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Michel Lautensack's Blog

By Del Val Realty & Property Mgmt | Broker in Malvern, PA
  • 4 Ways to Raise Private Money For Real Estate Investors

    Posted Under: Financing  |  October 1, 2011 10:49 AM  |  403 views  |  No comments
    Now that the mortgage market for buying investment real estate is all but dead - investors need to have other sources available or go out business. Fannie and Freddie will no longer be available for investor mortgages, traditional banks and saving and loans will not touch investors loans for many years to come and hard money lenders, when available, can have total cost over 25%.

    The answer is private money raised from people, not banks, through a process called private lending. Here are the four top ways to attract and develop your group of private lenders.

    Private Lending Group Presentations

    A private lending presentation involves getting 5 to 20 people into a room and doing a group presentation where you lay out the details and benefits of your private lending program. This may not be for everyone depending on your comfort level of talking in front of a group of people. But there is big advantage of doing group meetings. When people start to ask questions and tell positive stories a certain level of group think starts to take effect and can be very powerful on the attendees.

    One-on-One Meetings

    If you are not comfortable with group meetings - one-on-one meetings are a great alternative. I generally recommend a breakfast meeting in a quiet restaurant where you can have 15 to 45 minutes of time with your prospect. Like the group meeting you need to lay out your private lending program's details and benefits.

    Out of Town Prospects - Creditability Kit

    If the potential prospect is out of town you will need a good creditability kit you can send in the mail. It is very important to follow up two or three days after you send the package to see if they have any questions. Even if they do not participate right away, keep in contact and they may invest some time down the road after a number of follow up contacts.

    Existing Private Lenders

    If you already have a private lender, or lenders, be sure to keep asking them if they would like to participate in more deals. You will be shocked that most investor only give a very small investment to start and wait to see how things turn out before giving you more money. So keep asking and do what you say you are going to do they will develop a better relationship and trust level with you. As the relationship grows they will invest larger and larger sums to grow your real estate investing business.

    And I invite you to learn more about Private Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled "Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!" by going to http://www.learnrealestateinvestingblog.com/

    Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Kit
  • Note Clauses That Makes You MONEY!

    Posted Under: Financing in Philadelphia, How To... in Philadelphia, Property Q&A in Philadelphia  |  June 28, 2011 10:15 AM  |  517 views  |  No comments

    Private Lender Note Clauses

    That Make You Money!

     

    One of the most important documents you will ever sign with a private lender

    is the actual Note that creates the loan obligation.  In a typical private lender transaction, you, the real estate investor (borrower), borrow money from a private individual (private lender) and that transaction is documented by a Note and Mortgage.

     

    The Note lays out the terms and conditions under which the private lender

    is willing to lend you money and under which you are willing to borrow money.  The Mortgage is the security document for the borrower’s performance under the Note and usually is secured by a piece of real estate you own or are about to purchase.

     

    The Note is where you want to control the private lending process in your favor and give you, the borrower, the control and flexibility you may need in the future.  If the Note does not contain the right clauses, you are potentially giving away tremendous control to your private lender and, ultimately tying your hands.  

    When dealing with private lenders, it is critically important that you remain in control of your future options.

     

    If you were to go to your local office supply store and buy a template note form, you are potentially leaving your future control over to your private lender without even knowing what is happening.

    We recommend the following two clauses in any Note with a private lender:

     

    Prepayment Penalty Clause

    "The Borrower reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty"

    The prepayment penalty clause allows you   the right to pay off a Note prior to maturity without a prepayment penalty.  Without this clause, you may not be able to pay off a Note early, or worse, you may have to pay a large penalty for the right to prepay the Note.

     

    For example, if you have a three year Note secured by a piece of real estate you own

    and you get a great offer to sell the property, you may see a big pay day in your future. But, without the prepayment penalty clause, you may have to pay the lender’s full three year interest for the right to pay off early or the lender may require a penalty of several percentage points to allow you out of the Note.

     

    With the prepayment penalty clause, you have the full right to pay the Note off early with no prepayment or interest penalty.  The benefits of this clause can be very powerful and beneficial to you down the road.

     

    Substitution of Collateral Clause

    "The Borrower has the right to substitute like collateral of equal or greater value"

    The substitution of collateral clause allows you to sell the underlying real estate without paying off the private lender Note by substituting the collateral with a different piece of real estate of equal or greater value. 

     

    With this clause, you can flip a property without having to pay off your private lender every time you sell a property.  Imagine the work and inconvience to you and your private lender

    if every couple months you sell a property and have to pay off the previous loan and draw up a new Note .  This can be real burden on both you and the lender alike, and eventually the private lender grow tired of the process. 

     

    A much better solution is to use the substitution and collateral clause so that every time you want to flip a property, you have the right to transfer the Note to another property of equal or greater value without paying off the private lender.  The private lender is much happier because his money is always working without any inconvenience of new documents every couple months.    

     

    By using the prepayment penalty and substitution and collateral clauses, you are more likely to have a big payday coming because you will have the flexibility and ability to realize that payday.

     

    About the Author:

    Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lender PowerPoint Presentation Kit.  This kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your business.  To learn more about this powerful step-by-step kit and receive your FREE Private Lending Newsletter, go to www.RealEstateWealthToday.com

 
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