1112 Montana Ave., # 390 SM, CA BRE: NMLS: Tel: Fax:

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1 Global Financial Network, LLC Montana Ave., # 390 SM, CA BRE: NMLS: Tel: Sam@Samsadat.com Fax: Private Lending Class April 25, 2015 Today s talk is on Private Lending. What qualifies me to teach this class? I ve been in the lending business since I ve been a broker with the BRE since I got my NMLS endorsement since 2010, first year it was enacted. I ve been involved in over 2000 transactions in all capacities: mortgage broker, mortgage correspondent and mortgage banker from 1987 till Since then I ve been in Private Money Lending, also referred to as hard money. The private lending business cannot be taught in 2 hour no matter how good an instructor I am. But you won t need 100 hours or more at the cost of tens of thousands either. Today, I ll give you an overview of the business of mortgage lending. We ll cover its fundamentals and framework plus the major components of this awesome business.

2 The actual workshop will be conducted in about 30 days. In one full day, I will teach you how to become a successful private lender, raise OPM, evaluate deals and fund them with your or OPM money. The Private Money Mastery Class, which is the name for my upcoming workshop, will come with one full year of support and potential leads that I get from time to time. You can also bring your own deals and process them through my company to stay compliant with state and federal laws. The price of the workshop is yet to be determined but you will soon get an from me with all the benefits and investment value. Those who ve attended George Anton s PL training know that they start with $9,000 and end up with $30,000+ just to teach you the theory of the business. I ll teach you both the theory and practice in at an affordable price, which is aligned with my teaching philosophy. Any questions before we proceed? Let s get started: 1. What s private lending? 2. Why private lending? 3. How you can benefit from this business?

3 Private lending is the financing real estate with funds other than conventional sources. Conventional sources are banks, credit unions, mortgage bankers, etc. Example: Person A loans money to person B at an attractive return (interest rate) for a short period of time. The reason private lending is getting so popular is because banks cannot or do not want to loan money to certain unqualified individuals/companies due to many regulations post the 2008 crash. The benefits of private lending are high rate of return, fully collateralized by RE and short term maturity among many others. How does the mortgage system work in America? Have you ever wondered why banks never run out of mortgage money? Here s how the entire system works.. A. Borrower applies for a loan to a bank (primary source of money.) B. Borrower qualifies for the loan. C. Lender approves the loans, usually long term, and fund it thru escrow. D. Loan closes. E. Lender performs post closing requirements.

4 F. Lender sells loan to the secondary market on Wall Street. G. Secondary market issues MBS (mortgage backed securities.) H. Investors buy these MBS and replenish the source of funds. Private money financing has many similarities to this process with some major exceptions. 1. Borrower is not a homeowner. It s always an investor buying RE for business purposes. See Section 32 (high cost mortgage laws.) 2. Borrower can qualify much easier. Usually a credit report and loan application would suffice. 3. Private lending is more concerned with the asset (collateral) and not the borrower s credit or income. 4. Private lending is short term. 5. Private lenders don t/can t sell their loans to Wall Street investors and thus they can run out of supply. Thus the short term nature of these loans. Two ways to make money in real estate: 1. You can own it, fee simple, which is the highest form of ownership. You can buy it with all cash or finance it, but either way the property vests in your name. You have the grant deed proving you are the owner.

5 2. You act as a lender by financing it or buying the note to the property. 3. Notes can be performing or non-performing 4. For this class, we re focusing on performing loans. If you pay cash for the property, it is yours free and clear. Although there s a deed involved, there won t be a note in existence. If you finance the property, you will have two instruments to work with. There will be a deed for ownership and note for lender s security. What is a mortgage and how is it different from a deed of trust? Mortgage comes from the Latin root, Mortuus, meaning to pledge until death! This is just one example of how language can affect the human behavior. Don t most people in America keep refinancing till they die? Another example of language affecting human behavior. Disposable income vs. discretionary income. Mortgage or a deed of trust, as it s most commonly known in most of the states, is a loan used to finance the purchase of a property (real estate only.) Contrary to popular belief, you don t get a mortgage.

6 You actually give a mortgage to the bank along with the right to foreclose on you if you ever default. In a mortgage system, you have two parties: mortgagor and mortgagee. Mortgaee is the lender and mortgagor is the borrower. In the mortgage system, foreclosure must be done thru the judicial process. To better protect the rights of property owners, expedite the foreclosure process, and limit property owners liabilities, many states adopted the TD system. In the TD system, there are three parties involved: Trustee, trustor and beneficiary. Trustor is the borrower, trustee is a third party which has the power to start foreclosure upon default by borrower and beneficiary is the lender. In this system, the TD sale will be used instead of the judicial foreclosure. In an ideal situation, lender can have the property back under four months. Who can become a private lender? Anyone with money or access to it. How do you make money as a private lender? Same way banks do. Margin plus points. What s a margin?

7 Difference between what you pay for money and what you get for it. This is how banks make billions! Using the money to make money instead of labor and hard work! Where you can get the funds? Your own savings. Your HELOC, BLOC or credit cards with low rates. OPM from your family, friends, etc. How do you make sure your money is protected? Collateral (property). Right type of occupancy. Proper analysis of value / establish equity loan application with all disclosures. GFE, TIL, etc. Appraisal. Inspection if necessary. Credit report. Bank statements. Rehab costs. Rent roll, if applicable. Escrow company. Title company. Servicing company. Promissory note. Deed of trust. Business purpose letter. Personal guaranty. Proof of hazard insurance. Closing statements or HUD 1.