are more funds available than you can use. Isn’t it a good problem to have it?

Since Equity Trust Company has all the forms on their website, I make sure that making a loan is as simple as possible for my private lenders. I prepare all the required documents so all they have to do is sign and fax to Equity Trust. From then on, the private lender has nothing more to do. Simple. Easy. Your next task is to approve the settlement when the loan is repaid. Because the loan process is so simple and the interest rate so favorable, investors always ask to reinvest. This really is a bottomless cash investment fund.

Don’t forget that if you have cash in an IRA, you can also increase the interest you earn by becoming a private lender. You may not invest in any property or business in which you or your family have a personal interest, but you may invest in the projects of other investors that you know and trust. It’s a great way to take advantage of your IRA.

Have a rich week

lou