The most common stumbling block to investing in real estate is not having enough cold, hard cash to act quickly to snatch up the hot deals. What if you could create a hassle-free, never-ending supply of money to do all the deals you want?
What if there were no red tape delays from big money lenders? What if you were finally in control of your own destiny? It’s like tapping into your own “private bank”…
Use someone else’s retirement plan to fund your deals
The first step to creating your own private funding sources, independent of banks and other institutional lenders, is to cultivate your friends, relatives and business acquaintances–especially those with substantial retirement plans
You will have to show them how they can earn good rates of returns–much better than their funds can earn if deposited in banks and much more predictable upside than their funds can earn if invested in securities–by lending you their money secured by real estate.
What do they get? By using their existing IRAs and Pension Funds they can earn aggressive rates of return, secured by real estate, with no tax on the gain. This can result in a phenomenal internal rate of return that in turn compounds tax free within their retirement fund. Meanwhile, this has produced no negative effect on their current lifestyle or cash flow!
What do you get? The opportunity to build your assets rapidly by multiplying the potential number and value of deals you can do. It will also have the effect of attracting more investors to your deals. And, if you want to grow your own retirement account, you can reciprocate with your investors to assist them with their own real estate investing.
To enable the operation of this private bank, all that your financial friends need to do is to transfer or deposit their funds with a custodian that knows how to handle the paperwork for such investments as: Real Estate, Notes, Options, etc. Make sure that the custodian you choose is:
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Properly regulated, and
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Has been in business for a number of years with a record of stability.
Remember when dealing with your own or other people’s retirement funds, you need to make sure that those funds are properly protected.
How this concept works
A case study from our files illustrates how one of our clients, an investor/rehabber who is an investor with Mid-Ohio Securities we’ll call Bill, put this private bank concept to work.
A few years ago Bill ran out of money to do his deals. He was in a hot market, and he didn’t want to miss out. What he did next would change his life. He found a great little house that he could buy for $25,000, all cash. It needed about $5,000 in fix-up.
He went to some friends and relatives and borrowed money from their IRA’s. He paid them 15% interest ($2,250) for the 6 months it took to finish the rehab and then resell the house. His sales price was $52,000. After paying back his investors, he had a net profit of over $19,750.
Bill’s friends were so pleased with their returns, that he had no trouble getting more money. Now he has access to more than $600,000 in his own “private bank.”
Your three-step plan to unlimited investment money
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Find and negotiate a good deal, with a 75% loan to value ratio, so you’ll be able to give your investors safety for their investment. Build in enough gross profit so you can pay someone 10, 12, even 15% for the use of their money. (Remember, it is not the cost of the money but the ability to access the money anytime that is important.) Leave yourself enough time, through a contingency clause, to find your first money source. (If you’re stuck, look around the Creative Real Estate Online site for more information.) Be sure to follow IRS guidelines that prohibit certain transactions.
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Find an IRA custodian that allows you to invest in real estate ( and other special assets) using your IRAs. Remember, contrary to what some brokers or bankers might say you can do these types of transactions. Whatever you are told, keep looking for the right IRA custodian. It is in your best interest to find someone who will allow you to make the kind of investments you are already familiar with, to build wealth inside your IRA.
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Present this deal to friends, relatives and business acquaintances who have or who want to have a retirement plan IRA or pension plan. Offer them a good rate of return for the use of their money. Explain that their loan will be secured by a mortgage on real estate, with a good loan to value ratio. Keep “selling” your deal until you find someone who will lend you the money. Remind your prospective investors that their returns are either tax deferred or tax free, depending on which kind of IRA they have. Point out to them that real rates of return outside of tax-deferred/tax-free vehicles are reduced anywhere from 30-50% by taxes.
Once the retirement account is in place, the “private bank” is available to make loans and participate in other creative real estate transactions. To initiate the activity, the fund owner must simply submit brief paperwork that documents the desired transaction.
That’s it–the start of your own “private bank”! The only limitation to the amount of money you want or need is your expertise in finding good deals. The funding will already be in place.