Private real estate lending is not a solo venture.
It requires the best team you can find to help you create the best note for you
and your family.
Private lending and your team.
Before we jump into who should be on your team, let’s remember that the cost of each one is normal for borrowers. They’re used to paying for these services. If anyone tries to talk you out of using one or all of these “teammates,” it’s probably a good idea to walk away and find someone else to lend your money to.
Below is the recommended minimum to get a loan properly closed.
Attorney. To make sure your paperwork is legal, proper and protects you.
Closing agent. A third party that handles the paperwork, filings, and money transfers. This is typically an attorney, escrow company, or title company.
Valuation services. A realtor or appraiser who provides an as-is value for the property.
Title company. Provides title insurance to insure you are in the proper lien position (preferably first lien position).
Insurance company. Provides protection from fire or other loss on the property.
You may also wish to hire the following:
Servicing company. Will collect payments and verify taxes and insurance are paid in a timely fashion.
Note company. Help find, underwrite, and close each loan.
Every closing and every state handle private notes/real estate differently, so it’s likely you will have a different team each of you will have a different team.
https://thenoteshop.com/wp-content/uploads/2023/11/21.2.png6281200The Note Shophttps://thenoteshop.com/wp-content/uploads/2020/09/noteshop-logo.pngThe Note Shop2023-11-29 10:53:592023-12-01 11:06:43Private lending and your team
In our last post (Ways to make your private notes a lot more secure. Part 1) we discussed 5 ways to keep your private notes more secure. In this post we are going to wrap up our conversation on this topic with the remainder of our top 10.
Private notes are a great way to earn above market interest rates and this is a few ways to keep them more secure and well protected.
6. Check how committed your borrower is to their promises by asking them to put things in writing. That’s what a loan agreement is for—to spell out every term of the loan. You will find a lot gets promised and don’t try to commit it to memory.
7. Walk away if a borrower offers outrageous rates. If it’s over market rates, it’s probably a scam. Good borrowers don’t want to pay inflated rates. In fact, they want to pay and negotiate the lowest rate they can get.
8. Always escrow funds for fix ups. That means you hold the renovation funds back at closing and release them later, as work is completed on the property. This will ensure the property value is reached by all the worked being completed as agreed.
9. Ask for a borrower’s “story.” Learn about the good, the bad, and the ugly. This will build trust and prove if a borrower is trustworthy. If their story changes each time you talk to them, walk away. Don’t be talked into a bad loan relationship. Get all of your agreements in writing and fact check as much as you can.
10. When someone needs to close a deal SUPER-fast (in hours or a day or two), run, don’t walk. This “emergency” to fund NOW will likely become a pattern and those loans will become a headache for you for years to come. The borrowers will also likely want to skip steps that protect your money…there are too many loans out there to take on this extra risk.
If you have any questions on how to keep your loans as secure as possible please reach out to us on the Contact Us form.
https://thenoteshop.com/wp-content/uploads/2023/11/56.png6271200The Note Shophttps://thenoteshop.com/wp-content/uploads/2020/09/noteshop-logo.pngThe Note Shop2023-10-14 17:16:002023-11-06 17:16:23Ways to make your private notes a lot more secure. Part 2
Ways to make your private notes a lot more secure. Part 1
Putting money to work in private notes is a savvy, safe way to invest your money. But like all investments, there are there are a few ways to make them even more secure. Please understand that the fees and costs of these items should always be picked up by the lender. These costs are a lot less than they would pay with a traditional lender.
Here are 1-5 of our top 10:
Always insist upon using a third party to create your closing documents. Have your attorney complete or review all the documents (this should be covered by the borrower and not you). Do NOT let the borrower write them for you.
Hire an appraiser or local realtor to valuate each property to so you know the real current market value. Do put all your trust in the valuation provided by the borrower. It doesn’t mean they’re trying to lie. They simply might not know the value of the property. The loan to value is key to keeping your money secured.
Require each loan be closed, insured, and recorded by a title company and or attorneys office. If a borrower claims closing/recording through title is a waste of time or money, they are not the type of borrower to receive your money!
