Private Money

Rules to Live By When Dealing with Private Lenders PDF Print E-mail
Written by Alan Cowgill   
Monday, 01 March 2010 19:31

Alan Cowgill's Personal Rules When Dealing with Private Lenders...

This is my business. After many years in a corporate job working for others, I left because I wanted to run my own business my way and that's exactly what I am doing. I am using my business skills to create the kind of company I want. Along with creating my own rules, procedures, and systems within my real estate business, I have rules that I follow regarding my private lenders. A couple of my rules are:

a) Make interest payment when property sells
b) One private lender per mortgage
c) I keep my word

Let me further explain what I mean on each of these...

a) Make interest payment when property sells...
I didn't start out that way. I thought everyone would expect monthly or quarterly payments, so I started paying some early lenders monthly. But after a conversation with a RE guru, I quickly changed and now pay when the property sells. What a huge benefit to cash flow and what a BIG help with the office paperwork. Not only is this a matter of less paperwork for the staff, there is another practical reason for doing this. When a lender's money is applied to a property at closing, the clock starts ticking. The interest rate starts. However, it may take a couple months to renovate the house and find a buyer or rent-to-own tenant. So the cash flow from the property will not even start for a couple months.

In addition, when you sell the house the lender gets a bigger chunk of money to lend back to you for your next project. Everybody wins.

b) One private lender per mortgage...
The #1 question I get from all over the country is "can I pool lenders money". The answer is maybe.

You cannot "pool" lender's money unless you fill out some paperwork with your state.

So, if you need more funds to purchase and rehab a property, then the 1st lender (the one with the most money) gets a 1st mortgage on the property and if you need more money to rehab the property, bring in a 2nd lender and they get a 2nd mortgage.

They are your "Bank" and they get a mortgage (lien) on your property.

You take possession of the property in a land trust and you get the deed. The lender gets a mortgage. These are the two key documents on any real estate transaction.

Actually, you can have as many mortgages (1, 2, 3, 4, etc.) as you like on a property as long as you don't over leverage the property.

c) I keep my word...
I follow my agreement with each lender exactly. I run my business with integrity. Like I said earlier, my rule now is that I make interest payments when the property sells. But there are a few early lenders with whom I made the agreement to pay monthly.

I will stick to my agreement with them regardless of how long they invest with me. And, since they love those checks, they'll probably be around a long time -- and that's great as far as I'm concerned.

Alan Cowgill is a national speaker, author, and real estate entrepreneur. Alan had bought or sold over 200 investment properties. His step-by-step system "Private Lending Made Easy" teaches Real Estate investors and mortgage brokers how to find private lenders.

How Private Money Gives You Access to Cash Anytime You Need it PDF Print E-mail
Written by Alan Cowgill   
Friday, 26 February 2010 16:33

When I started my business by using banks, savings, credit cards, lines of credit, creative techniques with sellers (like land contracts or lease/options), and partners. But, once I was self-employed, I was concerned that it was going to be harder to get loans to purchase properties.

I had always been unhappy about how long the banks take to get the job done. I had it take 4-1/2 months on a house without a furnace. The bank didn't know if they wanted to make a loan on that kind of house, but that is what my rehab business is all about. Buy 'em ugly, cheap and fix 'em.

Just think, if I would have used a private lender on the above deal, I could have bought, fixed & sold the house and pocketed $20,000 by the time I got to the closing table with the bank.

With private lenders, I have the funds available all the time. When a good deal comes my way, I can grab it because I know the money is waiting for me. While my competitors are scrambling around applying at the bank, I've made an offer and closed the deal. My rehab crew is all over the property like ants before the competition knows what happened. I love having private lenders for my business.

So, a major benefit is SPEED to purchase a property.

Let's look at another major benefit of having private lenders. My first private lender was my Mother. My Dad had passed away in 1989 and Mom had insurance money. She proudly invested it on bank certificates of deposit (CDs). When I became a real estate investor, I learned about finding private lenders and so I talked to Mom about it. She loaned me $5,000 and received 10% interest in return. I paid her monthly just like her bank did with her CDs. She was delighted and so was I.

As my use of private lenders increased, I learned that some of them didn't need monthly payments and so I started to structure my loans so there was no payment until the property is sold.

This is a huge benefit... Think about what this has done to improve my monthly cash flow. Now my Mom will always get monthly payments from me because she is retired and depends on that income BUT anyone who can wait on their money, I'll let the money accrue. So the second major benefit is improved CASH FLOW because you don't have to make monthly mortgage payments but just let the interest accrue.

Alan Cowgill is a speaker, author, and real estate entrepreneur. Alan has bought or sold over 200 investment properties. His step-by-step system shows investors how to get masses of cash for their deal without ever going to the bank.

Why Every Investor Needs Private Lenders PDF Print E-mail
Written by Alan Cowgill   
Friday, 26 February 2010 16:27

This topic is near and dear to my heart. When I started my RE career, I heard about the necessity of finding private lenders. In fact I even found two. But then I stopped. For four years I PROCRASTINATED. I didn't get it!!! For four years I continued to go to banks and jump through their hoops. I also had used hard money lenders, but found them VERY expensive.

It wasn't until I quit my J.O.B. and found that banks wouldn't loan me money that I realized that I needed to bring private lenders into my life quickly.

When I took that step, everything changed for the better.

What are some of the advantages of using private money for your real estate investments? Well, if you haven't decided whether or not to use private money, I decided to lay it on the line here for everyone to see.

- Fast & you can buy at a discount
- No credit check & doesn't show up on your credit report
- Unlimited funds
- Control, you set the rules
- Help friends, family & meet a great group of people
- Get some of your profit when you buy
- Cash flow
- Flexible
- Can make offers with confidence
- Can structure quick and more profitable exit strategies
- Saves you money
- Cheaper than a partner
- Fund the purchase of defaulted paper
- It is the foundation for a very profitable brokerage business

In this business when a deal comes along you have to move fast. Many investors have watched a deal slip through their hands while they waited for the bank to approve their loan. Once you have private money available, that won't happen to you! You can make an offer knowing you can go ahead and set a closing date. Meanwhile, your competition is wondering how you did it so quickly!

Alan Cowgill is a speaker, author, and real estate entrepreneur. Alan has bought or sold over 200 investment properties. His step-by-step system shows investors how to get masses of cash for deals without ever going to the bank!


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