Lou Brown discusses Private Money with Rick Donner

Ron LeGrand says Private Money is like driving a Mercedes

Private Lending:  What is it and how does it benefit you?

When we buy houses, we prefer to borrow from private individuals.  Banks, Insurance Companies, Financial Planners and Stock Brokers borrow money (from you) through Savings Accounts, Money Markets, CDs and Bonds, at a low interest rate and then loan the money to investors (like us) at a higher interest rate.  By borrowing from private individuals, we cut out the middle man and are able to give you a higher interest rate.  Why would we do this?  Having the cash readily available allows us to buy at a discount.

How Does the Private Mortgage Lender Program Work?

Once we’ve located a property that fits our purchasing criteria, we borrow from you to purchase the property.  We have a formal closing with a title company and you’ll receive a mortgage on the property along with several other documents.  This will secure your legal position on the property.

 Who Handles the Property?

This is one of the great things about Private Lending.  You do nothing!  We will locate the property, negotiate the best deal close the property and then make sure you receive all the documents.  We then rehabilitate the property (cosmetic repairs like paint, carpet and appliances) bringing everything to code.  Next our property manager will prescreen and locate quality tenants to occupy the properties and collect the money.  At no time, will you have to deal with the tenants or property.  We will see that all bills are paid including maintenance, insurance and taxes.  Your job in the process will be to receive your monthly interest check.

How Do You Get Paid?

We borrow the money at 8% interest and make monthly payments to you.  We place a 6 year balloon in the note, allowing you to get your principle sooner, thereby giving you the opportunity to invest again in other projects of your choosing.  The banks typically pay 1% - 2% and require a longer hold time.

How Can We Buy Properties so Far Below Market Value?

As real estate investors and coaches, we know where to look, what to buy, and what not to buy and how to renovate.  We purchase small multifamily units meeting specific parameters that will allow us to maximize the property.   Value is created by taking ugly vacant properties, renovating them and putting tenants in them, which in turn improves the community.  Through our connections, we are able to buy in bulk and at a discount, finding deals that just don’t otherwise exist.

What Documents Secure Your Investment?

  • Mortgage
  • Title Insurance
  • Hazard Insurance Policy
  • Promissory Note

Lenders have no expense during this process.

  • Our #1 Rule:  The money borrowed is no more that 65% loan to value after renovation.  What does that mean?  If the property is worth $100,000 after repair, you won’t be lending any more than $65,000.  (This is additional security for you.  We know you know from a lot of TV ads where they’ll go out and they’ll give you 125% on your money.  We don’t do that; our paycheck is in what’s left over in that property when we sell it.  So we don’t and won’t over leverage.)

Take Control of Your Future!

  • If you loaned $50,000 at 8% interest, you’d receive $4,000 in interest annually.  That’s passive income (no work on your part) – the best kind!

  • A bank CD at 2% on the same amount pays only $1,000 annually.

  • That’s a difference of $3,000 PER YEAR!!!  This does not include some of our other additional incentives.

Invest With Your IRA or Pension Plan

Do you have money in an IRA or 401K Pension Plan?  Did you know you can self direct your IRA (Traditional and Roth) or pension plan?  Did you know your returns stay tax deferred or tax free?  It’s simple, easy and we do the work.  Did you know you can borrow your cash value on your Whole Life Insurance Policies, which are earning CD rates of return?  You would then loan back out to us to purchase properties.  You earn 8% instead of 2% or less!

The Next Step?

Give us a call at 888-548-8450 or send an email with any questions you may have to lending@donnercpa.com.  We look forward to working with you.

Profit in Today's Real Estate Market - A 3-part video series by Lisa Donner

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