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Why Do You Borrow From Private Lenders At High Rates?

There are several reasons.

Over the years we’ve learned in real estate that it’s not the cost of money that matters, but quick access to the funds so we can capitalize on opportunities.

In the real estate business a good deal can be here today and gone tomorrow.  Those investors who can act fast can capitalize on the best deals which in turn provide the best profits.

Private loans give us this competitive advantage over other investors who take weeks to go through the bank approval process in order to purchase properties.

Yes, we can go to a bank and borrow at lower rates; however, it often takes weeks or months to close on a bank financed property.  It is our ability to close on deals fast with cash that sets us out ahead of the competition and enables us to lock in the best possible purchase prices day in and day out.

Banks are now limiting loans to investors.  The maximum number of loans an investor can now get is four.

In the short term it is actually less expensive to borrow from a private lender at a higher interest rate without all of the bank closing costs than to borrow from a bank at a much lower rate but getting stuck with thousands of dollars in bank fees and closing costs.

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What is the minimum investment?

It depends.  Each private loan that we offer is based on the particular project and our exit strategy with the property.  Some properties we acquire and hold for the long-term.  For these types of properties we may offer longer term loans at higher dollar amounts ($100,000 +).

However, traditionally our minimum investment is $100,000.  If you have a lower number in mind so you can experience our program at a lower initial investment contact us to see if there’s a fit for us to work together at a lower amount.

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Do I have to handle all of the details myself?

Nope.  We handle all of the details for you.  All you have to do is let us know how much you would like to invest and we’ll get you the proper paperwork to get the ball rolling and to protect your interest in the private loan.  All of this costs you nothing. The borrower pays all costs. If you make a $100,000 loan, you send a check for $100,000 to the settlement agency and you get a mortgage for $100,000.

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Are these long-term private loans?

Generally, your investment is tied to a specific project with a timeline ranging from 1 to 3 years.   You can pick a term that suits your strategy. It’s your money and it’s your choice.

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What if I need to liquidate?

If you want out, to be fair for all parties,  a 60 day written notice is required because we will need to replace your funds with another investor’s funds. Truly, you really shouldn’t make private mortgage loans if you feel you will need the funds liquid in a short timeframe, but the option is always available.  Because of the costs associated with replacing your funds with another lender’s, there is a penalty of half of your accrued interest.

Just call us, and we will handle all of the details.

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Is my investment really as safe as it sounds?

When done with reputable and experienced investors like Ben Stern and Realty Wholesalers, being a private lender on low LTV property is extremely consistent and predictable. We always follow these common sense guidelines that we’ve talked about. Your money will grow two, three, or even four times faster than your current investments and you maintain control throughout the process.

Each property that we acquire is put through our rigorous financial evaluation in order to ensure the profitability before the property is ever purchased.  We only take on deals that we know are profitable for us, and only offer private loans to our lenders that will be profitable for them as well.

However, remember that making loans is a business and should be treated like a business.  If you set up a simple system and let the professionals implement the system, your loan portfolio can be hassle free and produce staggering yields.

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How can I use my IRA’s or retirement plan?

Most people don’t know, but making real estate loans is a widely accepted use for IRA’s and other Retirement Plans.   You can make private mortgage loans using the funds which are already in your IRA’s and other retirement plans.  These types of transactions using IRA’s have been going on for years and years successfully and have produced countless happy private lenders.

Think of the power of loaning out funds at high interest rates that are potentially Tax free or Tax Deferred (consult your accountant to verify your tax status with your funds)!

In order for you to use retirement accounts for loans they must first be administered by a third party custodian. We have found that a company called Equity Trust Company is the most flexible, efficient, and cost effective in the long run. You can visit them on the web at or simply talk to us and we’ll help you with the set up of your account.

After selecting your custodian, you simply send a transfer form to them and they’ll do all of the work for you.  Or, if you work with Guidant Financial, you have what’s called “true checkbook control” and receive a checkbook from which you can write checks directly from your IRA account without the sometimes lengthly custodial approval process that goes with so many other costodians. Once you’ve done that you are ready to make private mortgage loans.

