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PRIVATE LENDING MADE EASY
- 1. Private Lending Made Easy WELCOME
- 2. How to earn high, stable returns on your idle cash , under-performing stocks And retirement funds
- 3. Meet the principal Tom McManners President Property Projects
- 4. Agenda What We Do A Look at Our Business Model Why Invest in Secured Real Estate Greater Returns Can Supercharge Growth What We Choose to Buy Some of Our Recent Transactions How It All Works Choosing, Securing & Closing
- 5. Q&A
- 6. Notice Please carefully consider the investment expenses before investing. Real estate investments are not guaranteed or insured. Past performance is not a guarantee of future performance. Please seek advice and ask for more information before you consider any investment.
- 7. What We Do We buy houses substantially below market value, fix them up and sell them. THAT’S IT
- 8. Our Business Model Find Distressed Homeowners Facing impending foreclosure Paying on two mortgages Must move quickly for new job Health problems/nursing home Help Them Solve Their Problem Provide creative solutions
- 10. Absentee owner/out of area
- 13. It’s All About The Availability Of Money
- 14. It’s Not the Cost of Money… It’s the Cost of Lost Opportunities
- 15. Why Become A Private Lender Safety and Security Real estate secured notes/deeds Unpredictability and Volatility Erratic nature of some investments Pay Much Higher Yields Than Traditional Safe Investments CDs/Savings plans pay modest rates
- 16. Private Mortgage Loans Pay High Rates of Interest Secured by High Quality Real Estate Have Predictable Rates of Return Stable, Consistent Earnings A Win-Win for Lender and Borrower
- 17. How Are You Doing? How much are you currently earning on your investments? CDs, Stocks, Bonds, Mutual Funds, IRAs, 401k Are you consistently earning 8% to 10%? Would you like more control, more stability, more security?
- 18. Why Invest in Secured Notes Five Year Period
- 19. Why Invest in Secured Notes Five Year Period
- 20. Why Invest in Secured Notes Five Year Period
- 21. Self Directed IRAs IRS Specifically Allow REI True Self-Directed IRAs Why Use IRA Funds Earnings totally tax deferred In some cases totally tax free
- 22. Roll-Over Your Existing Plans Specific Procedures – A Simple Process Roll-Over/Transfer Procedures Details Equity Trust Company www.trustetc.com The Entrust group www.theentrustgroup.com We Can Guide You
- 23. Long Term Comparison 10% Simple 7% Compound 3% Simple
- 24. Long Term Comparison 10% Simple 7% Compound 3% Simple
- 25. Typical Transactions Variety of properties Solve seller problems Specifics of each deal
- 26. Typical TransactionsFlowery Branch Ranch Purchase Price $108,000 Lease Option Price Contracted at $169,900 Loan-to-Value (LTV) = 63% Added Private Lender 2nd After Private Lender 2nd = 73.5% LTV
- 28. Single woman lost her job
- 29. Opportunity to move in with friends
- 30. Desperate to avoid foreclosure
- 33. A Deal in ProgressSugar Hill Split Level The Specifics – Exit 2 Purchase price $ 73,000 After Repair Value $ 140,000 Acquisition/Repairs/Holding borrowed at 10% int. $ 22,000 Possible Tenant/Buyer purchased in 24 months $140,000 Pay lender 24 months interest $ 4,400
- 34. Before & After Sugar Hill Split Level $22k PL Note @ 10% Paid Seller = 1k Paid Closing Fees = 2k Paid Rehab = 13k Holding Costs - 6k= 22k
- 35. Free & Clear Purchases Got Equity? GO! Private Lender 1st - Imagine That! Seller Financing EXAMPLE PL Note $30,000 @ 8% in 1st Position Seller Note $140,000 @ 0% in 2nd $WEET!
