Becoming the Bank
Buying houses takes money. In a conventional scenario, the home buyer goes to a bank, gets a loan from the bank and gives the bank an agreement to pay back the loan. The buyer also gives the bank a mortgage to “collateralize” or secure the loan so the bank can get an asset (the home) if the buyer fails to pay the bank back. In the same way, when Clean Slate Properties finds a property we want to buy and rehabilitate, we give our private money lenders an opportunity to fund all or a portion of the purchase and the renovations.
Through private money lending, you have the opportunity to become the bank.
We offer a first position mortgage lien to the lender and of course we insure the property and name the lender as an additional payee should something happen to the property. The biggest difference is that we pay higher interest rates to private lenders than banks pay to consumers, often 3-5 times higher than bank rates. By becoming the bank, you have the potential to reap profits just like a bank would. It is a great way to generate cash flow, also known as passive income, producing a predictable income stream while having your principal secured by real estate and protected by insurance.
How You Benefit from Private Lending
There are numerous sources of funds to provide private lending opportunities. Some are tax advantaged, while others are more traditional. You should speak with your CPA, your financial planner, or your attorney to find out what is best for your situation. Keep in mind, certain self-directed retirement plans are completely appropriate for this type of investment and will provide tax advantaged returns.
Comparative Examples (Each Investment is Specific – These are Generic Examples)
Sitting in a Bank (Savings or CD)
- $100,000 x 2% Interest
- 12 Month Term = $2,000 earnings
- Insured by FDIC
Real Estate Private Lending
- $100,000 x 8% Interest
- 12 Month Term = $8,000 earnings
- Backed by Real Estate and Property Insurance
In this example, you are making a 4 TIMES greater return on your money!
The Stock Market vs. Real Estate Private Lending
Stock Market
- Completely Unsecured
- Not Insured
- Invest at Market Price
- Returns are Unknown and Variable
- Highly Volatile
Real Estate Private Lending
- Secured by Mortgage Deed
- Collateral is Fully Insured
- Collateralized Below Market Value
- Returns a Fixed Interest Rate for Term
- Less Volatile – More Stable
Private lending brings speed and efficiency to our transactions and our leverage is far greater when we purchase using private cash funds. Many homes we need a quick sale within 10-21 days. A traditional bank requires 30-45 days to close a loan. Many traditional home sales fall out of contract because of financing issues. Using quick cash allows us to negotiate a much lower purchase price and reduce everyone’s risk.
If you want to earn stable, predictable returns, please call or email Clean Slate Properties. We will provide more information and get you started on the path to more powerful earning potential.