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Post by Brian Gibbons on Mar 18, 2005 19:20:16 GMT -5
Private Money has to do with getting funds from Private Individuals. See here how to do that.
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Post by Brian Gibbons on Mar 19, 2005 21:45:18 GMT -5
Author: GRQ Properties, Inc.
Dear Private Banker,
Increase the Yield of Your IRA, Pension Plan, Savings or CD's to a Consistent 10%-15%!
Were you aware there is an investment opportunity that provides consistent high yields and
liquidity, secured by real estate, but without any management headaches? Sound good? Would the
potential to defer income taxes on your earnings or not pay them at all make it even more attractive?
If so, then please continue reading this important report to learn more.
There is a relatively risk-free way to earn great rates on your money without having to endure the
maniacal fluctuations of the stock market or settling for the ridiculous 2% rates banks pay on
savings accounts. It’s called Private Mortgage Loans.
What is a private mortgage loan?
When an individual makes a fixed-rate loan to a real estate investor so that the investor can purchase an investment property, there is no lending institution
involved, thus the terms private mortgage loan and private banker. The private banker is secured by
a first or second deed of trust similar to any lending institution.
Lending institutions lend money to almost anyone and will sometimes lend more than the value of
the property. This Loan-To-Value (LTV) percentage is an essential determinant of the risks involved in the transaction. If a lender makes a 100% LTV loan on a property and later has to pay for a foreclosure, repairs, and a Realtor, every dollar is an out-of pocket expense.
This is why lenders require borrowers to obtain mortgage insurance for any loan that will be higher than an 80% LTV.
The reason lenders prefer 20% down payment is because they know this will cover any expenses incurred in getting their money back out of the property.
If the property needs no repairs, then the excess is pure profit.
Therefore, to protect the private banker, private mortgage loans should not surpass the 80% LTV
mark.
In addition, to further increase the private banker’s security, any loan made at or close to the 80% level should already include the cost of repairs.
Many times the private banker’s LTV is much lower than 80%. It’s not uncommon to be as low as a 50% LTV loan.
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Post by Brian Gibbons on Mar 19, 2005 21:51:28 GMT -5
For example, an investor can purchase a property for $72,000 that needs carpet, paint, cleaning, and
other minor repairs that will cost around $6,000. However, the after-repaired-value (ARV) is actually $100,000. The private banker loans the investor 80% of the ARV of the property ($80,000) to cover the purchase, repairs, and closing costs. The investor makes monthly payments to the private banker until the property is repaired and sold or until the loan comes due, at which time the loan is paid off in full.
The private banker now has his original principal back plus earnings to reinvest.
Occurrences of default, where the investor can’t make his monthly payments on an 80% or lower LTV loan, are rare. In the worst case scenario (or perhaps best, depending on your perspective) the private banker takes the property back through foreclosure and now owns an excellent condition property that will sell for $100,000, which he “bought” for $80,000. That’s a profitable “worst case scenario”!
And what if this had only been a 60% LTV loan? Cha-Ching!.
continued....
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Post by Brian Gibbons on Mar 19, 2005 21:59:16 GMT -5
Frequently Asked Questions
Do I Need a Lot of Money to Be a Private Banker?
No! Private bankers can lend as little as or as much as they want. The amount of the loan and time
period will factor into the compensation negotiation. Additionally, you may want to start out small
with short-term loans until you get comfortable with the process. If you wish to loan only $10,000,
you simply write a check for that amount at the appropriate time. However, more opportunities and
more favorable terms will be available to those with larger amounts to loan.
Who Handles All the Paperwork and Details?
Unless you are highly skilled in real estate matters, we will handle all paperwork and details of each
transaction and pay any expenses. You begin to earn interest on the full amount of your funds as
soon as they are received. It is our goal to ensure this entire process is hassle-free for you.
How is My Interest Rate Determined?
The interest rate depends on many factors, including but not limited to, the risk involved, the amount of funds loaned, the time period, ability to fund quickly, etc.
How Do I Receive Payments?
Payments will be mailed monthly to whatever address and payee you choose.
Is This A Long Term Investment?
It can be whatever term you want. You can loan your funds out for as short as six months and/or up
to thirty years. It's your money and it's your choice. Short-term loans are typically interest only with full principal repayment at the time the loan is paid off. Long-term loans will have amortizing payments (part principal and interest in each payment) and may have balloon payments, depending on your requirements.
What If I Want To Liquidate Before the Term is Up?
Promissory Notes secured by Trust Deeds are purchased every day like stocks. It may take a few
weeks to sell your note, but we can assist you with that if necessary. Just call, and we will handle all
of the details of getting you your cash.
What Kind of Documents Would I Receive in a Typical Transaction?
Your closing package should contain the following:
•An original promissory note specifying the terms agreed upon.
•A copy of the mortgage. The original will be recorded and then mailed to you.
•A fire insurance endorsement naming you as mortgagee.
•A title insurance policy for the amount of your loan insuring you against any title defects.
How Safe Are Private Mortgage Loans?
As long as you follow the guidelines discussed above and apply common sense, private mortgage loans are relatively risk-free. You receive a consistent, high yield on your investment and your principal amount is secured by a real, tangible asset. You maintain control of your investment decisions and your money can grow two, three or even four times faster than your current
investments. And if you follow the simple guidelines listed below, your risk will be minimized considerably.
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Post by Brian Gibbons on Mar 19, 2005 22:02:44 GMT -5
Briefly, these guidelines are:
1. Don’t surpass the 80% LTV level.
2. Get a mortgagee title insurance policy (investor pays).
3. Have professionals close the loan.
4. Get an insurance policy on the property (investor pays).
Can I Use My Retirement Plans to Invest?
Although it’s not common knowledge, using self-directed retirement plans to invest in real estate is
specifically approved by the IRS Tax Code. And since your earnings can grow tax-deferred or tax-free
(Roth IRA), more money is left in the account to compound and grow. The results can be
staggering, especially when compared to traditional-type investments.
How Do I Setup My Retirement Accounts to Make Loans?
In order to use a retirement account for making loans, it must be administered by a "Third Party Administrator" (TPA) that allows real estate investments through a self-directed IRA. Very few retirement account administrators, including those who do have self-directed plans, will allow you to make real estate investments. If you would like to get setup, please contact our office and we will provide you the names and numbers of TPA’s that specialize in this field. Once your account is established, all you do is sign papers to direct your TPA to make the investment for you. Typically, there should not be any additional costs to you beyond your regular plan administration costs.
Some TPA's will even collect the monthly payments for you and deposit them into your account.
How’s that for hassle-free?
Summary
Mortgage lending is an incredible way to build wealth in a hurry that most people aren't aware exists. As numerous financial planners advocate, diversification is an important tool in any investment strategy. If your investments are limited to the up and downs of the stock market or savings accounts and CD’s that barely keep up with inflation, I strongly urge you to consider the many benefits of becoming a private banker. We will be happy to assist you in any way we can and
we look forward to serving you in the near future.
Thank you for your time and consideration.
Sincerely,
Tim Randle
GRQ Properties, Inc.
402A W. Palm Valley Blvd., #192
Round Rock, Texas 78664
512-255-1669 (O) 512-255-4049 (F)
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