I have gotten many questions now that people have started to find out how easy it is to find private money. Today I will share with you how I run my program.

1.   I pay my private lenders 6% to 9% interest on a first lien. I prefer paying monthly interest only payments where the payment is justified and supported by the income on the property. I can pay principle and interest if needed. I can also offer no payments if my lender would prefer to have their interest compound yearly. Interest only payments keep my lenders entire investment working and they make more money.

2. I pay my private lenders 9% to 12% interest on a second lien. I prefer to have their interest accrue with no monthly payments. My investor can earn interest on interest and I can avoid a negative monthly cash flow.

3.  For short term loans, I prefer to make no payments on a first or second lien when rehabbing or quick-turning a property that I expect to be sold and cashed out within 6 months.

4.  I collect my rents on the 25th and payments from wrap-buyers are due on the 1st, I have all my note payments due on the 15th of each month allowing the properties income to help cover the payment.

5.  My minimum investment is $10,000.

6. I am confident that I can payoff an investor early with 60 days advance notice by replacing them with another private investor.

7.  I offer a minimum earned interest of 6 months in the rare case I pay off my investor in less than 6 months. Since they probably do not want their money back that fast I will attempt to substitute the collateral or reinvest their payoff into another property.

8.  Interest begins on the day their cleared funds are received by my closing or escrow agent.

9.  I never pool funds together. In the rare cases where I need more than one lender to fund a deal I will give one lender a lien and the other lender a junior lien.

10.  I will buy my lender title insurance when acquiring a new property. I will not buy a lender policy if I am borrowing against a property I already own.

11.   I always keep valid hazard insurance on all my properties and each and every lender on the property will be added to the policy as a mortgagee.

12.  I will never accept private money from my lender until they have received an original promissory note and the security instrument (deed of trust or mortgage) has been sent off for recording.

13.  I will never pressure an investor to do a deal. It’s pass or play. If they pass I will offer it to my next lender waiting for a deal. If I cannot find private money I will use hard money lenders as a back up. If I can not get hard money or private money from my existing contacts then perhaps the deal is not as good as it should be.

14.  I keep all my promises. If a lender wants me to sign personally I will do so since I am committed to take care of them first if anything goes wrong with the deal. However, I never offer to “guarantee” my lenders investment as that may violate federal or state rules and regulations related to securities. I prefer to sign as trustee or president.

15. I follow state and federal rules and regulations related to offering securities and seek expert legal advice as needed.

16.   ***** NEW ****   I use a Private Money Coordinator to assist me in raising and managing the Private Money needs of my business.

Download my private money lenders PowerPoint presentation HERE

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