FREQUENTLY ASKED QUESTIONS:
Why does it make sense to have passive investments in real estate?
Most people go through life letting others make decisions for them and they are not in control of how their money is invested or what it earns. That means they’ll never really know if what they are investing in will give them enough of a return to take care of their future, their family, the kids' college, or their retirement. Because of that, they’re playing guesswork games with their money and hoping they’ll get in or out at the right time and it’s virtually impossible to always make the “right decisions.” By becoming a private lender who invests passively in real estate, you can get 10%-12% fixed returns, safely secured by real estate. Since your returns are fixed, that means they never change. They’ll also be much higher than CD’s, money markets, commodities, and most stocks and mutual funds.
What is private lending?
Private lending is essentially you lending an amount of money secured by a promissory note and a deed of trust (mortgage) which are both recorded at the State of Arizona’s Recorder’s Office, against the title of a piece of real estate (single family home or condominium). Properties are located in the Phoenix metropolitan area and are purchased 30% or more below market value as determined by a licensed appraiser. The low Loan-to-Value (LTV) ratio of 70% or less provides investors with added collateral to secure their investments.
Investors also receive a Hazard Insurance Policy listing them as the loss payee, a Title Insurance Policy guaranteeing their recorded investment in the property as well as a copy of the Appraisal or Market Analysis Report. All funds are handled by a local attorney's office and title company.
Can I use my IRA or 401k to lend from?
Absolutely; in fact, that’s what many of our investors do. You must be in control over where your investments go from your IRA or 401k, and you can take any old IRA or 401k that you have and roll it over in to a self-directed IRA. There’s no penalty for doing this because you’re not taking a distribution, you’re simply changing the Administrator to one that allows you to self-direct where the funds go. Doing it this way, you can make all of your gains tax deferred without counting on someone else to get you 10%-12% fixed returns day in and day out.
Two companies we recommend are Entrust Group (www.theentrustgroup.com) and Equity Trust Company (www.trustetc.com). You are able to get a FREE Information Packet via both their websites. The entire process is extremely easy to do and we can assist you through the entire process and are also available to answer any of your questions. The entire process only takes approximately 2-3 weeks.
Why is Harvard Property Holdings LLC willing to pay such high returns?
There has never been a better time to buy houses in the Phoenix area. There are a record high number of foreclosures and “short sale” deals available, and the availability of short term capital is more important than the cost. We needed to move quickly to purchase from sellers who are willing to happily give us equity in homes for FREE in exchange for peace of mind or debt relief and we didn’t have time to go through banks because the process just takes too long.
Also, since we are buying properties with large amounts of equity in them, it allows us to give away a portion of our profits back to you through repaying the original loan amount plus a generous interest on top of it. By using private lenders we can also hold our properties over a year, making our taxes much less.
Are high interest loans like this new to real estate?
Absolutely not! This is a multi-billion dollar industry that has been around for decades. There are companies out there like the Money Store, American General, Household Finance, Beneficial, Ford Credit and numerous others. Their niche is to lend money to homeowners who typically use the money for home improvements or even loan consolidations. The loans are secured by a Second Mortgage on the property. Our niche is to borrow the money the same way, except we’ll use it only for the funding necessary to buy, renovate and carry the property until we sell it; also secured by a mortgage against one property.
How is the private lender (investor) protected when they lend money?
Your money will never be pooled or “co-mingled”; you’ll have one mortgage secured against one property that’s also got at least 30% or more equity in the property. That means there will always be a large hedge factor between what you loan and the available profit or equity in the house.
There are also four key items that secure your investment each time you lend:
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A Promissory Note which states the exact fixed return that you will receive. Whatever the note states is what you’ll receive. |
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A Deed of Trust (mortgage) will be created by a local Title Company to secure the property as collateral for your loan. That means you will have a lien on the property and we cannot sell it without paying you off first. |
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A Title Insurance Policy will protect you against any title issues or claims that may arise. |
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A Hazard Insurance Policy will be in place for your protection in case of an unexpected catastrophe or problem. |
Who handles all of the paperwork?
A local Title Company and real estate attorney will handle all of the paperwork. You’ll send your funds directly to the Title Company and make them payable to them. The closing agent won’t disperse any funds until all of the documents that secure your investment are in place and signed off on. You will be provided with a promissory note that states the terms of your loan, the mortgage instrument that gives you collateral and the Title Insurance Policy. You will also be given a copy of your Hazard Insurance Policy – showing you as the insured loss payee as well as a copy of the appraisal or market analysis report. Harvard Property Holdings, LLC, will pay for all of the closing costs to secure your investment, including the insurance and title policies.
You’ll receive a copy of the mortgage that day, and then once it is filed in the State of Arizona Recorder’s Office and recorded in the Deed Books; you’ll get a stamped copy in the mail a few weeks later.
Do these loans pay down or are they interest only?
Typically the loans are interest only. That means none of the monthly interest goes towards your principal loan amount and you earn interest on top of interest every month. If you want to, you can do an amortizing loan where some of each month’s payment goes towards the principal balance and the rest goes towards interest. You’ll make more money if you do interest only; however you are in control to set the terms here as to how you would like to be repaid.
How long are the typical loans and how much do I need to invest?
Typical loans range from 12-60 months. You can invest as little as $25,000. Most loans range from $25,000 to $200,000 depending on the property.
Is private lending really a safe investment?
It’s much safer than the stock market because you have no ups and downs to worry about. You might make money in the stock market one month or one year, and then get wiped out the next. When it’s all said and done most people get returns that barely keep up with inflation. By investing in real estate, you won’t be gambling on companies that you have no control over or know little about who is running them.
Your investment loans with us are safely secured by real estate and you’ll get fixed returns of 10%-12% that never change. Also, there are no fees or commissions, no early withdrawal penalties, and there will be large spreads of equity versus your investment. You’ll just need to use common sense and take a look at what the property is worth, what’s owed and what you’re lending. Remember, you don’t have to put all of your investment funds into real estate; but it’s a great place to get consistent, predictable and reliable returns.
How do I get started?
Just contact us either by telephone or e-mail when you’re ready to get started making more money. We will then set up a meeting to discuss the amount you have available to lend, the interest rate, and the length of the loan. We will then find a property that matches your needs. Once this is accomplished, you’ll arrange for the funds to be sent to the Title Company. A closing will be set up at Title Company’s office and you can sit back and watch your investment grow. You’ll get fixed returns that never change, that are safely secured by real estate.
Call today to learn how to increase the earning power of your money:
602-324-2300