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Private lender presentation
- 1. Private Lending for Higher Profits Southeast residential partners
- 2. Notice Please carefully consider the investment objectives, risks, costs and associated expenses before investing. Real estate investments are not guaranteed or insured. Past performance is not a guarantee of future performance. Please ask questions and ask for more information before you consider any investment.
- 3. Private Lending for Higher Profits How much are you currently earning on your investments? CDs, Stocks, Mutual Funds, Savings, IRAs, 401K accounts Are you consistently earning 10%? Do you want to have more control and safely increase your return on investment?
- 4. Recent Market History… Stock Market Interest rates Corporate fraud Accounting fraud Securities fraud World events
- 5. Real Estate… Slow, steady appreciation Tangible asset Everyone needs shelter Tax benefits The American Dream
- 6. Who We Are… We are a local Real Estate Investment Company We are affiliated with a group of investors that buys and sells several houses each month We work with Private Lenders to finance many of the houses we buy
- 7. What We Do… We buy pre-foreclosure and distressed houses, usually in nice neighborhoods We buy houses from sellers who need to sell quickly or who need debt relief We renovate and then lease or sell the property
- 8. What is Private Lending? We borrow funds from private individuals for acquisition, repair, holding and selling costs In exchange, our lenders safely earn a higher than average return on an investment secured by real estate
- 9. Why Not Use Banks? Credit is tight Banks move slowly Our sellers need to move quickly This is a very competitive market Access to cash allows us to buy quickly and at a discount Banks will not lend money in certain situations e.g. No carpet or no furnace = No Loan
- 10. Let’s walk through an example You have money to lend (self-directed IRA, old 401K, CD/Savings) We locate a house to buy and provide you with details to evaluate At a formal closing, you receive four documents to secure your investment We purchase and renovate the house We pay off your loan including Interest earned L SO D We sell or refinance the house You earn 10% simple interest
- 11. Example: $15,000 Loan Rate Earnings 2.0% 10.0% 12 Month $ 300 $1,500 You make as much in ONE year at 10% as you do in FIVE years at 2%
- 12. Example: Power of Compounding $15,000 Loaned at 2% Year Principle Rate Interest $15,000 Loaned at 10% Total Principle Rate Interest Total 1 15000.00 2% 300.00 15300.00 15000.00 10% 1500.00 16500.00 2 15300.00 2% 306.00 15606.00 16500.00 10% 1650.00 18150.00 3 15606.00 2% 312.12 15918.12 18150.00 10% 1815.00 19965.00 4 15918.12 2% 318.36 16236.48 19965.00 10% 1996.50 21961.50 5 16236.48 2% 324.73 16561.21 21961.50 10% 2196.15 24157.65 6 16561.21 2% 331.22 16892.44 24157.65 10% 2415.77 26573.42 $9680.98 Reinvest the principle and interest each year and you earn over $9600 more over 6 years
- 13. Example: $15,000 Loan Dollars Growth on $15,000 Loan 30000.00 25000.00 20000.00 15000.00 10000.00 5000.00 0.00 2% 10% 1 2 3 4 Years 5 6
- 14. How is your loan secured? Four Documents Security Deed or Mortgage Promissory Note Lender’sTitle Insurance Hazard Insurance
- 15. Additional security… We will not over-leverage property Maximum 80% Loan to Value (LTV) Helps protect your investment Based on after-repaired-value (ARV) and comparable sales irs pa Re bl ra pa om C le s Sa e
- 16. Do you have an old 401K or IRA? We can help you earn TAX FREE retirement income using self-directed IRA Accounts that permit you to make high yield loans secured by real estate Rollover your old 401K or IRA to a custodian that allows investment in Real Estate Custodians - examples Equity Trust Entrust Group Pensco Trust Company
- 17. Do you have an old 401K or IRA? (continued…) Minimal account cost Fees comparable to other custodians Takes about 10 days for transfer Paperwork is online or we can handle transfer Direct transfer, so no tax impact You can invest IRA, Roth IRA, Simple IRA and Simplified Employee Pension (SEP) Assets
- 18. What if you need to get your money back quickly? Term Should fit your investment strategy Most is negotiable IRA holders invest for longer term 24-36 months We will match an investment to your needs If you need money back quickly? Give us a few weeks to replace your investment with another lender There is no early withdrawal penalty
- 19. Private lender money at work… Owner Finance using Existing Financing Before After
- 20. Private lender money at work… Rehab with Private Financing Before After
- 21. Private Financing Breakdown After Repair Value Purchase Price Amount to Seller Amount Borrowed Includes $190,000 $120,000 (Subject To) $ 2,000 $ 23,650 Acquisition/Reinstatement costs Repair Costs Holding Costs Marketing Costs Terms: 10% Payable upon sale of property
- 23. Private Financing Breakdown Sell in 6 months for net of Repayment of loan $23,641 + 1,182 = Net Profit $160,659 $ 24,823 $ 39,477
- 24. How do I get started? You can start earning 10% today Set up a self-directed IRA if you do not have one already – ask us about some local companies Sign up to receive our private lending opportunities (on the right) Let us know how much you would like to lend and we will match you with an appropriate property
- 25. Thank you! The Southeast Residential Partners Team
Notas do Editor
- I’d like to take a few minutes to share some great information about how you can increase your return on your investments.
