Frequently Asked Questions

So what is a Private Loan Maker anyway?
For the purposes of this Web site... A Private Loan Maker is any individual, trust or entity willing and able to make private real estate secured loans to someone engaged in the buying and selling of real estate. Please read our FREE Special Report: How to Invest in Real Estate Secured Loans and Boost your Income as a Private Loan Maker for more specific information.

What happens when you deposit your money with a bank?
They give you a receipt (certificate) for your money and a promise to return your principal — plus interest — after a certain period of time. They then loan your money out, at interest, to someone who agrees to pay a higher rate of interest than what you agreed to accept from the bank. You receive a low rate of interest because the bank provides guaranteed safety of your principal through the Federal Deposit Insurance Corporation (FDIC).

Suppose you agree to accept 3% on a certificate of deposit. The bank will turn around and loan your money back out at 6% or more. They're making money — more than you are — on your money. But that's what you agreed to. You have the lowest risk and you get the lowest return. The bank takes more risk by loaning money for car loans, house and home equity loans, etc., and they get paid more.

If you want to make more money on your money, maybe YOU should consider doing what the bank is doing with YOUR money. Afterall, bankers are renowned for their conservative lending practices and are extremely averse to risking capital. Maybe they are smart loaning their (your) money at a high rate of interest. Maybe the added risk isn't that much afterall.

Is your money secure? How safe is it?
The money you lend is always secured by a Deed of Trust (Trust Deed) against a property we are buying or already have title on. If you are uncomfortable with the loan amount or the real estate offered as security, you should not fund the loan. Safe is a relative term. Someone might consider money put under their mattress, safe, because they know where it is and can access it any time. But is it really safe... Is it secure? Probably not. Only you can determine whether an investment is safe, secure and worth the risk for the return you are promised.

How much money do I need?
The average loan amount on 1st mortgages ranges from $135,000 to $ 210,000. First mortgages can be several hundred thousand dollars up to $1,500,000 per loan. On 2nd mortgages the average loan amount is $25,000 to $45,000. There are many other opportunities to loan smaller amounts ($10,000 to $20,000) and this might be a good way for you to get started as a private loan maker. We will contact you when a new loan matches your lending parameters to review the specifics.

All I have is $10,000... Can I still make a real estate loan?
No. We do not want to borrow all your money. If you have limited resources you should probably leave your money where it is. We prefer dealing with individuals who want to diversify an existing financial portfolio by making private loans secured by real estate. Consult qualified advisors before making any investment.

Can I make larger loans if I want?
Yes. It is not uncommon for some of our private lenders to loan $350,000 up to $750,000 or more on a 1st mortgage secured by an executive home or commercial property.

Where is the property located?
Colorado. Primarily the front range communities including Metro Denver, Evergreen, Conifer, Aspen Park, Highlands Ranch, Lone Tree, Castle Rock, Parker, Franktown and Colorado Springs. We may occasionally acquire ski area property located in Aspen, Vail, Beaver Creek and Winter Park.

I am a hard money mortgage broker. Can we do business?
Probably not. We already have an extensive list of private lenders available to fund our acquisitions and we consider these relationships proprietary and confidential. If you have a solid loan request, we may present it to one of our lenders and your fee would be protected.

I have several 100 thousand dollars to invest. Do you want a partner?
No. We are not arranging partnerships. We are private real estate investors buying and selling in our own portfolio. Only if you are interested in funding private real estate secured loans — at above average interest rates — will we consider doing business.

How do I get started?
It's very simple... If you are investing personal or family funds you just need to complete the Private Investor Profile form. Complete the required information, indicate the availability of your funds and when you would like to start considering loan proposals.

Can I use a traditional IRA or Roth IRA to fund loans?
Yes. You can use an Individual Retirement Account (IRA) or Roth IRA to fund private real estate loans, provided your Third Party Administrator (TPA) is setup to allow this type of investment. If you have any questions regarding your plan or its administration, you should contact your IRA plan administrator.

Once we locate a property to purchase we will contact you with the loan specifics. When it is time to close the loan, you notify your TPA where to send a check for the gross loan amount. There are no costs to you in making a loan, except your retirement plan administration costs which are minimal. If you have chosen to receive monthly loan payments, some TPA’s may even arrange to collect monthly payments for you and deposit them into your account. It's that simple.

