Using private lenders - Posted by Paul

import · October 27, 2000, 1:26pm

Posted by Bud Branstetter on October 29, 2000 at 22:01:34:

Merle,

Haven’t done it yet, but got the idea because my mother belonged to one of the local groups. She got knocked down in a local grocery store and the store was cooperative in settling. Here there are many local senior groups that meet at an activity center daily. My original idea was to survey the local grocery stores and present the results to the group. Grocery store do not like to call an abulance when someone is hurt on their premises. Senior friendly grocery carts, trained personel, etc.

Those same groups would be concerned about estate planning. I get some invitation every month or so to go to a seminar on avoiding healthcare costs. Many of the cafeterias have a private room were for the price of the meals you can meet. Rather than competing with them it may be better to cooperate with them.

import · October 27, 2000, 1:26pm

Using private lenders - Posted by Paul

Posted by Paul on October 27, 2000 at 13:26:25:

Hey all,

I am just starting out. Will view some properties for the first time over the next few days. Have no job currently, marginal credit, no collateral or cash to speak of. Good enough risk potential, I’d say. However, I am completely convinced I can break into this business, sometimes relying on private money and credit for things like cash down, closing costs and repairs. What I want to know is how to word my promissory notes to my private money lenders. They need some reasurances first on getting the money back with returns, and second on how to either collect from me or take control of the property involved in the event I default. What types of terms are normally used, what constitutes default (90 days behind?), how much return can they reasonable expect (15% of monies loaned?), basically how can I write a note to make everybody happy and safe? Appreciate any advice. Thanks

Paul in Santa Barbara

import · October 28, 2000, 3:56pm

You are looking in the wrong places … - Posted by Merle

Posted by Merle on October 28, 2000 at 15:56:53:

Isn’t it amazing how we are such creatures of habit and how we tend to copy one another?

Post after post describes these high cost private sources for funding. 3 points and 12% interest, etc.

We have used private funding for 16 years. We’ve never paid more than 11% interest … presently paying 9%. Never paid a point to any of them.

There are (I believe) millions of dollars sitting out there in CD’s, savings accounts, and other low return investments. The owners of these funds would love to earn higher rates … but they are afraid to try anything other than the traditional “safe” methods.

We have not used banks for financing for about 15 years. We’ve purchased more than 300 (lost count) properties … presently have 121 houses … all financing witrh private investors at 9% interest.

Stop looking for “investors” and start looking for folks who need to earn more money on their savings. People who wouldn’t know “hard money” if they saw it. Advertise your rate … tell them what you do and how you do it.

I reads once that many people have a weight problem because they allow the menu to control what they eat. And, guess what! Menus are designed to sell food! The restaurant owner doesn’t care about your weight problem … only his pocket book.

Take control of your business. You decide what will work for you. If you can’t afford to pay 18% interest (and who can?), then advertise the rate you can pay. Look for the person who will accept a lower rate.

We have not experienced a shortage of loans since we began. Where do you find these folks? Well, first of all, they are not reading the investment ads. And especially not the real estate ads. They read ads pertaining to their life and their day-to-day needs.

They read publications offering special consideration to retired people. They read garage sale ads. They go to senior citizen clubs and organizations.

They want safety first! They want a higher return … but only if they can believe their money is completely safe and secure. Just make sure that whatever you offer them does exactly that and you will soon be turning away money. I turned away just over $100,000 this past week. We are not buying any more houses til after the holidays.

Read some of the other posts I’ve written about our investor program. Do a search for “Merle.” I don’t sell any books, tapes, or courses … but will be gald to answer your questions … either posted or email. All answers posted here.

Think! Think! The money is out there!
Merle

import · October 27, 2000, 8:15pm

Re: Using private lenders - Posted by dewCO

Posted by dewCO on October 27, 2000 at 20:15:16:

You don’t have to worry about that–they’ll do it for you. That’s their business. You just need to decide if you want to sign it! They usually lend against the property only, 60%-70% of the as-is value, with 3-5 points and 11%-15% interest rate.

import · October 28, 2000, 9:09pm

This is interesting Merle…(some questions) - Posted by Ben (NJ)

Posted by Ben (NJ) on October 28, 2000 at 21:09:15:

I am a large purchaser of tax liens and I regularly
earn interest ranging from 18% -30%. My liens are hand picked and we have developed a formula which insures high returns with high priority liens, a 99% redemption rate and very low risk. I am currently using bank financing and am borrowing money at a very good rate (a Libor spread), however the bank fees and demands are getting annoying. I have never thought to approach the private sector like this and just offer them 8 or 9 % secured returns, but it does make sense when they are making 3 or 4% in savings accounts. Would this be considered a “security”? How do you structure it, as a Limited partnership. Do you pool funds or does each investor invest in one property? What about liquidity? Do they have to invest for a minimum time period? Thanks.

import · October 28, 2000, 12:06pm

Re: Using private lenders - Posted by Ray

Posted by Ray on October 28, 2000 at 12:06:48:

Hi DewCO
I sure would like to find a hard money lender with those rates 3-5 pts. and 11-15%int. I see those #'s on this site all the time. The only rates I find are the same 10pts. 18%int. I swear its like they all got together and fixed the rates. If I didn’t need their money, why I’d…

import · October 29, 2000, 6:44am

Re: This is interesting Merle…(some questions) - Posted by Bud Branstetter

Posted by Bud Branstetter on October 29, 2000 at 07:44:47:

Ben,

Ever thought about giving an asset protection seminar to a senior group and the benefits of putting the title of their house in a land trust to avoid probate. You could then throw in the commercial on what you do and what you can offer them.

The most trouble about securities violation come from advertizing. If it is a one on one and they are satisfied and trust you why would there be a problem.

import · October 28, 2000, 9:41pm

Re: This is interesting Merle…(some questions) - Posted by Merle

Posted by Merle on October 28, 2000 at 21:41:26:

Just happened to be online when your post popped up.

We do things differently today than when we first started. If I understand your situation correctly, I would probably borrow the necessary funds from one investor for each transaction. Vitally important to handle it just like you would a bank loan; i.e., Promissory Note and Deed of Trust or mortgage. You must consult a qualified attonrey in your state to make sure you comply with all laws. Liquidity? We have always promised to cash someone out within a few days … no fees, charges, etc. Only had to do that a few times in 16 years. Most of them do not want their money back … rather have the interest.

We write all notes for 5 years with the right to pay off early - no penalty, of course.

If you are sure of your success, being able to tell them you are personally responsible for their money as well as their having the property for security makes a great impression on them.

Good luck,
Merle

import · October 28, 2000, 10:58pm

Re: Using private lenders - Posted by dewCO

Posted by dewCO on October 28, 2000 at 22:58:27:

If you haven’t already, try hardmoneynetwork.com

Haven’t used them myself but others here have.

import · October 29, 2000, 6:30pm

Re: This is interesting Merle…(some questions) - Posted by Merle

Posted by Merle on October 29, 2000 at 19:30:05:

Over the years, we came up with many ideas for attracting new investors. Interestingly enough, we never had to use them. Our little ad in the Pennypower adn later, our radio program, generated more than enough cash for our business.

Your suggestion sounds good. I wonder how you would get people to come … what the cost might be and if the result would outweigh the cost and effort.

Seems like there are a lot of seminars for seniors … banks, invetsment counselors, and the like. You would be competing with them. Might be costly.

Let me know if you do something like that.

Merle