- Before we start, though, I have to go over this disclosure with you, since we’re talking about an investment.
- How much are you currently earning on your investments? By investments, I’m talking about CDs, stocks, savings accounts, I-R-As, pension plans, and 401k accounts. Are you earning 10% or more? (Do you even know?) Most people I talk to have accounts that are barely keeping up with inflation. If this is you, then please pay very close attention to what I’m about to share with you, because you can safely earn thousands more dollars on your invested funds over the next several years. By using the same money you’re investing now, we can show you how you can gain more control and safely make it grow 3, 4, or even 5 times your current rate, simply by making sound investments in real estate.
- Most people put their money into traditional investments such as savings accounts, mutual funds, stocks, and CDs. That money is controlled by banks, brokerages, and accounting firms – many of whom have shown greater interest in their profits than in yours. If you’ve kept up with the news, you’ve got to ask the question – do you really trust these companies to protect and manage your investments? Stock-market investors have learned the hard way that securing your investment is more important than ever. With real estate, you have a solid, tangible asset backing up your investment. You control the investment, rather than depending on some board of directors or the whims of the market. Events in recent years – the collapse in high tech stocks, the 2001 terrorist attacks and subsequent world events, the fall of corporate giants like Enron, Tyco and Worldcom, and the lack of integrity of some in the accounting and securities industries – have shown that it can be very risky to concentrate all of your money in Wall Street’s hands.
- But despite the catastrophic events of the past several years, real estate continues to have steady (and sometimes accelerated) appreciation. It’s a tangible asset. People still want to own their own home -everyone needs shelter. In the midst of all of the turmoil of recent years, the demand for housing in this country has grown. More people are buying houses than ever before. That’s why it’s a great time to invest in real estate. As the stock markets have struggled and world events can have an unanticipated impact, real estate continues to hold its value and to appreciate. It’s an investment that provides more safety, predictability and many of the few remaining tax benefits. We’re not talking about high risk real-estate loans that got some banks and savings & loans in trouble some years ago. We’re talking about very safe loans backed by single family homes in good neighborhoods. We’re talking about investing in the American Dream, by putting your investment dollars into private mortgage loans.
- Our company is a local investment company that is affiliated with a group of investor that buys and sells many houses each month [NOTE: if you are a member of a REIA group, then you DO belong to a group that buys and sells many houses each month] Many times when we buy houses, we work with Private Lenders who provide the financing for many of the houses we buy
- Every month, we buy houses from people in foreclosure, people that need to sell their houses quickly, for any number of reasons (spouse has moved and other spouse is left behind to sell the house; death or sickness in the family; job loss, bad experience in the hose, out of state owners, etc.) We buy these houses, and often have to buy them quickly, if they are facing foreclosure or are falling behind in payments. We renovate the houses and then lease them out or sell them.
- When we buy these houses, we like to borrow funds from Private Lenders – because we can and need to move very quickly - for expenses such as acquisition/closing costs when we acquire the property, to repair the house – everything from just paint and carpet, to extensive renovations, to holding costs - monthly mortgage payments, insurance, taxes, utilities, yard maintenance, etc. Because we need access to quick cash, we pay a high rate to our lenders – like when you see something on sale that you want to buy now, before someone else gets it, you may put it on a high interest rate credit card and pay it off over a few months – this is the same principle – we can buy at such a discount that a bit higher interest payment is more than worth it
- People wonder why we don’t go to a bank to get access to funds to buy houses – We certainly can do that in some situations. But when our sellers are facing foreclosure, or have already made five extra house payments on a vacant house, they need us to move quickly. Also, when you are in a very competitive market, you need to have quick access to cash to be able to buy houses quickly, or else you lose the best deals to other investors; AND with access to cash, you can offer the seller a lower amount of ALL CASH, as opposed to some cash now and some later – they will take my offer and I get the house if I can pay cash. Lastly, Banks will not lend money on a house without certain things in the house – something as simple as missing carpet over an unfinished floor, or if there is no furnace – which can be replaced in a rehab – won’t pass muster with the bank’s approval process
- Now let’s talk through an example. Let’s say you have funds to invest – either in a retirement account, or you, your family, or your company has extra cash that you want to put to work. We find a house that we want to buy, that matches your investment criteria and we provide you with all of the details – the purchase price, repairs needed with estimates of costs, comparable sales, estimates of the after-repaired value, and other details to help you evaluate the property and potential investment. If you approve of the deal, we provide you with four documents to secure your investment – which I’ll discuss in detail in a minute. With those funds, we purchase or put a second mortgage on the house, then we renovate it. During this time you are earning 10% interest on your investment. When the renovation is complete, we either lease option, sell, or refi the property. When we sell or refinance the house, you get your principal and interest paid back into your account as part of the closing. And (especially if you’re lending from a retirement account), we will probably want to re-invest the cash for another round.