For excellent information on the subject of using real estate mortgage investments to accelerate your wealth building, visit Equity Trust Company on the Internet. With over 30 years experience, they are the recognized leader in administering self-direct IRAs for tax-deferred and tax-free investment benefits. Equity Trust Company can set up a self-direct IRA for you that is qualified to make private real estate loans. You can also learn about the New Equity Trust Self Directed Individual (Solo) 401k advantage and how to convert Traditional IRAs into Roth IRAs. Contact us if you have any questions.

Who handles all of the paperwork?
We do. There are NO expenses for you. The borrower pays all costs. We NEVER touch your money prior to loan origination. Once you agree to fund a loan, you will be contacted to send your funds directly to the title company or attorney who is responsible for preparing the proper documentation and loan closing. If you make a $35,000 loan, you will get a note and deed of trust for $35,000. All loan origination services cost you nothing.

How do I get paid?
Depending on the transaction, we will structure the note with 6-12 months prepaid interest. Interest accrues in the note until the property sells or is paid monthly, or as otherwise agreed. We pay a minimum of 6 months interest irrespective of note pay-off date. The minimum note rate is 9% on mortgages (note and deed of trust) of $100,000 or less, and 12% on mortgages of $100,000 or more. These interest rates are subject to change without notice. When the note is paid off you receive your principal and accrued interest, or it is sent directly to your retirement trust account.

What about lending money through a Mortgage Broker instead?
You are contacted by a mortgage broker about a new loan opportunity. You agree to send in your money by certified check to their attorney or title company and end up with a note and deed of trust. You receive payments according to the terms of the note and are paid off when the loan becomes due, or in advance, due to the sale or refinance of the property.

Sounds like a pretty good deal. But it's a much better deal for the mortgage broker. They typically get paid 4 to 10 points of any loan they originate. One point is equal to 1 percent of the loan amount. For instance, if you agreed to fund a 1st mortgage loan for $115,000, the mortgage broker might charge the borrower 12% interest only per annum (1% per month), plus a mortgage broker fee of 8 points on the total loan amount. That would be $115,000 x 8% (8 points) = $9,200.00

So as the private money lender, you make a loan of $115,000 but your borrower only gets $105,800 from the proceeds. Actually they get even less than that, because the borrower will have other costs to get the loan. For instance, title insurance policy fees, recording fees, attorney fees, document preparation and closing fees, appraisal and property inspection fees, etc.

The mortgage broker is entitled to compensation because he/she did arrange the loan by matching you and your money, with a borrower with real estate collateral. But you actually make less money on the loan than does the mortgage broker. If the loan pays off in 6 months you receive $6,900 in interest payments. Remember the mortgage broker? He got $9,200 all upfront!

What if I want to liquidate my loan early?
You should not invest in a real estate loan if you think you might have to liquidate early. But, if something unforseen comes up and you need to liquidate all or part of your loan, we can arrange it.

Do you charge a penalty if I need to liquidate part or all of my loan early?
We do NOT charge an "early withdrawal fee" as do many banks on certificates of deposit. We do ask you give us 30 days notice if special circumstances require liquidation of your loan.

Is this a long-term investment?
No. We use the loan funds for acquisitions and normally pay them off though a sale or refinance of the property within 6 to 12 months. However, you can request a longer term loan. Some private money investors prefer making loans for 5, 10 or 15-year terms. We can arrange any loan terms suitable for your investment or retirement strategy.

Is this a mortgage pool?
No. If you make a $100,000 real estate loan, you get a $100,000 note and deed of trust against the property we purchase or have title on. You alone will own the note. Essentially, you are the bank.

How do I know my investment is protected?
After loan closing you will receive the following documentation:

1) Promissory Note
2) Deed of Trust
3) Appraisal or CMA market report
4) Hazard Insurance Policy - Showing you as an insured loss payee.
5) Lender's Title Insurance Policy - Showing your recorded interest in property.

These documents provide evidence of your secured interest in real estate.

What if I have another question?
Contact us and we will do everything we can to answer your questions.