- 36. Securing Your Loan Transfer of Funds Held in escrow by attorney Never directly paid to us Closing Documents Deed Promissory Note Title Insurance Property Insurance
- 38. There Are No High Pressure Tactics. It’s Pass or Play First Come, First Served
- 39. Documents are signed at formal closing to secure your loan We locate a and negotiatea great deal First Choice Bulletin presents opportunity. A private lender partner steps forward The Process Home is bought and renovated Your loan is paid with all interest earned
- 40. Q & A
Notas do Editor
- Let’s take a look at this evenings agenda…I’ll spend a few minutes talking about our business model, what we do and why it makes sense for us to pay such high rates of interest on our mortgages (Slide)Then I’ll share with you some numbers; comparing our private lending program to more traditional forms of investing. We will look at why you should consider this alternative and what it can mean to your portfolio.Iwill also share with you how you can further supercharge growth of your funds by using a true self-directed IRA. How you can take advantage of some little known IRS rules that can accelerate your retirement fund’s returns. (Slide)Later we’ll look at the kinds of deals we do; the typical types of homes we buy and I’ll share a couple of transactions in detail to show you our property buying and selling strategies (Slide)Finally there will be an overview on how the whole process works; how we let our investor-partners know we have opportunities available, how they can opt-in, how their investment dollars are protected and secured – and what kinds of legal protection is provided.(Slide)
- So we can stay on track and get through the presentation in a reasonable time frame –please hold your questions until I conclude the presentation. You will find that many of your questions will be answered as we go through.We will end with a Q & A session to conclude the night.Before continuing, I’d like to introduce to you a few VIP’s that are in the audience tonight. You are welcome to ask them questions as well at the end of the presentation. First, I’d like to introduce Mrs. Tammy Brown. Tammy and her husband Eric have invested twice with Property Projects. One property has sold and they cashed out. Their second property is still earning interest. And they are currently shifting some monies from other IRA’s they have into Self-Directed IRA’s so that they can invest in future properties with us.Second, I’d like to introduce Mr. Tim Koenning. Tim is a partner and Financial Advisor with Magnolia Investments right here in Buford. He is the current President of the Buford Business Alliance and the local chapter of BNI (Business Network International) here in Buford. If you have any questions that I can not specifically or adequately answer about investing with your IRA, we can turn to Tim.And third but not least is Mr. Anthony Franco. Tim referred Anthony to me, and Anthony has also become a private lender with Property Projects. His investment is a Buford home that we currently have a tenant in and is earning a nice, stable return of 10% on.So we have some people that have already considered private lending in the audience and hopefully you will consider asking them some questions at the end.Okay before we get into it, take a look at this.(Slide)
- As with any investment opportunity it is important that we make these standard disclosures.Please take a minute to read through the slide.(Slide)
- Okay! Let’s get started by giving you a quick overview of what we do. We’ll come back a little later with more detail, but here it is in a nutshell (Slide)We buy single family houses significantly below market value, fix them up and sell them.(Slide)That’s it.(Slide)
- This is our business model:Property Projects has targeted marketing campaigns designed specifically to find DISTRESSED HOMEOWNERS. There are a lot of them these days. And DISTRESS comes in many forms Divorce Moving Health Two or more mortgages Unemployment Age, etc.
- And, for the record, this down turn in the financial markets and the collapse of our banking system is resulting in unprecedented opportunities to buy bargain priced properties. The banks are overloaded with defaulted properties and are selling them off at unheard of prices. This is the absolutely the best time to buy houses – if you have the cash to do so.When do we buy? When there is EQUITY. Our motto internally is “If there’s equity – GO!”Another IMPORTANT answer to “When do we buy?” is BEFORE THE PUBLIC CAN.Our targeted marketing finds distressed homeowners BEFORE - the banks get themBEFORE – a real estate agent gets themBEFORE – another investor finds themThis is an important notion to understand. We find homes BEFORE THE PUBLIC, or the masses – COMPETE OVER THEM.(Slide)
- Great opportunities don’t stay great forever. Time is of the essence.Private Lending allows us the ability to act quickly – BEFORE others find the opportunity. The faster we move, generally the better the deal. THIS IS WHY WE PAY HIGH INTEREST RATES.(Slide)
- It’s all about the availability of money.(Slide)
- Simply said,…it’s not the cost of money that is important, it is the cost of lost opportunities.So there’s a brief description of what we do and why we are willing to pay 8-10% on our private money mortgages.That’s looking at it from our point-of-view.
