Zero Risk Real Estate: Creating Wealth Through Tax Liens and Tax Deeds

Tapping into Private Money

If traditional financing isn’t available for a variety of reasons, then private money may be the solution. Sometimes referred to as hard money loans, these types of financing arrangements usually carry higher interest rates, higher costs, and tighter LTV ratios, but they look more carefully at the value of the property than traditional conventional bank loans do.

Private investors can be individuals, groups of people, or investment firms simply looking for a good solid rate of return. They want to recoup their investment quickly, and they’re more interested in the property’s value than in your credit rating. Private money lenders do not have any guidelines or rules to follow, and they do have the flexibility of lending money to whomever they want. When you work with a private money lender, you get your money right away instead of having to wait 30 to 90 days to close on a traditional loan.

At a 30 percent loan to value rate, and looking at the example we just used, a 10 percent interest rate would still be a good deal for you as well as them. Using these numbers, you would borrow $54,000 at 10 percent interest on normally a 1-year balloon note for private money. Your monthly loan payment would be $473.89. Again, if you are renting the property out for $900 a month, you have a net profit of $426.11, plus you have put $54,000 of cash buying power into your hands. The only thing to be aware of is that the balance of the loan is going to come due in 12 months. ...