"Private Lending" refers to the process of borrowing real estate investment funds from private individuals at rates higher than these lenders can normally achieve in the marketplace. The attraction of private lending is the speed and ease of funding a deal.

As prospects express interest explain that the investments are secured by real estate and do not exceed 75% loan-to-value (LTV) of the after repaired value of the home. Each investment is based on a specific property, and they can decline any property with which they are not comfortable. All you require is that they approve quickly (within 48 hours), and can fund within 7-10 days or less.

Once they have approved the investment, the funds are wired to the closing attorney to be held in escrow. After the closing, the lender will receive a Promissory Note from you (either personally, from your business entity, or both), a Deed To Secure Debt (mortgage) on the property, lenders' title insurance, and listed as a mortgagee on the hazard insurance policy.

If no single investor can fund the entire investment, then piece several loans together by providing the largest investor with a first position mortgage, and each smaller investor a progressively subordinate (2nd, 3rd, etc.) mortgage. Typically, we pay an additional percentage on the interest rate to entice investors who accept subordinate positions.

Now you may be wondering how many people you know really have $75k -$100k -$150,000 just lying around ready to invest. More than you think - and most of them don't even realize it! That's because the money is tied up in their IRA's which they believe can't be accessed until retirement. That's only half true. They can't personally withdraw the money without suffering penalties; but they can invest their funds (and receive your interest tax-fr ee! if it's a ROTH IRA) if they rollover into a self-directing IRA.

A self-directed IRA is administered by a third party institution (we recommend Equity Trust Company in Ohio www.trustetc.com ) and allows the IRA owner to make decisions relative to the investment of the funds. In other words, the IRA owner can decide to use his IRA funds to make a real estate investment in your property. Most people do not even realize this as a possibility. They believe their money must stay tied up in an IRA until retirement earning nominal interest. Imagine how thrilled they are when you provide this alternative! Imagine how much money is currently sitting in traditional IRA's that you could tap into. There are more funds available than you can use. Isn't that a nice problem to have?

Since Equity Trust Company has all of the forms on their website, I ensure that making a loan is as simple as possible for my private lenders. I prepare all of the required documents so all they have to do is sign and fax to Equity Trust. From that point on, the private lender has nothing else to do. Simple. Easy. Their next task is approving the payoff when the loan is re-paid. Because the loan process is so simple, and the interest rate so favorable, investors are always begging to re-invest. This truly is a bottomless pool of investment cash.

Don't forget that if you have cash in an IRA, you can also increase the interest you're earning by becoming a private lender. You can not invest in any property or company in which you or your family have a vested interest, but you can invest in the projects of other investors which you know and trust. It's a great way to leap frog your IRA.