Private Money Lending Opportunities

For More Information Contact Matt Hansen

What is Private Lending?

A private money loan is a loan that is given to a real estate investor, secured by real estate. Private money lenders are given a first or second mortgage that secures their legal interest in the property and secures their investment. When we obtain a home, we give our private lenders an opportunity to fund the purchase and renovation of the home. Through that process, the private lender can yield extremely high interest rates — 4 or 5 times the rates you can get compared to traditional cash investments through the bank. 

Essentially, private money lending is your opportunity to become the bank, reaping the profits just like the bank does with the money invested in them. Where does the bank usually invest their money? In REAL ESTATE via loans to consumers! It’s a great way to generate cash flow and produce a predictable income stream – while at the same time, provide excellent security and safety for your principal investment. You can do what the banks have been doing for years…make a profitable return on investments backed by real estate. There is no other investment vehicle like it. It is the most secure investment on planet earth. You can drive by it, touch and feel it.

The process is simple. We find a property we want to purchase — and once you give us the green light, we borrow the funds from you to purchase and renovate the property. At closing, you receive a Promissory Note with the loan terms and conditions and a Mortgage to use the property as collateral.

 

Next stage is the property renovation. Once the renovations are complete (typically 4-6 months depending on the size of the project), we then refinance the home with long term debt and rent the home out. When it’s time for the refinance closing, you’ll receive your principal back plus double digit interest in a lump sum payment paying off your loan. It’s just that simple! The goal is to keep rolling that money into new deals. You will make substantial profits growing your wealth — building a long term mutually beneficial relationship. 

Here are the Numbers from an Actual Deal We Have Done:

After Repaired Value (ARV): $233,000
Purchase Price: $135,500
Estimated Repairs: $20,000
Closing / Holding Costs: $5,000
Total Private Loan: $160,500 (69% of ARV)
Loan Term: 12 months
Interest Rate: 12%
Total Interest Paid to You: $16,200
Your Total Payoff: $176,700

Our loan terms are 12 months but on average we complete the projects in 6 months.
Therefore the interest paid to you in this example would likely be $8,100 in just 6 months.
You can then roll these funds into another deal.

Frequently Asked Questions

These are the most frequently asked questions by our investors regarding Private Lending. If you have further questions, just send me an email at Matt@HansenHoldings.com or schedule a call and I will be happy to assist you.

Q: How Do I Get Started?

A. Simply contact Matt at 904-200-2749 or Matt@HansenHoldings.com to schedule a call to answer any questions

Then, when we find an investment that is a good fit, we will let you know what it will take to get the job done. You will simply transfer the funds from your account to the Title Company, where they will secure them by a Promissory Note and Mortgage against the property with your name.

Q: Is Your Private Investor Program A Safe Investment?

A: Making private loans for real estate is one of the safest investments because it is backed by real estate and has a fixed return. Most investors consider it much safer than the stock market. Think about it: with the stock market you are getting stock in companies you know little about, in a volatile market no one can really control, and the value can be impacted or manipulated by outside influences. The only real choice you get to make is whether you buy or sell.

We only purchase houses with 75% Loan to Value on After Repair Value in good neighborhoods. This means we are paying 75 cents on the dollar for the home. You have 25% equity in the home on day one of purchase. Your money is also protected by the collateral of the property.

Q: When Will the Loan Be Repaid?

A: You are paid interest at “loan payoff” in 12 months or less in a lump sum along with your principal. (We typically repay funds in 6 months.) Funds will be wired transferred directly into your designated account at payoff. We will keep your money as busy as you want it. The more often we turn it, the faster it is growing for you.

Q: How is the Interest Rate Calculated?

A: Interest is paid as an annual percentage rate. For example, if the rate is 12% annually and the loan is repaid in 10 months you will receive 10% interest plus your full principal paid back.

You can usually roll the funds into another deal immediately to maximize your returns and creating a compounding interest effect. Based on the condition of the house, we will provide you an estimate of the pay-off time frame before making the loan.

Q: Won’t I Need a Lot of Money To Get Started?