- Part Two of Private Lending Made Easy is about WHY BECOME A PRIVATE LENDER?It may surprise you to know that, according to US Census data there are over one million outstanding private mortgages that involve seller financing or private lending.Why are these loans so popular?(Slide)Well, properly structured mortgages, backed by secured real estate notes, offer tremendous safety and security.(Slide)They are stable investments not prone to the whims of the stock market – they offer consistent, level, predictable returns, day-after-day, month-after-month. They are immune to the volatility that is so prevalent in the market.(Slide)And… the returns are so much greater than those paid on the traditional safe, conservative investments.(Slide)
- Private Mortgage Loans typically offer higher rates of interest(Slide)They are fully secured by the value of the underlying loan at favorable loan-to-value ratios. Never more than 80%, and often better.(Slide)You know how much your investment is earning, and will earn every day, every month, every year, for the full term of the loan.(Slide)The earnings are stable and consistent(Slide)BECAUSE YOU LEND – THE DEAL CAN BE DONE. The real estate investor makes a great profit and you make a higher than average return. A win-win for lender and borrower.(Slide)
- How are you doing? It has been a rocky road for many people in 2008. Some of you may only know that your returns haven’t been that good.Others of you may know exactly how your investments are doing. (Slide)Irregardless, are you consistently earning 8% to 10% or more on your investments? (Slide)I talk to investors regularly. Some have become more conservative with CD’s or bonds. Some have decided to hold onto exactly what they have and wait for the market to rebound (but there’s really no telling how long that will take) and some have simply cashed out – like my Father-in-Law with the cash under the mattress savings plan. Private Lending may be a good solution for you that you haven’t considered. By using the same money you’re investing now, I can show you how you can gain more control - and safely and consistently grow at a stable, predictable rate, simply by making sound investments in real estate. (Slide)
- Why should you consider investing in secured notes? Well, of course, it’s about security and safety but it’s also about how much money you can make over time.(Slide)Let’s do a little comparison. This is based on those of you that currently have a conservative investment approach.Here’s a table that makes comparisons over a five year period – starting with a 5 Year CD earning three percent compound interest.As you can see, if you had deposited $50,000 - at the end of five years you would have accumulated $58,801 – a gain of $8,801.Now let’s look at what the earnings would be on a five year private mortgage loan earning 10% simple interest.(Slide)
- As you can see that same $50,000 would have accumulated to $75,000, or a gain of $25,000.Compare the $8,801 gain to the gain of $25,000 from the Private Lending Note and the difference is…(Slide)
- $16,919 - or 309% more.And that’s just five years. Think about where you might be had you started such a program ten years ago- or where you could be 5, 10, 15, or 20 years from now.(Slide)
- Now, up to this point I have talked about investing with your after tax dollars in more conventional savings vehicles like CDs, stocks, mutual funds.I want to shift the discussion to an even more powerful strategy that can really supercharge your retirement investment program.Traditionally, we’re led to believe that your retirement funds have to primarily grow utilizing stocks, bonds, CD’s or mutual funds.NOT TRUE. Your retirement savings have other investment vehicles form which they can grow within.(Slide)The IRS has specific rules that permit your IRA to invest in a wide variety of investments, including real estate! They allow you to truly self-direct your IRA.Many investment firms label their products self-directed – but don’t be fooled – it is a purposeful confusion - when all they mean is that you can direct it into a narrow range of products, usually mutual funds and investment funds, THAT THEY SELL. Be careful! (Slide)So… just because the IRS allows you to, why would you want to invest your IRA funds in Private Mortgages? It’s because as long as the funds stay in your IRA there are no taxes to pay during the IRA accumulation period. Your earnings are totally tax deferred until after retirement. The compound effect of this on your accumulated earnings is exponential. And, if you really want to the ultimate result, use your ROTH IRA, and there will never be any tax to pay on either the accumulation or the eventual withdrawal.
