generating wealth through private lending
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Generating Wealth Through Private LendingSRCapitalManagement.com
Generating Wealth Through Private Lending
Disclaimer…
This presentation and its associated training materials are proprietary to SR Capital Management. Copies may not be made without the express written permission of SR Capital Management. The information contained in this document is subject to change and supplementation without prior notice.
Welcome to Private Lending
Generating Wealth Through Private Lending
During this presentation you will learn how to…
Welcome to Private Lending
Let’s look at the agenda to get started…
PRIVATE LENDING OBJECTIVES Earn high yields, secured by “safe” real estate.
Stay in control of your money.
Receive predictable monthly payments.
Generating Wealth Through Private Lending
How Private Lending Works.4
Benefits of Private Lending.2
What is Private Lending?1
AGENDA
Risks and the Time for Private Lending.5
3Why would a Borrower use a Private Lender?
Generating Wealth Through Private Lending
What is Private Lending?1
AGENDA
Generating Wealth Through Private Lending
What is Private Lending?
STOCKS BONDS
WALLSTREET
CERTIFICATE OF DEPOSIT
Before we get into what Private Lending IS, let’s highlight
what Private Lending is NOT...
Generating Wealth Through Private Lending
PRIVATE LENDINGRefers to an individual making a loan
to another individual with real estate as collateral.
You are the bank. Your name is on the promissory note. Your name is on the recorded deed of trust.
Let’s begin by defining Private Lending...
What is Private Lending?
Generating Wealth Through Private Lending
Private Lending worksjust like a bank using the 3-M’s…
THE 3-M’s MAKING the rules.
MOVING risk to the Borrower.
MAKING money.
What is Private Lending?
Generating Wealth Through Private Lending
Trust Deed Investing Private Mortgage Lending
Private Money Lending
Private Lending isalso known as…
What is Private Lending?
Generating Wealth Through Private Lending
Why haven’t I heard of Private Lending?
BECAUSE
Wall Street and Financial Institutions…
Don’t make money from it.
What is Private Lending?
Generating Wealth Through Private Lending
Benefits of Private Lending.2
AGENDA
Generating Wealth Through Private Lending
BENEFITS Investment is continually secured by tangible property which has a greater value than
monies invested. This ensures that your money is well protected by a very conservative loan to value (LTV).
Relative safety as it provides a lower risk investment when compared to other investment opportunities.
Delivers greater returns than other investment opportunities while still providing excellent downside protection.
Provides predictable monthly payments where you, as the bank, receive payments first. If the Borrower doesn’t pay you get the property.
Deals are short term which keeps you in control of your money.
Let’s start by going over the benefits of Private Lending…
Now we’ll look at examples of each benefit…
Benefits of Private Lending
Generating Wealth Through Private Lending
BENEFIT 1 Investment is continually secured by tangible property which has a
greater value than monies invested. This ensures that your money is well protected by a very conservative loan to value (LTV).
Let’s take a look at an example…
Benefits of Private Lending
Generating Wealth Through Private Lending
There is a $500k house in the Southern California area.
NO MORE than 65% of the loan to value (LTV)
would be lent against this asset.
VALUE: $500k
PROTECTIVE EQUITY:
$175K (35%)
LOAN: $325K (65%)
“Protective Equity” The cushion which protects the Investor’s loan during potential
downward cycles.
Private Lending Example
Generating Wealth Through Private Lending
BENEFIT 2
Relative safety as it provides a lower risk investment when compared to other investment opportunities.
Let’s take a look at how Private Lending comparesto Stocks and Conventional Banks…
Benefits of Private Lending
Generating Wealth Through Private Lending
PRIVATE LENDING STOCKS BANKS Immediate passive cash flow
generator. Not good for cash flow. No cash flow.
No costs involved. Costs involved. No costs involved.
Working with experienced Private Lending professionals.
Working with experienced, commission based professionals.
Using published bank interest rates and term for yield or cash on cash return.
