The Basics of Private Real Estate Lending

What makes a private money loan different from a regular loan? Let's talk basics first before going into the details.

Find out if you fit into any of these categories.

How are investors able to pay private lenders higher rates of returns? It's all about the real estate...

This is a quick summary of a private money deal from start to finish.

It's much simpler than you think. Don't forget to ask questions!

1. Promissory Note

2. Deed of trust (mortgage)

3. Insurance policy

To summarize:

We purchased and renovated the property using a short term private lender's funds. After renovating the property, we put a tenant in place, then applied to refinance the house with a traditional bank for a longer term loan.

When refinancing, typically bank will lend you up to 60% of the value of the property. This bank gave us a little less, but it was enough to pay off our initial private mortgage lender + their interest.

The best investors acquire properties at steep enough discounts to ensure the security of their investors. If the numbers don't make sense, we won't do the deal.

For more information about other deals, shoot me an email to info@baltimorewealthbuilders.com and I'd be happy to explain further. It's important to have a full understanding of this process so you know your funds are secure.

Page 1: Buy-Side HUD-1 Settlement Sheet. You will see the purchase price and amount of private money loan circled on this document.

Page 2: Deed of Trust (Mortgage). You will see the loan amount circled. This document is recorded in the official state land records.

Page 3: Appraisal: At the bottom of the page, you will see the amount the property appraised for to give you an idea of the amount of equity our lender had backing the loan.

Page 4: Refinance HUD-1 Settlement Sheet. This is how we paid our private lender back. You will see the total payoff amount circled, which included their principle + interest.

*Lender name blacked out for privacy reasons*

This simple diagram will give you a visual representation of how a private loan will outperform traditional forms of investing.

Most people don't know that you can lend money out of your IRA or 401K. Traditional IRA custodians don't want you to know this because it does not benefit them (or the mutual fund companies). Learn about different funding sources on this lecture.

Self-Directed ROTH IRAs are the most powerful retirement investment vehicle for those that want to be in control of their money. Learn how to use them and how simple they are to create in this video.

Be sure to check out www.TrustETC.com and www.TheEntrustGroup.com for more information about how to start your self-directed Roth IRA or roll over your traditional IRA into one.

If the investor defaults, private lenders DO have options. If the investor buys cheap enough, they can end up taking ownership of a high-equity house that they can resell for a profit. Be sure to choose the investors you work with by speaking with their other lenders and making sure they have a solid track record.

How much do private lenders lend? We discuss this briefly here. It all comes down to the real estate investor's particular business model.

We don't recommend it, but there are ways to get your money back early. It is not ideal.

There are several ways to structure how exactly you will get paid your interest and principal. Learn how here.

Short term vs. long term? You have options.

Please contact us at info@baltimorewealthbuilders.com or reach our office at 443-848-8028.

The benefits of private mortgage lending. This is just the tip of the iceberg!

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