A Blog About Nothing: How To Make 10% Interest Securely

At this moment investors are furiously taking their money out of the stock market and investing in Treasury bills that currently pay a whopping... 0.43% interest! (That's what the 3 month T-bill got down to today.) That means that for every $1,000 you invest your return will be a grand total of $4.30 per year!

Why do you think everyone is pouring money into this so called "investment"? Obviously it's not for the rate of return. It's simply to avoid losing their money -- they're more worried about their Return OF Investment, rather than their Return ON Investment. And who can blame them? As the financial markets implode and the stock market jumps around like a person with an ice cube down the back of their shirt, investors don't know what else to do besides the equivalent of putting their cash under their mattress. They just don't know a better solution!

But I do know a better solution. And I can't stay quiet any longer. It just makes me crazy, seeing people dumping their money into an investment with a negative rate of return (taking inflation into account), when I know all sorts of people that would love to pay them a much higher, secure, fixed rate of return! There is a MUCH better way. I want to shout it from the rooftops, "Hey! Stop giving away your money! I can show you how to make 10% securely!"

Notice that I didn't say "safely" or "guaranteed". Those words are frowned on by regulating bodies for good reason. Nothing is guaranteed. But you CAN make 10% securely. The solution is to become a PRIVATE LENDER.

HOW DOES IT WORK?

Real estate investors, such as I, need your money to buy property. And we're willing to pay a good rate of return. The rate of return is much higher than you will get from CDs and Money Markets, AND it's a FIXED rate of return, so you don't have to worry about crazy market swings like you do with stocks and mutual funds. And your investment is secured by a real estate property.

In my case I pay 10% interest for short term loans (up to one year), with the interest accruing until the loan is paid off, or 8% for possibly longer term loans where you receive a monthly payment.

HOW IS THE MONEY SECURED?

Your money is secured by a home, generally at 70% or less "loan to value" ratio, which means that you would lend less than 70% of the current market value of the home. The home would serve as collateral (security) for the loan, so if your loan wasn't paid, you would get the collateral, i.e. you would get the home.

WHAT IF YOU DIE?

People always want to know what would happen if I died. The answer is that I would have a funeral and be buried, and it wouldn't affect you at all. The company would go on making your payments.

The real question you're trying to ask is "What if I don't get my payments?" Because if I died and you still got your payments, you wouldn't have a problem, right? You might feel a little bit sorry for me, but you would soldier on. But if you didn't get your payments, because I was dead, or for any other reason, that's when you would become concerned.

So the answer to your real question, "What if I don't get my payments?" is this: Since your loan would be secured by a property, you could foreclose on the property, simply by making one phone call to the trustee. The property would be sold at a trustee sale, and you would get all of your money back, plus all of the interest and fees. If the property failed to sell at the trustee sale, then you would end up with the property. And since your loan would be secured by a property at less than 70% "loan to value", you would end up with a property that would most likely be worth quite a bit more than the amount of your loan. For example: If you were loaning $70,000, your money would be secured by a property with a current market value of $100,000 or more. If we stopped making the payments, you would be able to take the home and sell it. Since it would be worth at least $100,000, you would very likely be able to sell it quickly for more than the balance owed to you on the loan.

HOW ELSE IS THE PROPERTY SECURED?

Not only is your loan secured by the property, it is also secured by hazard insurance and title insurance.

HAZARD INSURANCE: A hazard insurance policy (also known as fire insurance) is always provided, so insurance would pay for the damage from fire or any other type of disaster covered by the policy.

TITLE INSURANCE: A lender's title insurance policy is provided to the private lender (you), so you would be covered in case there were ever any issues relating to the ownership of the property.

CAN I SEE SOME EXAMPLES?

EXAMPLE SCENARIO 1:

Market Value of the Property Securing Your Loan: $100,000
Your Loan Amount: $70,000
Loan Duration: 1 year
Interest Rate: 10%
Interest Accrued: $7,000
Your Payoff Amount at the End of the Year: $77,000

EXAMPLE SCENARIO 2:

Market Value of the Property Securing Your Loan: $100,000
Your Loan amount: $70,000
Loan Duration: 1-5 years
Interest Rate: 8%
Monthly Payment to You: $466.67
Your Payoff Amount at the End of the Loan Term: $70,000

HOW DOES THE LOAN PROCESS WORK?

The process is very simple. If you wanted to become a private lender, you would tell us how much money you had available to lend. We would then find a property that matched your available funds. When we were ready to close you would wire the funds to an escrow company, and they would provide the title insurance and coordinate the transaction.