Realty411 Magazine Featuring Patty Arvielo - New American Funding | Page 17

A
private money loan is a loan that
receives a mortgage on the home along with other
is given to a real estate investor,
important documents.
secured by real estate. Private
Next stage is the property renovation. Once
money investors are given a first
the renovations are complete (typically 3-6
or second mortgage that secures
months depending on the size of the project), the
their legal interest in the proper-
RR will list and sell the property. When it’s time
ty and secures their investment.
for closing, the lender receives his principal plus
As real estate investors when we have isolated
10% interest payment. It’s just that simple!
a home that is well under market value, we give
The goal is to keep turning that money for the
our private lenders an opportunity to fund the
lender and keep them making substantial profits
purchase and rehab of the home. Through that
so they keep coming back – to build a long-term
process, the lender can yield extremely high in-
mutually beneficial relationship.
terest rates – four or five times the rates you can
get on bank CDs and other traditional investment
HOW THE LENDER BENEFITS
plans.
FROM PRIVATE LENDING
Essentially, private money lending is a lend-
er’s opportunity to become the bank, reaping the
The private money lender (PML) can benefit
profits just like a bank would. It’s a great way
greatly from investing their capital. A real es-
to generate cash flow and produce a predictable
tate mortgage/deed of trust provides them with
income stream, while at the
security instruments they would not get
same time, provide excel-
with other investments. The PML also
lent security and safety for
has added layers of protection because of
Rehab
Flip:
3-6
months
your principle investment.
how the RR buys, and because the PML
You can do what the banks
has recourse available in case the RR
Wholesale Flip: 3-15 days
have been doing for years…
were to default on the loan.
make a profitable return on
Residential redevelopers currently
investments backed by real estate. There is no
pay four to five times what a typical bank CD
other investment vehicle like it.
is paying. Rates may fluctuate some, but not
much, depending on the purchase price and rehab
HOW THE PROCESS WORKS
involved.
The lower the price the RR pays for a home,
The process is simple: The Residential Re-
the RR can pay a little higher rate to make sure
developer (RR) finds an extremely undervalued
the lenders make it worth their time. Private
property to purchase, and once lender gives the
lending means the PML can relax while the
green light, the RR borrows the funds to purchase
money is in a truly safe place, working for them.
and renovate the property. At closing, the lender
Done correctly, equity is built in the purchase >
TYPICAL HOLD TIME:
- RISKS VS. REWARDS -
Sitting in Bank
$100,000 x 1% interest
12-Month Term = $1,000 ROI
Real Estate Private Lending*
$100,000 x 10% interest
12-Month Term = $10,000 ROI
*Backed by Real Estate