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What happens if your company doesn’t pay?

Actually, there are several options available, but first and foremost, please be aware that Integrity and honesty is an essential part of our business and we only make sound investment decisions.   If we produce even one negative result for a private lender that could affect our entire business in a negative manner.  So, we operate our business in a way that we ensure our private lenders are taken care of each step of the way.

However, to lay out the options:

  1. We could restructure the payout schedule on the note. For sake of example, let’s say we are behind on payments to you.   Assume our company can and would like to keep the house, but can’t come up with enough money to bring you current in one lump sum. You could let us continue to make regular payments and make an extra payment on our arrears in addition, or you could simply add the arrears to the principal balance and extend the term of the loan.  This option would mean that you would be earning interest on the interest and would result in a higher return in the end to you.  This is just one option out there in the event that this case should occur (which it has never occurred with our company to date)
  2. Place the signed deed in escrow and deed you the house.  Another option may be to simply have our company deed you the house.  After we deed you the house you are the owner of the property which we were able to purchase at a steep discount.  You can then of course hold onto the property if you wish or turn around the sell the property to liquidate the asset.  Because our private lenders typically loan 65% LTV (loan to value), should this situation occur the private lender would take ownership of the property at a heavily discounted price.
  3. As a last result, you can simply foreclose.  Because we pride ourselves in treating our private lenders like gold we prefer not to let a situation get to this point.  We would rather simply deed you the property than force you to foreclosure.  However, to cover all of the bases, should foreclosure be the option available, foreclosure isn’t as time consuming and costly of a process as most people think. It’s as simple as sending your note and mortgage to an attorney and saying ‘foreclose’.   All you have to do then is sit back and wait.   Nine times out of ten, before foreclosure is complete, someone will be calling your attorney’s office with a payoff letter, and your loan will get paid off.   When this happens, you will collect all accrued interest, your principal balance, and all attorneys’ fees, court costs, and all other expenses you have incurred in connection with your loan.  If you wind up with the house, that doesn’t mean you have to keep it.   It can be sold immediately at a fair sale price and still produce a profit over and above the already high yield on your loan.
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Now, help you make a well informed decision we’ve talked extensively about default and maybe we’ve provided more information than is necessary, but we wanted to make sure you have all the facts and we’ve answered any potential questions.

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What kind of documents will I as the private lender receive?

The documents and process is rather simple.  All private lenders receive a closing package which should contain the following:

  1. The Mortgae Deed of Trust. The original will be recorded in public records in the county that the property is located in and then returned to you in the mail.  We keep a copy for our records.
  2. The original Note. The note is executed, and you receive the original.
  3. Hazard insurance endorsement. Private lenders are named on the hazard insurance policy, also known as casualty insurance, as the mortgagee which our company pays for.  This further protects you and your investment.

These documents combined work to provide you with further security and comfort on your investment.

I realize that you likely have more questions about becoming a private lender for our company, such as specific projects, specific returns, etc.  I hope we’ve answered some of your questions and opened you up to the incredible power of making private mortgage loans.

If it appeals to you, you can get started right now by filling out our quick Private Lender Questionnaire.   While most people are complaining about the low rates they are getting on their CD’s and other low paying investments, you could be receiving strong returns backed by low LTV investment properties !!!

You’ve worked too hard for your money to see it give you low returns in an uncertain financial market.

It may be time you finally put your money to work for you by earning higher returns as a private lender for a reputable real estate investment company with a track record of success like Realty Wholesalers and Ben Stern.

To this point I hope we’ve been able to give you the information you need to take the next step to becoming a private lender. If not, please don’t hesitate to contact us anytime for any questions at all.  We’d be more than happy to answer your questions and provide you with the information you need to make a well informed decision to either work with us or not.

Private lending is an incredible way to build wealth in a way that most people aren’t aware exists. You’re not one of those people who are uninformed anymore. If you have other questions, please do not hesitate to call us at (561)-998-7855 or Click Here to send us an email.

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