Always pay for title insurance and request first lien position. First lien position will ensure you get paid back first, before anyone else. If you just order title and don’t request to be in 1st lien position you may end up in a jr lien position.
Always verify wire instructions verbally with your title company to avoid fraudulent activity. Do this each time you send or receive a wire. Wire fraud has increased and always take the time to protect your money.
https://thenoteshop.com/wp-content/uploads/2023/09/58.png6271200The Note Shophttps://thenoteshop.com/wp-content/uploads/2020/09/noteshop-logo.pngThe Note Shop2023-09-26 16:50:502023-11-06 17:16:58Ways to make your private notes a lot more secure. #1
A strong asset and payment stream are the keys to backing all your investments.
How do you do this? By establishing a solid foundation of good returns through good loans.
Good loans are made up of 3 key components:
Good properties
Good borrowers
Good security
Lets start by looking at number 1 in this post and follow up in future posts with 2 and 3.
Good properties.
How can I keep my money working safely for me in any economy?
The first step is to find good loans. And the first step to finding good loans is to find good properties. Because real assets are the BEST way to protect your money.
That’s what I want to chat with you about today.
Good properties.
They are the first foundation block to creating good loans. But what makes a good property?
Here are my top 3 musts:
Must be highly marketable. That means it should be:
In an area of demand
In good condition
A functional home
The property must produce income for the borrower. Think rentals, small commercial or fix and flips (from the sale).
Must be in locations you understand and like. Loan in areas that fit your comfort level. If you are from a small town loan in small towns. If you are from the city put your money to work in the city.
Remember, a real asset (that you like) to protect your investments is the first key building block to good loans.
Ready to build your foundation for good loans? Contact us today and see how we can help you succeed in private lending.
Email us a question at Mike@TheNoteShop.com
Schedule a 30-minute consultation.
Enroll in my personalized coaching services.
Did you enjoy Private notes-Income and Security #1? Check out:
How would you like to lend someone money on a property that you think you’re in a good, secure position with? But then you find out they never owned the property to begin with?
Trust me, it happens.
Everything looks great until payments don’t arrive, and you hire an attorney to foreclose on the property. That’s when you find out the borrower never owned the property and had no right to put a lien on it. Worse, if a lien was actually placed on the property that someone else owns, you will have the extra cost of releasing the lien.
Believe it or not, there are brazen thieves in the world who will fake ownership in properties. They might rent and/or borrow money on them.
So, where does that leave you and your money?
Unfortunately, by the time you discover all of this, most or all of your money will be gone. You’ll probably never find the person who stole it. If you do, they will likely have spent it all.
How do you protect you and your money from a fake owner?
Most thieves are always looking to talk you into a shortcut.
They will tell you, “It’s just a waste of money to involve outside resources for a simple process like a loan.” After all, you both can go right down to the county and record the mortgage or deed (aka, the lien). You can literally watch them hand the lien over to the county and get a receipt to prove it’s recorded.
Guess what?
The county does not check who owns the property when an item is recorded. They simply record what’s handed to them.
So, great. They recorded the lien, but the lien is not valid, and your money is not secured. More likely, it’s gone.
This is another reason you should involve outside resources on such a large money transaction.
The key to stopping thieves is to require every loan be closed, insured, and recorded by a title company. A title company will check and verify the borrower actually owns the property and you’re in the lien position you’re expecting.
If a thief is good and brazen enough to fool the title company, the title company will pay you back your money and write off the loan. But this only happens if you actually pay for a title insurance (aka, a loan title policy).
Title insurance gives you peace of mind that your loan is secured and valid.
Most thieves will never agree to this because they know they’ll get caught. To avoid getting caught, they will try talking you out of purchasing title insurance. They usually do this by pointing out the costs and time involved.
Regarding these so-called costs: If a borrower goes to a traditional lender or bank, they will pay thousands of dollars more than a private lender. So, the cost of title is on the borrower, not you. If they don’t want to pay for title insurance, then fine. They can find another lender and you can find a better borrower; someone who’s grateful and happy to pay a little extra to ensure your funds are secure.
Never listen to a borrower if they claim these costs are nonessential. A quality borrower will be focused on protecting your money by using third party resources, like a title company to close and record.
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