Frequently Asked Questions
Do I Need a Lot of Money?
No! You Can Make loans as small as $25,000.
Who Handles All Of The Details?
Well, we believe that unless you are highly skilled in real estate
matters, you should use a good mortgage broker (me). It's my job
to get you proper documentation and protect your interest. All of
this costs you nothing. All costs are paid by the borrower. When
you make a $25,000 loan, you send a check for $25,000. That's it!
Do I Have to Collect Payments?
Absolutely Not! We can help set up your account with a collection
agent, we use Mid-Ohio Securities, and have for years, and they will
collect each payment when due and deposit it right into your account.
This can and should be a hassle free investment. In fact, we strive
to keep our investors as far away from the collection process, as
possible, for that reason. (Hassle Free) You may
be surprised to know that your bank will even collect the payments
for you if you wish.
Is This A Long Term Investment?
No! It can be any term you want. You're the boss. Usually we want
a five-year term or less, but sometimes we don't care if it stretches
to ten or fifteen years. You can pick a term that suits your strategy
for retirement. Some investors make interest only loans with a Short-term
balloon, some balloon in five and some people prefer the longer
term. It's your money and it's your choice. Of course, we are going
to come to you with a term that suites our needs. If that works
for you, its a go. If not, it's up to us to change your mind, or
to find another investor.
Who Borrows These High Rates?
We do. We quickly realized that "It's Not The Cost of Money,
But The Availability!"
This also holds true for Real Estate investors. I have made it
possible many times for investors to acquire good deals on houses
because the funds were available. If an investor can get good at
locating good deals, the bank only wants to loan on the purchase
price not the value of the house, thus penalizing him for being
an astute investor. Having the money available will make or break
the deal and paying a higher interest rate is irrelevant compared
to...
**The Loss of Thousands of Dollars If The Money Were Not Available**
Remember, you as a lender won't lend more than 70% to 80% LTV regardless.
You're making a safe loan. You should never make a loan without
a 20-30% safety net. If you don't violate that rule, you should
always come out a winner.
What Kind of Documents Should I Receive?
Your closing package should contain the following:
- An original note
- A copy of the mortgage. The original will be recorded and then
sent to you.
- A fire insurance endorsement naming you as mortgagee.
- A first mortgage verification (if you're making a second)
- A title insurance policy for the amount of your insuring you against
any title defects. - This process is handled by professionals.
Are There Other Avenues of Income From Loans?
Another nice income comes from prepayment penalties. (We always
include prepayment penalties on funds we borrow as a benefit to
our lender) This is a penalty that is incurred when a loan is paid
off early. It's commonly used by finance companies and small lending
institutions as another profit center. This penalty can be a percentage
of the unpaid balance of three months interest on the unpaid balance.
For example, the note could be worded that any time it's paid off
before it's due, you would receive three months interest in addition
to the regular interest. It's our way of saying thanks!
**These Loans Are Almost Always Paid Off Before They Expire**
If you are receiving a three month interest penalty on a $25,000
loan at 12% interest, we are talking about an extra $750 over and
above what you're owed.
Is My Investment Really As Safe As it Really Sounds?
Yes, as long as you followed the guidelines that we've talked about
and apply common sense. Mortgages aren't as hands off as mutual
funds or stocks or other kinds of non-participation investments,
but in return for a little effort on your part, your money will
grow two, three or even four times faster than your current investments
and in addition, you maintain control.
If you follow some simple guidelines when making loans, your risk
will be minimal as best. Briefly, these guidelines are:
1. Make only the LTV loans we discussed...No exceptions!
2. Get title insurance for the amount of your loan.
3. Have professionals close the loan.
4. Make sure, fire insurance is maintained on the property at all
times.
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 that system, your loan portfolio can be hassle free and
produce staggering yields. Also remember, all costs are to be by
us the borrower...not you.
How Do I Use My IRA of Pension Plan or 401K?
Making real estate loans is an approved and widely accepted use
for IRA's and Pension Plans. Think of this...you can now make your
investment grow rapidly..Tax Deferred, and or even Tax Free.
Since Uncle SAM isn't taking a bite out of your profits until you
draw out the money, more money is left in the account to compound
and grow. The results are staggering. You'll be receiving interest
on interest and... (See the example)
In order for you to use retirement accounts for loans they must
first be administered by a "Third Party Administrator"
or TPA. This TPA sets up and is approved to administer your loan.
This means you will probably have to transfer your plan to one of
these TPA's, unless, of course, your present administrator is set
up to do that. Again, we use Mid-Ohio Securities.
When your TPA is located simply send the transfer form to them
and they'll do all of the work for you. Once you've done that...
YOU ARE READY TO MAKE LOANS!
When you've selected a loan, you simply notify your TPA where to
send the check for the gross amount of the loan and you're in business.
There should be no cost to you except your plan administering costs.
Even your set up fee for collecting the monthly payments from us
your borrower could be collected at closing from the loan proceeds
if you instruct the closing agent to do so.
Some TPA's will even collect the monthly payments for you and deposit
them right into your account.
There are some restrictions when dealing with IRA's such as self-dealing,
but you're TPA will furnish you with all of the facts upon request.
If you have any questions regarding your plan or its administration,
contact your Plan Administrator. If you need help transferring your
IRA just give me a call. I've located the best in the country.
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