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Further
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A gadfly on a dinosaur’s butt, or the hood-winking of the American stock investor. - Charles M O Melia
Have you ever noticed how some words in the English language are so perfectly named for what they describe? And how some words seem to be, I guess you could say, backwards? For instance, the word sunflower! How wonderfully aptly named is the...
YEAR END TAX PLANNING AND PREPARATION FOR BUSINESSES – Tax Tips for 2004 - Dianne Goodman CPA
Now is the best time to start thinking about your year end tax planning for your business. These tax strategies can be put into effect by the end of the year and some as late as when the tax return is due. Planning now will save you money and reduce...
How Will Your Business be Judged? - Dave Balch
Like it or not, people DO judge a book by its cover. It's just a fact of life. Everything having to do with your business that is presented to the outside world is one more judging opportunity. How do you measure up? You've probably heard it said,...
Are You Valued as a Leader? - Arthur Cooper
Are You Valued as a Leader? By Arthur Cooper (c) Copyright 2003 Are You Valued as a Leader? A recent survey in the UK asked employees what qualities they looked for and valued most in a leader. The responses were interesting and worth...
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How I Became a Hard Money Lender
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Written By:
Barrett Niehus
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Unlike other investors, my venture into real estate was a natural extension of my secondary business as the IP Ware software developer. However, opportunity and perseverance beget wealth, or at least a decent side income.
Aside from my ventures into lease optioning residential property, I and my partner have managed to acquire a number of properties with our own credit. However, when looking at our finances and the return we were getting for the amount of effort involved, we both decided there must be a better way. That is when it occurred to me. Instead of trying to leverage our existing assets for a diminishing return, perhaps we could be the bank.
Here is the scenario as it has played out. First of all, we control a decent number of properties with our own credit. Most were purchased with 100% financing using multiple capital sources. However, each contains only a primary lean and is financed using standard mortgage terms. Subsequently, there is a 20% secondary credit position available on each of these properties.
Now normally, an investor would use this 20% equity stake in the existing properties to leverage the purchase of more properties. However, our approach has been a bit different. Because interest rates are so low, we can borrow against the 20% equity position in each of the properties and loan this money to investors who need short terms financing to control and rehabilitate properties. Essentially, we are using our existing properties as collateral to borrow money at the - continued below ...
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going finance rate and loan it out at substantially higher rates of return. We have become the bank.
For investors who need money fast, this system works out beautifully. They pledge their property as collateral, and we loan out up to 75% of the purchase price. All parties benefit, and investors with opportunities that do not need long term financing have a source of funds to do their deals. Everyone wins.
If you are thinking of setting up this type of program yourself, there are a significant number of legal caveats that you must be aware of. The first is the company funding the second lean holder position on your existing properties must be aware of and amicable to what you are doing. This is a legal requirement of which there is no way of avoiding without committing fraud. Next, the usury laws in your state determine the maximum interest rate you can charge your customers. There are a host of additional laws that are more specific to the lending process, but a good lawyer will help you work through them.
Regardless, there is a decent return to be made helping others do their deals. Use your existing properties to secure the funds to lend, and make sure you have an experienced lawyer to help you sort out the details.
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Barrett Niehus is a principal for IP Ware Commercial and Residential Real Estate Investment Analysis Software http://www.freetrainer.com
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| _Additional Resources ... |
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Innovators: How To Turn Your Dreams Into Reality - Neil Armand
Whether you have tried to sell your ideas in the past and failed or whether you have never tried beyond nurturing your ideas in your mind, please remember this--if you deeply believe in your ideas and if you have a vision of greatness for your...
Profitable Growth Is Everyone's Business - A Book Summary - Regine Azurin
This article is based on the following book: Profitable Growth Is Everyone's Business "10 Tools You Can Use Monday Morning" By Ram Charan Published by Crown Publishing Group, 2004 ISBN 1-4000-5152-5 198 pages The days of ruthless downsizing and...
Venture Capitalists - William Cate
Venture Capitalists By William Cate Published March 1998 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] They invest in less than 1% of the companies they review....
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