- Here is an example that compares the earnings on a $15,000 loan – where you can earn about 2% interest with a bank, versus 10% with one of our houses. You literally make as much in less than 3 months at 10% than you do in a full year with the 2% rate. Conversely, you make 5 times as much at 10% that you do at 2%. Even if there is an early withdrawal penalty with your investment (like a CD) the return at 10% will often (more than) cover it in the very first year.
- If you were to make an investment that pays off in a year, and then you take that principle and interest and re-invest it, look at the difference in the return on that initial $15000 if you were to do that over 6 years!
- And here you see the impact on growth in your investment in graphic form – quite impressive! Almost $10,000 more earned in 6 years.
- With this investment, you’re protected in four ways. Let’s say you invest $50,000 in a home valued at $75,000. First you’ll get a security deed, or mortgage, for $50,000, which is a lien against the property. That means you’re the bank. You’re in control. You’ll also get a promissory note with the terms of the loan, signed at the closing, that will state your interest rate, length of the loan and payment terms. Third, you’ll get Lenders Title Insurance, insuring your interest in the property. And last, you’ll receive a certificate of homeowner’s insurance naming you as the additionally insured lender, protecting you against loss. Doesn’t this sound more secure than the stock market?
- We also take pains to never borrow over 80% of the after-repaired value of the home – much the same as banks consider an 80% or lower loan to value a much better risk for them – so should you.
- If you have an old 401K from an old employer that is just sitting out there without much attention from (or earning much for) you, or if you have an IRA – you can use these retirement vehicles the invest in real estate. There are many custodians out there that can handle investments in real estate. For example, Equity Trust Company will handle the transfer and has all of the forms online for you.
- If you have one of those accounts and want to roll it over into one of these accounts, we can help you, or you can check it out online. If you think you’d like to do this, go ahead and check out some of these sites and begin the process of transferring your funds. This is a tax-free transaction if you do not take control of the money – there are certain rules – make sure you check with your CPA. And you see the types of accounts that you can have with these custodians to invest.
- And what is the term of your investment? Well, it can be almost any term you want. You can pick a term that suits your investment strategy. You’re the boss. If the funds are in your I-R-A, then you’ll probably want to invest for the long term, because you won’t be using those funds until retirement. Or if you’re switching from a mutual fund or CD, maybe you want to invest for 24 to 36 months. It’s your money and your choice. And of course, we’ll come to you with an investment term that suits your requirements. Now, what happens if something unexpected happens and you need to liquidate? You can certainly do so. All we ask is that you give us a few weeks to replace your investment, but you won’t be required to take a discount when you cash out, like you would with a CD. Note that you really shouldn’t make mortgage loans if you plan to liquidate shortly, but that option is always available. And unlike the banks, there is no pre-payment penalty when you withdraw funds early.
- Here is an example of what we call a “pretty house” – one that requires basic repairs – maybe just paint and carpet – and we usually borrow $10-15K for those repairs, as well as holding costs and selling costs.
- And here is an example of a complete rehab that one of the associates in our group did.
- Here are the numbers in our deal- We estimate the ARV to be $190,000 and we were able to borrow and pay all cash for the $40,000 purchase price plus the repairs, holding costs, etc. We paid the seller $40K and got back $42K at closing to make repairs, market the property, etc.
- Here are the numbers on this deal - We estimated the ARV to be $190,000. We are using the existing financing (Owner Financing/Subject To) and will borrow $21,641 for acquisition and reinstatement costs, repairs, holding costs, and marketing costs to sell. The seller is behind and just wants $2000 to move out of the house. Monthly payment is $1050/month (PITI). We are willing to pay 3% to an agent who brings a buyer (but note, that I NOT included in the cash required up front. It will be paid out of proceeds at closing, so we don’t have to borrow that from our private lender.
- If we sell this house in 6 months (after repairs, etc.) and pay our lender almost $1200 on his $23650 loan – a very nice secured return of 10%. And we make a nice profit, too!
- If you are interested in investing or finding out more about Private Lending. Please listen to the audio CD that I can provide. If it sounds like something you’d like to do, please also check out the sites for some of the self directed IRA custodians, like Equity Trust. Then let’s talk about any questions you have, how much you might want to lend, and for what term(s) and let’s get started!
- This is my closing slide and call to action. I ask if they have any questions, how much they might want to invest. I tell them they can start with a small amount if they want to be sure that this really works. If they need info on where to rollover their 401K, I provide Equity Trust (or other) web site., etc.