Loans » Promissory Note

Real Estate Investors – “7 Step Formula” to Secure Private Money

admin — Sun, 28 Feb 2010 06:39:37 +0000

First – Determine how much money you need to acquire a certain property and be sure to include the purchase price, closing cost and complete renovation costs. If you do not know the renovation cost be sure to make your best estimate so you do not leave these out.

Second – Start to market for private lenders. Make a point to tell everyone you know and meet “that you investing in discounted real estate investments and are looking for investors.” Show your potential private lenders how to start investing passively in investment real estate. You can also use other marketing strategies such as sending out post cards to wealthy people or putting up flyers in 55+ communities.

Third – You will need to create a presentation kit to educate your potential private lenders to the power and security of investing in discounted real estate. Essentially, position them as “the Bank.” Deliver your presentation to your contacts within your sphere of influence and your warm market, such as business associates, friends, family, realtors, accountants and attorneys to name a few. Some of these people may know other contacts within their own networks interested in investing.

Fourth – You will find that many potential private lenders have CD’s or money market funds that are only yielding 3% to 5%. Your presentation has to show that you can offer your investors anywhere from 9% to 15% return on their money versus the small returns they are currently getting at the bank. If they stocks or bonds they may be even more willing to invest in something as safe as good solid local investment real estate versus losing 50% or more in their stock portfolios. You need to offer them more income with a secure investment.

Fifth – Once you have a potential lender or two that has expressed some interest you need to present your proposed deal. You will need to show them what it will cost to purchase and rehab the property and what it will be worth once compete. You may want to borrow all of the money to purchase the property. Or you may go to a bank and borrow 80% and then use your private lender to fund the remaining funds.

Sixth – Make sure your private lender sends the funds (i.e., certified check or wire transfer) to your closing attorney or title clerk. Never have the funds made out to you or your company. Create a promissory note for your private lender explaining the terms of the transaction and make sure they are in either first or second lien position on the property.

Seventh – Complete the purchase of the property and rehab and be sure to invite your private lender out a couple times to see the progress so they remain comfortable the investment and build a long term relationship.

I invite you to learn more about Private Money Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by going to http://realestatewealthtoday.com/FREE-eBook.html

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Money Lending Kit

Private Lending – How to Finance Real Estate Through Private Mortgage Lenders

admin — Sat, 12 Dec 2009 12:58:39 +0000

photo credit: TheTruthAbout…

When considering financing through a private mortgage lender, you must first locate a private lender with an interest in your particular real estate venture. Private lenders are ordinary people who are willing and financially able to fund your real estate venture by means of their own assets. You can locate private lenders through networking with others in the business, asking for referrals, or making a public presentation to a group of potential private money lenders.

Assuming you have located the private mortgage lender, you will need to set up a meeting to negotiate the terms of the private mortgage loan. Keep in mind that the private lender you choose can secure funds for you through a commercial institution or through personal assets such as bonds, stocks, or cash. You will want to negotiate terms that will present a win-win situation for both you and the lender.

Financing your real estate deal through a private lender is not difficult however; it will involve some simple steps with documentation that will include a Promissory Note, Mortgage, Certificate of Insurance, and a Disclosure Statement. It is also a good idea to consider any federal or state security issues (SEC) which occasionally transpire through the private lending process.

The Promissory Note and the Mortgage document: The Promissory Note and the Mortgage document the terms you have agreed upon with the private lender. The Promissory Note explains in detail the terms in which the lender has agreed to fund your real estate venture as well as the terms you have agreed upon to borrow the money. The Mortgage outlines the terms of your performance as the borrower and generally is filed with your local county office by an attorney to insure that the filing process is done correctly.

Certificate of Insurance: The Certificate of Insurance is obtained from the insurance agency of your choice and should be provided to your private lender. The property insurance should include a title to your lender and a title to you as the borrower. It should also outline the exact terms of coverage with regard to property type and causes of loss such as flood, basic, broad, special, or earthquake.

Disclosure Statement: Use of a Disclosure Statement is always a good idea in a real estate transaction due to the fact that investing involves uncertainty and risks. The Disclosure Statement will outline the risks to your private lender, as well as your plans for use of the property and any possibilities for change during the course of the transaction. This statement acts as assurance that both you and the lender are aware of the possible risks involved before you enter into the real estate transaction.

Federal Regulations: You will want to check the federal regulations as well as those for your particular state with regard to what is termed as issuing a Security. In many cases, when you work with a private lender, it is considered issuing a Security under SEC guidelines. To avoid any problems, you may need to register with your state or federal SEC if you do not fall under certain exemptions.

I invite you to learn more about Private Money Lending and get my new FREE 20-page ebook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by clicking here http://realestatewealthtoday.com/FREE-eBook.html

Private Money Lending – What Documents Are Required to Close a Real Estate Deal?

admin — Thu, 18 Dec 2008 23:24:40 +0000

photo credit: David Boyle

In a typical private money lending transaction, you the real estate investor (borrower) will borrow from a private individual (private lender) and the transaction is documented by a Promissory Note and Mortgage.

Additionally, you will need to name your private lender on your property insurance. We also recommend you included a disclosure statement.

Promissory Note

One of the most important documents you will ever sign with a private lender is the actual Promissory Note that creates the loan obligation. The Promissory Note lays out the terms and conditions under which the private lender is willing to lend you money and under which you are willing to borrow money.

The Promissory Note is where you want to control the private lending process in your favor and give you the borrower the control and flexible you may need in the future. If the Promissory Note does not have the right clauses contained within it, you are potentially giving away tremendous control to your private lender and tying your hands in the future.

Mortgage

The Mortgage is the security document for the borrower’s performance under the Promissory Note and usually is secured by the piece of real estate you are about to purchase.

The Mortgage is the document that you will record with your local county recording office. Generally, you should have a title clerk or attorney record the Mortgage to be sure it is done correctly and to avoid any problems later.

Certificate of Insurance

You should always provide your private lender with property insurance, including both an owner’s title policy and a lenders title policy. You will want to make sure your lender is named as an additional insured on your hazard insurance policy, just like you would if Bank of America was your lender instead of your private lender.

Disclosure Statement

You may want to consider a disclosure statement form that outlines exactly what it is you will be doing with the property, how you plan to exit out of the property, the time line you are projecting and the risks involved with real estate investing and the possibility your entire plan could change while owning the property.

Private lending does have investment risk and it is possible the investor could lose some or even all of their investment. You need to make them aware of these risks before you use their money for investment purposes.