Short term 6-18 months. Short or long term depending on volatility and speculation.
Minimum 12 months.
Relatively secure as it is backed by “safe” real estate (collateral) that has a value greater then monies invested.
No security, collateral, or protective equity.
FDIC insured.
Higher and more stable returns than stock market.
Much lower returns unless timing is good. Volatile, involves speculation and emotional aspect of other investors. Results in less predictable and inconsistent returns.
Stable but consistently low returns.
Private LendingComparisons
Generating Wealth Through Private Lending
Let’s look at the potential for Private Lending, as well as a snapshot in history of the Stock Market and Bank CD/IRA’s…
BENEFIT 3
Delivers predictable returns compared to other investment opportunities while still providing excellent downside protection.
Benefits of Private Lending
Generating Wealth Through Private Lending
Private Lending Potential
And sometimes as
high as…
Private
Lending
Interest
Rates
12-15%
7%
10%6%
8%
9%
Typical rates an investment could earn…
Generating Wealth Through Private Lending
Private Lending Comparisons
S&P 500:Volatile/Unpredictable
STANDARD CD/IRA:Less than 1%
Data as of August 2012
Generating Wealth Through Private Lending
Let’s look at the potential monthly payouts based onvarious investment amounts and return percentages…
BENEFIT 4
Provides predictable monthly payouts where you, as the bank, receive payments first. If they don’t pay you get the property.
Benefits of Private Lending
Generating Wealth Through Private Lending
Potential Monthly Payouts
6% Return
8%Return
10%Return
12%Return
$50,000 Investment $250 $333 $417 $500
$100,000Investment $500 $667 $833 $1,000
$250,000Investment $1,250 $1,667 $2,083 $2,500
$500,000Investment $2,500 $3,333 $4,167 $5,000
Private Lending Monthly Payout Chart…
Generating Wealth Through Private Lending
Let’s look at what that means…
BENEFIT 5
Deals are short term which keeps you in control of your money.
Benefits of Private Lending
Generating Wealth Through Private Lending
SHORT TERM INVESTMENTS Structured to protect the investment
against potential downward cycles using protective equity and term.
Allows for greater flexibility to reinvest in another high performing opportunity.
Principal funds are deposited back into your bank account immediately.
CONTROLLING YOUR MONEY
Reduces overall risk of the principal investment.
Short term deals (6-18 months) are desirable because…
When the term concludes or the home is sold…
Benefits of Private Lending
Generating Wealth Through Private Lending
AGENDA
3Why would a Borrower use a Private Lender?
Generating Wealth Through Private Lending
“Why would a Borrower choose a Private Lender and be willing to pay as high as 12%, or even higher, instead of using a Conventional Bank with lower rates?”
BENEFITS FOR THE BORROWER
To answer the question, we need to look at the benefits for the Borrower…
IMMEDIACY Access to capital much faster than conventional lenders.
ASSET BASED UNDERWRITING Borrower qualifications can be subordinate to value of the property.
TIMELINESS Conventional lenders are not fond of short term loans.
IMPROVEMENT COSTS “Rehab Loans” can include the cost to improve the property, thereby increasing equity.
NUMBER OF LOANS Traditional lenders limit the number of loans.
A common question is:
The Borrower andPrivate Lending
Generating Wealth Through Private Lending
How Private Lending Works.4
AGENDA
Generating Wealth Through Private Lending
THE 5 STEP PROCESS
REMEMBER: YOU ARE THE BANK
Borrower Requests
Loan & Submits
Documents
Lender Assesses Project &
Establishes Terms
Investor Introduced to Project &
Commits
Escrow Initiated to Completion
Investor Payout
Simple, we break it down into…
How Private Lending Works
Generating Wealth Through Private Lending
What does it cost the Investor to participate?
Unlike financial institutions,e.g., Morgan Stanley, Goldman Sachs,
Charles Schwab, etc.
Charges No Investor Fees…. EVER!
