Private Money Lending is a great way to generate cash flow and produce a predictable income stream - while at the same time, provide excellent security and safety for your principal investment. This allows you to make a profitable return on investments backed by real estate.
We also welcome other forms of lending
A private money loan is a loan that is given to a real estate investor, secured by real estate. Private Money Lenders are given a first or second mortgage that secures their legal interest in the property and secures their investment. When we have isolated a home that is well under market value, we give our private lenders an opportunity to fund the purchase and rehab of the home. Through that process, the lender can sometimes yield high-interest rates – typically higher rates than you can get on most bank CDs and other traditional investment plans.
The process is simple. We find a potential investment property we want to purchase - and once you give us the green light, we borrow the funds from you to purchase and renovate the property. At closing, you receive a mortgage on the home along with other important documents. The next stage is the property renovation. Once the renovations are complete (typically 3-6 months depending on the size of the project and market conditions - but can be as quick as 3 days), we’ll then list and sell the property. When it’s time for closing, you’ll receive your principal plus an interest payment, varying on the project and terms. It’s just that simple! The goal is to keep turning that money for you and keep you making substantial profits so you keep coming back to us – building a long-term mutually beneficial relationship.
You, as the Private Money Lender, can benefit greatly from investing your capital. A real estate mortgage/deed of trust provides you with security instruments you would not get with other investments. You also have added layers of protection because of how we buy, and because you have recourse available to you in case we were to default on the loan.
Mortgages offer the banks solid, long-term, fixed returns. You can put yourself in the position of the bank by directing your investment capital, including retirement funds to well-secured real estate mortgages. Mortgages have ultimate safety because if a default occurs, the bank can recover its investment as the first lien holder on the property.
Each property we acquire is put through a rigorous evaluation process in order to assess the profitability before the property is ever purchased. “integrity" is an essential part of our business, and we only make sound investment decisions. Also, for your protection, you are also provided these documents to secure your investment capital:
Promissory Note: This is your collateral for your investment capital
Deed of Trust/Mortgage: This is the document that is recorded with the county clerk and recorder to publicly secure your investment against the real property that we are providing as collateral
Hazard Insurance Policy: This is where you as the private lender would be listed as the “Mortgagee” for your protection in case of fire or natural disaster, etc.
We do pay for a title search as well as a title policy on the home just as we would in a typical transaction. For a rental investment with a long-term note, we always keep a valid hazard insurance policy on the property to protect against causalities. You’ll be named as a mortgagee and notified if the insurance was not kept current. In the event of any damage to the property, insurance distributions would be used to rebuild or repair the property, or used to repay you.
Private Money Lenders bring speed and efficiency to our transactions, and our leverage is far greater when we purchase using private cash funds. Many of the homes we are purchasing are in need of quick sale within 10-14 days. A traditional bank requires 30-45 days to close a loan. Many traditional home sales fall out of the contract because of financing issues. Using quick cash as leverage allows us to negotiate a much lower purchase price and reduce our risk.
Being able to offer a fast closing with private funds motivates sellers to take our offer over the competition, and entices them to take a much lower price than they would from a conventional buyer. Also, lending guidelines are also continually changing and are requiring applications, approvals, junk fees, and strict investor guidelines. They also limit the number of investment properties that can be purchased by one company.
On a new home purchase requiring renovations, private lender funds will be allocated to the purchase price, renovations, carrying costs, cost to resell, and a small buffer for unexpected expenses.
Cash held in most types of bank accounts can be accessed quickly and can fund your deals in minutes, instead of hours or days. Fees are generally minimal for wire transfers and cashier’s checks.
A home equity line of credit is a very powerful source of funding that many people have and don’t even think of. Unleveraged equity is dead money and it’s not making any interest. You can easily tap into that money. It’s a way to make sure you’re in the first position when we’re ready to pull the trigger and buy a property.
Personal loans and “signature lines of credit” can be obtained from most banks or credit unions by anyone with good credit and a stable income.
More and more private money lenders are using their IRA funds to invest in real estate. A self-directed IRA is essentially the same as a traditional IRA but allows you to purchase a broader range of investments, including real estate.
Liquidated Securities & Investments
Investments are a way to put your savings to work earning more money. However, if your stocks and investments have not performed as you had expected, it might be time to consider other investments. As you know, stocks can be liquidated as and when you wish. Sometimes you need to liquidate your investments because you need the money for something you want to purchase such as real estate.
When working with private lenders, $50,000 is our minimum standard investment. When first investing with us, a lower initial investment amount may be agreed upon to ensure you’re confident when working with our company.
The majority of our loans are set up on an 8-12 month note; however, it depends on the size of the project. If we are doing a teardown and rebuild, we will have to wait on the county inspectors for many approvals - thus causing delays. We account for all of those details upfront and will give you an estimated time frame for the return on your investment. Also, we do not pool funds - your funding will be tied to one piece of property secured by a deed of trust.
