Frequently Asked Questions 

What is a private lender?

An individual with personal funds who makes loans to individuals or companies at an agreed upon rate of return and timeframe for that return is a private lender.

How is the money used?

On a home purchase requiring renovations, a private loan will be allocated to the purchase price, renovations, carrying costs, cost to resell, and buffer for unexpected expenses.

Why don’t you get a traditional loan?

There are many reasons, but the primary reason is, time and negotiation leverage. Many of the homes we are purchasing are in need of a quick sale within 10-14 days. A traditional bank requires a minimum of 30-45 days to close a loan. Also, our leverage is far greater when we purchase using cash funds. Many traditional home sales fall out of contract because of financing issues, and this allows us to negotiate a much lower purchase price and reduce our risk. Lending guidelines are also continually changing. New requirements include applications, approvals, numerous fees, and strict investor guidelines.

How can you afford to pay such high returns?

We factor those returns into our financial analysis from the beginning. We buy only properties that our analysis shows will produce significant profits to us while at the same time providing our private lenders with high returns on their investment. In addition, our projects and the loans through which we fund them are short-term (typically 6 months or less).

Are you really helping sellers?

Absolutely. With your cash funding we can offer something very few buyers can. We buy on the seller’s timeline in as little as 10-14 days. Knowing that we’re going to renovate the home and buying it in As-Is condition is a very important factor to most sellers of distressed property. They also won’t have to pay any additional fees.

What if the market gets worse and values go down?

Our strategy is not to speculate 3 years down the road. Our goal is to purchase quickly and sell even faster. Our typical target is 3 months for completion of renovation, and 3 months for sale and closing. With rare exceptions, the market doesn’t tend to shift that dramatically in that timeframe. And, we buy in strategic areas where inventory is already low and demand is high, which minimizes our risk.

What interest rate do you typically pay your private lenders?

The interest rates we pay will vary, depending upon the nature of the project. On a short-term note (6 - 12 months), we typically pay our private lenders a 10% return based on the length of time the funds are held.

How long will my funds be held?

The majority of our loans are set up on a 6-12 month note, with the goal to complete the project, sell the property, and pay our investors within 6 months. Larger projects, such as a teardown and rebuild requiring multiple governmental inspections and approvals, can take longer. We go over all of those details with you up front, and we will give you an estimated timeframe for the return on your investment.

What if I’m on a short-term note and you sell the home after only 1 month?

It’s extremely important to us that we do not waste your time. However, occasionally, situations may occur where we find a buyer immediately. In this scenario, we provide you with two options: we can either move the note to another property, or return your investment with interest prorated for the amount of time we have held your funds.

When will I receive payments?

Typically, we pay one large lump sum at closing on a short-term note. This is much easier to manage for both of us, especially if your funds come from your self-directed retirement account.

Is there a Guarantee on your investment?

No. There is no guarantee, whether government-backed or otherwise, on these privately held real estate notes. Subject to the risks mentioned above, you derive protection from the equity in the real estate.

What kind of insurance do you get on the home?

We obtain a Builders Risk/Vacant Dwelling policy to cover damage to the property while we own it. Our private lenders are named on this policy. We also require our contractors to provide general liability and workers compensation insurance. In case of damage to the home while we own it, insurance distributions would be used to rebuild or repair the property, or to pay off our private lender(s).

Will my money be pooled with other investors’ money?

No, we do not pool funds. Your funding will be tied to one piece of property secured by a deed of trust.