A: We have investors that start with as little as $35,000. This would cover a down payment or renovation costs on a house. Purchase price of the homes start at $100,000 with renovations of $25,000. The average all-in cost for our deals is $160,000.

Q: How is My Loan Guaranteed?

A: You will receive a Promissory Note documenting the terms and conditions of the loan and a Mortgage that puts the house up as collateral. Plus, we require fire & hazard insurance and title insurance on all houses.

If your loan amount covers the full purchase price of the house and renovations, you will have first-lien position on the house.

If your loan amount just covers the down payment and/or renovations, then you will have second-lien position on the house.

Bottom-line, both first and second lien positions will be made whole in the rare event of a default because all houses are purchased at 75% of After Repair Value. i.e. If the After Repair Value of the house is $100K that means full loan amount is only $75K.

Q: Can I Use My IRA or 401k to Make these Loans?

A: Yes. In fact, it is a great use for them, and what better way to grow it than tax deferred. (Please consult your tax professional.)

If you already have a self-directed IRA or Solo 401K you can typically loan funds from that account immediately.

If you have a regular IRA or 401K you must transfer the funds to self-directed administrator of your choice. (There are no penalties from the IRS as you are just rolling over the funds.)  There are expenses involved to set up the self-directed account, but it is worth it as you will get total control of your funds.

I personally use an Enhanced Qualified Retirement Plan (EQRP). It gives you checkbook control of your money and your investment choices. If you decide you want to purchase real estate with your retirement account, you need the funds in an EQRP type account to reduce your taxes significantly.

Q: Who Handles the Paperwork?

A: All real estate closings are done by an independent title company. Your cashier’s check or wire transfer will be made to and sent directly to the title company.

The title company is responsible for processing the Promissory Note and Mortgage. They receive your funds and apply them to the purchase. They also ensure all documents are in place and secure your interest just like they do every time they close a loan for a bank or other lending institution. You will get copies of all the paperwork and it will be officially recorded with the County Clerk.

Like all legal documents, your signatures will need to be witnessed by a Notary Public. This can be done at the title company’s office or remotely in whatever city you live with a local Notary Public.

Q: How Much Notice Will I Get When I Need to Fund a Loan?

A: The funds need to be received by the title company typically 3 days before the closing date. Of course, you will have reviewed and approved the details of the loan 7 or more days before sending the funds.

Q: Why Haven’t I Heard of This Before?

A: Two reasons. One, nobody gets paid to tell you about private lending. Stocks, Bonds and Mutual Funds all have large companies and brokers who get paid hefty commissions when you invest in the stock market.

Second, most people try to generate a passive or retirement income by using conventional wisdom, and they let other people control their money and make decisions for them.

This is not about conventional wisdom. Show me one super wealthy person who has earned their money or lives their life by conventional wisdom. You must educate yourself on other invest options to earn higher than average returns on your money.

Q: Why Would You Pay Such High Interest?

A: It is because the cost of money is not our main concern. The availability is much more important. Banks take several weeks to process loans. If we cannot obtain the money quickly to win deals to buy and fix the house, we cannot make a profit.

Real estate investors buy distressed properties at steep discounts. The profit margins are typically significant therefore they can afford to pay high interest rates to private lenders.

It is a win-win situation for everyone. The borrower can close more deals and the lender receive high returns on their money. It makes for a better, longer, ultimately much more profitable relationship for all of us. Our hope is that you will be so ecstatic you will tell all your friends and family so they will invest with us too and grow their wealth like you.

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A: It is because the cost of money is not our main concern. The availability is much more important. Banks take several weeks to process loans. If we cannot obtain the money quickly to win deals to buy and fix the house, we cannot make a profit.

Real estate investors buy distressed properties at steep discounts. The profit margins are typically significant therefore they can afford to pay high interest rates to private lenders.

 

It is a win-win situation for everyone. The borrower can close more deals and the lender receive high returns on their money. It makes for a better, longer, ultimately much more profitable relationship for all of us. Our hope is that you will be so ecstatic you will tell all your friends and family so they will invest with us too and grow their wealth like you.

For More Information Contact Matt at Matt@HansenHoldings.com or schedule a call.