Raising Private Money Online Series

Class 1: Introduction to Private Money Financing Than Merrill

Konrad Sopielnikow Chris Yates

Your Coaches

Than MerrillChris Yates Konrad Sopielnikow

Why NOW is the time?!

The Money Tree• Cash

• Partnering

• Bank Financing

• Hard Money

• Subject-To / Owner Financing

• Private Money• Self Directed Retirement Accounts

What is Private Money Financing?

• Raising and borrowing money for real estate investments from private individuals

Why Private Money?• No BANKS or Hard Money Fees!• Better Terms • Speed of Funding• No Credit Check• No Application Process • 100%+ Financing!• Relationship Driven• Everything is Negotiable!

Types of Private Money• Cash• Retirement Accounts (IRA’s, 401k’s etc.)

• Liquidated Securities and Investment Assets (Stocks, bonds, mutual funds, CD’s etc.)

• Home Equity• Personal and Business Credit Lines• Credit Partners

Where to Find Private Investors?• REIA and Investor Clubs

• Through Real Estate Attorneys

• Networking with Busy Professionals – • Attorneys, Doctors, Accountants, Financial

Professionals, Other Entrepreneurs

• Business and Banking Networking Events

• Family & Friends* - Retirement Accounts!!!

• Get OTHERS to raise money for you!

Preparing Your Marketing• PowerPoint Presentation or Video

– Before and After Pictures or Videos*** • ex. “TRASH TO CASH” from FortuneBuilders

Rehabbing Homestudy Course

• Credibility Packet– Company Resume / Description– Case Studies Outline and Pictures– Investor Program Description & Answers to FAQ– Business Cards (*Referral Reward Program)

Meeting Investors• Network, network, network…• Learn about prospect’s current investments & goals• Educate your investor about YOUR business• Describe your private money program• Ask if they know anyone who may be interested in

making high returns and • Let them know of your referral program• Set up a follow up meeting when interested

How Does it Work?

Find Unhappy Investor

Private Money Meeting with YOU

Identify Property

Get Money & Close the Deal

Sign & File Investor Security Docs

Find Wholesale Buyer or Fix up and Sell House

Pay Happy Investor

Private Money Program• 12 % Annual Simple Interest Rate

– ex. $200,000 invested for 3 months = ($200k x 0.12 x 3/12) = $6,000

• 6 month term• Principle and Interest payable at sale

– Monthly, Quarterly interest payments an option

• Secured by subject property• NOTE: You are the owner on title!

• Guaranteed 1-3 points (for short term financing)

• No costs or effort to investor (closing, processing etc.)

Documents• Promissory Note

• Mortgage Deed or Deed of Trust

• Hazard Insurance Policy– Listed as “Mortgagee”

• Personal Guarantee (***when requested only)

Closing Process

Funds From Private Money Investor Into

Escrow or to Attorney

Closing Documents w/ Mortgage Deed, Promissory Note Mortgage or Deed

of Trust Filed at the Courthouse

INVESTOR GETS: Original of Promissory Note and Copy of

Mortgage Deed or Deed of Trust

YOU GET: the House

Common Mistakes or What NOT to Do

• Equity stake in a deal (Money Partner)

• Tours of properties before pre-screening

• Pooling of money between multiple investors

• Not associating money with a project

Private Money Success Tips• EDUCATION

– Real Estate Knowledge – Understanding the Market & Alternatives

• COMMUNICATION– Defining Your Private Money Program– Understanding Investor’s situation / goals

• EXCITEMENT FOR THE BUSINESS!!!– Always Recruit New $$$ Investors– Networking, Networking, Networking…

Case Study

• 124 Smith Street, New Haven, CT• Purchase Price $100k• As is value of $150k; ARV of $200k• Rehab $30k• Investor lending $130k at 12%• 6 month note• Paid off in 120 days (4 months)• $130,000 x .12 x 4/12 = $ 5,200 in interest

Case Study

• 124 Smith Street, New Haven, CT• Purchase Price $100k• Wholesale value of $150k• Investor lending $100k at 12%• 7 day flip • $100,000 x .12 x 7/365 = $230.14• ***guaranteed 1 point min. = $1,000

CM Yates – Case Study

• CM Yates Purchase Price = $71,000

• Estimated Renovation Budget = $18,000

• Closing Costs = $500

• Pro-Rated Taxes and Insurance = $1,000

• Total Cost Basis = $90,500

Initial Deal Structure

• Investor Funds: $100,000– Lender Fees: $1,500– CM Yates Cost Basis: $90,500

Remaining Funds = $8,000

Joe’s Earnings After One Year

• $100,000 Principal Invested+ 1.5 Points = $1,500

+ Interest @ 12% = $12,000

= $13,500 Earned in 1 Year

13.5% APY• Secured by Deed of Trust• Insured by Hazard Policy

Q & A