How Private Lending Works
SRCapitalManagement.com
Generating Wealth Through Private Lending
INVESTOR DEAL POINTS 25% - 70% loan to value (LTV) which translates to a
protective equity of 75% - 30% on the monies invested. 6 to 18 month term.
1st or 2nd deeds of trust depending on deal structure.
6% -10% interest rate.
Types of properties: Non-owner occupied, 1 - 4 unit residential properties. System in place for Borrower rehab loans for fix & flip deals
that pay a bonus to the Investor after the sale.
A typical investment…
How Private Lending Works
Generating Wealth Through Private Lending
PARTIES INVOLVED TO PROTECT THE INVESTMENT TITLE COMPANY Issues title insurance to insure the loan and works with escrow for bank to bank wiring for the Private Investor.
ESCROW COMPANYManages the paperwork and the process. Records the deed of trust against the property.
LICENSED APPRAISER/REAL ESTATE BROKERVerifies a conservative value of the property with an appraisal or broker price opinion (BPO).
LICENSED MORTGAGE BROKEREnsures proper documentation is complete and laws are maintained.
FORECLOSURE COMPANYHandles delinquencies for the benefit of the investment.
How is the investment protected?
How Private Lending Works
Generating Wealth Through Private Lending
The Private Lender collects a spread between what is collected from the Borrower and what is paid to the Investor.
How does the Private Lender make money?
SR CAPITAL MANAGEMENT Analyzes the prospective
opportunity. Structures the deal.
Coordinates, monitors, and facilitates the entire process from start to finish.
Protects your interests every step of the way.
Gives you the majority of the profits.
It’s simple…
How Private Lending Works
Generating Wealth Through Private Lending
AGENDA
Risks and the Time for Private Lending.5
Generating Wealth Through Private Lending
What if the Borrower has a latepayment?
What if the loan defaults?
Why will very few make it all the way to aforeclosure auction?
One of the most important things to look at ina deal is the value of the property. How doyou know that the value of the home we arelending is not an inflated value?
The Risks & Mitigations
MITIGATIONSExpect that the Borrower will have at least
onelate payment. You get paid more fromBorrower penalties. Some loans will default and go intoforeclosure. Very few make it all the way to aforeclosure auction.
There is simply too much protective equity tolose by the Borrower. Remember, when westructure deals we are moving risk to theBorrower, just like the banks.We cross verify the value of the home by anindependent, licensed 3rd party valueanalysis, providing an appraisal or brokerprice opinion just like a bank would require.
RISKS
Every investment has risk…
Generating Wealth Through Private Lending
What happens if we experience anotherreal estate crash like in 2008?
What is the risk for the Borrower?
What if we have to foreclose?
What does a foreclosure cost theInvestor?
The Risks & Mitigations
MITIGATIONSWe mitigate the time that the note is exposedto the market by creating short term loans.
The Borrower has to bring cash or propertycollateral to the transaction. Again, we arealways moving risk to the Borrower.
A foreclosure takes about 90-120 days and will
result in the Borrower losing any interest andequity in the transaction.
Nothing. SR Capital Management handles thecharges upfront and recoups the fees aftertaking control of the property.
RISKS
Every investment has risk, continued…
Generating Wealth Through Private Lending
The “Perfect Storm” has been created by current
economic challenges…
Time for Private Lending
Tight credit markets.
Home values down.
Increase in foreclosures.
Distressed banks.
ECONOMIC CHALLENGES
Limited opportunities for Borrowers to purchase properties.
The timing and conditions for Private Lending are ideal…
Generating Wealth Through Private Lending
Contact SR Capital Management to take advantage of this unique economic environment to start generating wealth with Private Lending.
The “Perfect Storm” has created this limited window of opportunity. Don’t miss out… Take action today!
THE TIME FOR PRIVATE LENDING IS NOW
What are the next steps?
David Stromswold949-929-7355
david@srcapitalmanagement.com
Time for Private Lending
SRCapitalManagement.com
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