What is Private Lending?
Discover how private lending can be a win-win for the borrower and lender.
More About Private Lending
A private lender provides capital to professional real estate investors for the purchase of residential, commercial, or rental real estate or to supplement funds for covering down payments, renovation costs, or closing costs. Synonymous terms are mortgage lending, peer‑to‑peer lending, self‑directed lending, and non‑traditional lending.
Asset‑based lending provides private lenders security and returns that are typically better than those of traditional investment methods, with no fees charged to the lender. Private money investors are given a first‑lien position mortgage and promissory note that get recorded at the county courthouse, making this a secure, collateral‑based investment.
Most commonly, private lenders seek to maximize investment returns in exchange for speed and flexibility—funding traits that are highly sought after by real estate investors. Becoming a private money lender is a rare opportunity to cut out the middle man and become the bank while safely generating a consistent flow of monthly income. Clients who lend us money profit just as any bank would, but at a higher rate of return.
We pay our lenders anywhere between 8 and 10% interest on their capital.
How do Private Lenders Secure Their Investment?
As a private lender, instead of dealing with a bank, you can direct your investment capital, including retirement funds, to extremely secure real estate notes and mortgages. Notes and mortgages provide the ultimate security. Should the borrower default, you as the “bank” have the option to recover your investment as the recorded first‑lien holder of the property. However, if you decide to invest with us please don’t do so hoping we default. We have a 0% default rate. Remember: the properties we procure are worth significantly more than your investment because of our ability to purchase far below market value.
Every asset we acquire is put through a rigorous due diligence and evaluation process. With the help of our entire team of real estate professionals, we have filtered well over 1,000 properties through this process. Thus, we’re extremely qualified to assess the profitability of a property before it’s ever purchased. Our name and reputation mean more to our business than anything else, and it’s for that reason that we reject properties that don’t meet our strict purchasing criteria.
For protection, Our Private Lenders are provided the following documents to secure their investment:
Learn more about Private Lending by scheduling an appointment to talk one-on-one with Ben about this unique investment opportunity.
Overview of the Closing Process
Step 1Your investment goes into escrow with the aforementioned attorneys and title company, Hocker and Associates.
Step 2We pay the costs associated with finalizing the closing documents.
Step 3You receive a copy of the original promissory note, a copy of the mortgage, and a proof of the insurance policy.
Step 4The mortgage and promissory note are filed and recorded at the courthouse.
Step 5We deposit your return directly into your bank account every month or mail you a check—your choice!
Why Do Real Estate Investors Often Avoid Working with Banks?
A majority of highly successful real estate investors currently work, or have worked at one point in their real estate careers, with private money lenders to fund their real estate transactions. Why is that?
Private money lenders bring speed and efficiency to real estate transactions that banks simply cannot guarantee. Being able to purchase real estate with cash is a powerful weapon in a real estate investor’s arsenal. Many of the sellers we deal with seek quick solutions for their property and typically prefer to close within 15 days or less. Unfortunately, banks require 30–45 days to close loans, and contracts fall apart on many homes because of financing issues. Using quick cash is a selling point for our customers and allows us to negotiate prices significantly below market value in exchange for the quick and hassle‑free services we provide. This in turn substantially lowers our risk as a real estate investor.
Banks are also constantly changing their lending guidelines and aren’t always flexible when it comes to real estate investments. They require applications, have rigid down payment requirements, require approvals and appraisals, charge junk fees, and impose very strict investment guidelines. They also often refuse to loan on non‑conforming product types. For us, and many successful investors like us, banks introduce far too many obstacles and prevent buyers like us from providing the quick services our customers expect when selling their property to us at a discount. With private lending, you can effectively cut out the middle man and lend to us directly, capitalizing on the banks’ lack of efficiency.