- If you have IRAs or old 401(k)s not earning 8-10% you can roll them over to a trustee who can then invest them on your behalf. The custodian.IRS rules are very specific and you have to follow their procedures - but it’s not hard to be in compliance - you just have to follow the guidelines.(Slide)The roll over process is straight forward and it only takes about ten days to complete. You set up a true self-directed IRA with companies like Equity Trust Co or the Entrust Group who then act as the custodians of your funds and manage them, at your direction.To learn more about them go to their websites. They have a ton of information, including details of the transfer procedure. They also have great information on the advantages of using self-directed IRAs as part of your investment mix.Of course, we are available at any time to help guide you through the process and discuss the advantages and merits of IRA funding.The power of using IRA type funds to invest is that, during the accumulation period, there is no tax to pay on the earnings. That makes a phenomenal difference. Let’s take a look. (Slide)
- Okay, I know, some people love these graphs and some people hate them, but it I use it because it does a good job of illustrating the points.Remember that $50,000 investment? It grew over five years at 11% to $77,500. You can see that on the chart.We’ve also compared that to what you might have made on a 3% CD … and also stocks or mutual funds, returning an average of 7% over the five year period.3% compound interest would have grown to $58,000. The 7% stock investment would have grown to just over $70,000.Let’s say you had your IRS reinvest that $77,500 back into another private mortgage for five more years and you did that a couple of more times. Lets look at what your returns could be after twenty years… and then, let’s compare those returns to, the 3% CD and, 7% average earned your stocks or mutual funds:(Slide)
- Here’s what it looks like. After twenty years your 11% investments have grown to $288,600. The 3% CDs would have only grown to $90,000 and the 7% returns would have accumulated to just over $193,000. A pretty dramatic difference, don’t you agree?And the reason it can compound so dramatically like that is… that no tax has been paid on earnings anytime during the twenty year period. So… in effect you are earning money on money that would otherwise have gone to taxes.That’s the power of tax deferred investing. This is how you can make your retirement account grow.--------------------Okay, so now you have an idea of what we do as a company, and you’ve seen what kinds of returns you might expect, let’s look at some of the properties we buy – the security for your loans – and how we structure our deals. Ron will come up and take you through an overview and a couple of case studies.…Ron!(Slide)
- Now it is time to take a closer look at deal structuring.I like private lenders to GET THIS…Property Projects is CREATING REAL ESTATE SOLUTIONS WHEN TRADITIONAL SOLUTIONS – HIT THE WALL.Sellers find a way to sell – because we create a solution for them.Buyers find a way to buy – because we create a solution for them.Private Lending allows us to GET THE PROPERTY – HOLD THE PROPERTY AND SELL THE PROPERTY.Private Lenders ENABLE THE SOLUTION!(Slide)
- Within the INVESTING WORLD right now – there is something called REO’s. Bank-owned properties. Huge glut. TON’S OF INVESTORS VYING FOR THEM.They’re attractive because investors can buy property for 50, 40 or even 30 cents on the dollar.But huge competition drives up the price. AND The lower the cents on the dollar – the more rehab and risk.I BUY PRETTY HOMES WITHOUT COMPETITION. IT’S GENERALLY MY DEAL TO TAKE OR NO DEAL.My marketing found this seller. A Pretty home in Flowery Branch. I made my offer – she accepted. I lined upMy private lender. I found a tenant/buyer in less than 4 weeks. PERFECT.Look at the #’s….
- Next up in Sugar Hill – this is CURRENTLY AN ACTIVE PROPERTY…My marketing found this women that…(Slide)
- There are two possible exit strategies…Quick Turn…Minimum 6 months(Slide)Sell to a tenant/buyer on a lease/option. Complete the purchase within 12-36 months(Slide)
- Let’s look at the specifics of the first strategy:(read slide)(Slide)
- Here’s how the second strategy would work:Read the slide
- Ahhhh! Free & Clear Purchases. Real Estate Investors often have to change strategies. Right now, mainstream investors are buying REO’s. Each strategy, independent of whatever it is, has a common denominator driving it – EQUITY. Got Equity? GO!Over the past three years investors have focused on Pre-Foreclosure, Bankruptcies, Expired Listings, etc. Often times you could find equity & go.But no longer. Finding equity in these strategies is tough now.BUT NOT WITH FREE & CLEAR PURCHASES. There will always be equity in Free & Clear – right? Makes sense, right?SO YOU MAY ASK – WON’T EVERY INVESTOR BE JUMPING ON THIS BAND WAGON? No. Anybody know why not? Can free & clear homesellers be distressed. Sure. FREE & CLEAR PURCHASES ARE DIFFERENT BECAUSE THEY REQUIRE RELATIONSHIP BUILDING AND GOOD SALESMANSHIP.Free & Clear is the recession proof. It won’t eb & flow. There will always be free & clear sellers, and they will always have equity!SO WHAT MAKES THIS STRATEGY GREAT FOR YOU – THE PRIVATE LENDER? 1st v 2nd position…
- (Slide)