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 we’re working out of a retirement account. On a longer note, we will pay monthly just like a typical mortgage.
1st or 2nd Lien Position:
The Investor, as “mortgagor,” has the right of first lien holder and Power of Sale on the property. The 1st lien position is placed behind a senior mortgage. You are probably used to hearing the term first and second mortgage. The second mortgage is a junior lien because it’s in 2nd position. The senior lien or first mortgage must be paid prior to the 2nd lien.
If this is something you'd be interested in doing please use the contact form below to reach out to us and schedule an appointment. There, we will be going into further detail as well as answer any questions that may have come to mind while reviewing this information. We look forward to helping you secure your next investment.
4701 Preston Park Boulevard, Plano, TX, USA
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07:00 am – 07:00 pm
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Monday - Friday: 7am - 7pm
Sunday: By Appointment
Fazio Real Estate Solutions, LLC
5900 Balcones Drive, Austin, Texas 78731, United States
Copyright © 2021 Fazio Real Estate Solutions - All Rights Reserved.
Disclaimers and Disclosures
All materials available on this website and provided by Fazio Real Estate Solutions, LLC are samples and for informational purposes only. Fazio Real Estate Solutions, LLC does not provide legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation. You are solely responsible for ensuring that your business practices comply with all applicable, local, state, & federal laws.
LICENSE HOLDER DISCLOSURE: Texas law requires a real estate license holder who is a party to a transaction or acting on behalf of a spouse, parent, child, business entity in which the license holder owns more than 10% or a trust for which the license holder acts as the trustee or of which the license holder or the license holder’s spouse, parent or the child is a beneficiary, to notify the other party in writing before entering into a contract of sale. Disclose if applicable: Niccolo Fazio is a licensed real estate agent in the state of Texas. All Parties engaging in a transaction with Fazio Real Estate Solutions, LLC acknowledge that Niccolo Fazio is a real estate agent, however, Niccolo Fazio is not representing any party involved in any transaction. Fazio Real Estate Solutiions, LLC nor Niccolo Fazio does not represent you as your real estate agent in any capacity of a transaction unless agreed upon by all parties in writing.
CONSUMER ALERT ** PLEASE READ THE FOLLOWING **
Due to the recent rise in cybercrime sweeping the real estate industry, we want you to be aware of the following important information: There have been many instances of real estate agents', brokers', attorneys', and/or consumers' e-mail addresses being hacked/phished. The cyber-criminals forward bogus wire instructions, redirecting deposits and/or cash to close to a fraudulent bank account. Once received, the money is quickly sent offshore, where it is difficult if not impossible to retrieve.
If someone representing Fazio Real Estate Solutions, LLC or any other party involved in a transaction you have with this company sends you wire instructions, CALL OUR OFFICE IMMEDIATELY BEFORE SENDING ANY FUNDS. DO NOT SEND AN E-MAIL. We will never ask you to send wires to any other person or entity.
Fazio Real Estate Solutions, LLC or any other party involved in a transaction does not claim to be the owner of the properties of the contracts that we market for sale. If we are not the owner(s) then we simply have an equitable interest in the property. Fazio Real Estate Solutions, LLC or any other party involved in a transaction is a real estate investment firm and does not claim to be licensed real estate agents or brokers therefore we are not providing representation of the seller(s).
Fazio Real Estate Solutions, LLC or any other party involved in a transaction will assign to the buyer equitable interest. The assignment will be initiated upon reaching a purchase agreement and deposit received. The deposit will be refunded if only the seller doesn’t perform and/or the title does not clear within a reasonable amount of time. The contracted closing is only extended if the title is not deemed clear and all involved parties agree to the extension.
All above-stated information, including any projected after repair values and estimated repairs, are a matter of personal opinion and therefore should be verified independently by the buyer. Always perform your own due diligence to verify and validate any numbers presented before signing a contract or assignment to purchase any property.
REGARDING ASSIGNMENT CONTRACTS: EQUITABLE INTEREST DISCLOSURE PURSUANT TO TEXAS PROPERTY CODE SEC. 5.086: THIS INSTRUMENT REPRESENTS ONLY AN OPTION OR ASSIGNMENT OF AN INTEREST IN REAL PROPERTY. IT IS NOT A TRANSFER OF TITLE. THE ASSIGNOR DOES NOT HAVE LEGAL TITLE TO THE PROPERTY. CONSULT AN ATTORNEY PRIOR TO EXECUTION IF YOU DO NOT UNDERSTAND THIS DISCLOSURE.
CONSULT AN ATTORNEY PRIOR TO EXECUTION IF YOU DO NOT UNDERSTAND ANY DISCLOSURES OR CONTRACTS.