HOW IT WORKS
When we pay cash for a house, we offer a private lender the opportunity to loan the funds instead of using our own funds or loans from banks. Since we get a high return on our own cash, we can offer our private lenders a higher interest when we use their money to fund new deals. Maximum loan to value is 75%. That means we will borrow maximum $150,000 on a $200,000 property. The money we borrow is secured by a 1st note and deed of trust (mortgage). Our private lender gets a fixed interest based on the loan and term. Monthly payments include principal and interest, or interest only, depending on the needs. Interest only payments keep 100% of principal working. Most loans will typically be for 1 year but can be 1 to 10 year terms dependent upon the needs of the private lender. Sometimes we borrow offering a 2nd deed of trust. For example, on a house worth $200,000, if there is a first mortgage for $100,000, then we can offer our private lender a second mortgage of (up to) $50,000. In the case of a second position, we pay a higher interest rate.