Category Archives: private lending

How to create your own bank for your deals

In case you don’t already have your own personal money tree growing in the back yard, you can not get bank financing for your deals but you want to invest in today’s opportunities I have GREAT NEWS for YOU today!  Here is a path to follow where you can fire your bank and succeed!

1.  Create your own bank with retirement accounts

The best-kept secret in America is the Self-Directed IRA.  There are billions of dollars sitting in retirement accounts like 401k and various IRAs, but only two percent of the total assets are a self directed IRA.  Most of the retirement account assets are sitting in stocks, bonds, mutual funds and CDs.  The main reason for this is because the banks and brokerage firms sell these investment instruments.

A self-directed IRA allows the owner of the account to make investments in many different asset classes, including real estate.  It is easy to establish a new self-directed IRA or roll other existing retirement funds into a self-directed IRA.  The account custodian will take the role of administrator and assist with the documentation in your real estate deals and help you understand the prohibited transactions to avoid.

Once funds are in a self-directed IRA they can be used to purchase real estate or to lend to another investor to purchase real estate.  If you buy real estate within your self-directed IRA, all of the future proceeds and profits will need to go back to your retirement account and not into your checkbook for everyday use.

 

I prefer to use retirement accounts as the bank.  Accounts owners can lend the funds to other real estate investors.  The retirement accounts get a fantastic return and the investor gets the freedom to buy houses without needing a bank mortgage.  Who do you know that has a 401k or IRA that you can talk to about working with you as a private lender for your real estate deals?  Make a list and begin to share the best kept financial secret with them and use their funds for your deals.

 2.  Network, Network, Network

Everyone has money problems today, and that includes everyone from the unemployed to the very wealthy.  The wealthy are struggling to find a path to cut losses in the stock market without placing all their funds into CDs that are earning less than 1% in today’s marketplace.

Millions of dollars have been taken out of the market and placed on the sidelines.  Today’s economic challenges make it easier to approach potential lenders with a real estate option as an alternate to CDs and the stock market. Who wouldn’t want to earn more than 1% ?

Develop a simple, concise 30 to 60 second summary of what you do and how you work with private lenders to provide a solid return. End your short presentation with a question that requires a response. Once you can naturally tell your story, you are set to spread your message.

Where can you effectively network to find private lenders?  Start with financial type meet-ups focusing on retirement, investments and other meetings with small business owners.  You can also spread your message using social media such as Facebook, LinkedIn and Twitter.

The most recent private lender I picked up was because I was a good listener.  I heard this individual tell me that he use to live off of his CD interest, but that it is no longer possible since the rates are now so low.  He also told me that he was not sure what to do with their funds because he did not know how to get a good return on a safe investment.  Are you ready to respond when you hear someone talking about how to make good returns and preserve their capital?

3.  Attract the money

I am an Engineer by education, not a salesman by any real stretch, so I am not personally comfortable with asking people for their investment dollars for my real estate deals.  The good news is that once you start to have some success working with private lenders, you will find that more of them will begin to find you as “success breeds success.”  The whole key is to be prepared to educate people and help solve money problems.  The good news is the answer is by investing in real estate with good old fashioned hard assets in your market.

If you begin to attract money, are you ready to put it to good use?

The deals and opportunities in today’s market are likely the best of our entire generation.  The key is to be able to buy as many houses as you want without using your own money and without needing a bank mortgage.

What is holding you back from creating your own bank?  If you had private funds, would you be buying houses right now?

 

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How to use private lenders for your real estate deals

Eliminate the banks and you will succeed in today’s market.
By Jim Ingersoll
  Enjoy this video clip where I discuss the value of using private lenders.

Want more info on private lending?

1.  Watch for my soon to be released book on private lending on Kindle
2.  Join me at http://coaching.creonline.com OR join my mastermind group by emailing me direct jim@investingnownetwork.com
3.  Watch for my soon to be released Brand New Product on Joint Venture Investing
4.  Come to my soon to be scheduled LIVE EVENT:  Flipping Academy Boot Camp

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How to leverage real estate and structure private lender financing with David Phelps

By Jim Ingersoll
Enjoy this 10 minute video of my good friend David Phelps talking about the importance of leveraging time and resources
when completing real estate deals.  Everyone could paint, do yard work and clean our own houses, but is that the most
effective use of your time, energy and abilities?

Maybe you could be out finding more motivated sellers and structuring more deals if you outsource and contract other
components of your real estate investing models.

David also highlights the anatomy of a deal and the  how and why to use equity financing in your investing models.  Enjoy this video, leave me comments
and please share this video.

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How to structure an LLC with a Self-directed IRA

By Jim Ingersoll

Self-Directed Retirement Plan Investing Using an LLC Structure

Offers Maximum Flexibility & Protection for Active Investors

 


 

Did you know that you could purchase real estate, lend your money like a bank in notes and mortgages, purchase franchises or private equity in businesses and still have a brokerage account?  Since 1974 and ERISA (Employee Retirement Income Security Act), you have been able to do this, but your broker and your banker will never let you know!  Your broker and banker would lose commissions and income if you moved your assets from a brokerage account to any of the alternative investments mentioned.

 

Traditional retirement accounts have lost trillions of dollars in the past few years, causing many savvy investors to seek alternative ways to invest their retirement portfolios.  In increasing numbers, this search is leading to self-directed investing – a rapidly growing trend that enables you to have complete control over selecting and directing your own IRA, SEP or 401k investments. 

 

How do you take advantage of these alternative investments?  You can choose a self directed custodian or an administrator (who works with a custodian).  Is it legal to move your IRA or rollover your old 401k to another custodian?  Yes it is.  Just as you could move your IRA account from Fidelity to Morgan Stanley, you are simply changing custodians.  The change to a true self directed custodian allows you to take advantage of alternative investments.  But not all custodians are alike – some allow you to invest in real estate, some do not.  Some allow you to invest in real estate and finance it and others do not.  To finance you would need to find a non recourse lender, where the only recourse for the lender if you default is to take the property and not come after you personally or your IRA.

Choosing a self directed IRA administrator to place the assets of your IRA in a Limited Liability Company (LLC) which holds title to the assets, can give you the ultimate flexibility in investing.  The LLC is thus the purchaser of any investment the IRA makes.

 

The LLC structure offers investment flexibility by simplifying asset titling and allowing for immediate response to investment opportunities.

 

The LLC structure also facilitates the pooling of assets with other investors, or with the account owner’s discretionary investment money.  Pooling opens the door for self-directed investors to participate in larger investment opportunities.

 

Finally, the LLC structure offers an additional layer of protection for the Retirement Plan’s assets.

 

Most of the self directed IRA companies are custodians and not administrators.  Custodians, as the fiduciary of your IRA funds, are not allowed to set up an LLC structure directly.  The client would have to search for an ERISA lawyer. Setting up an LLC structure through a lawyer who is not familiar with ERISA rules and the results can be very damaging. The IRA/LLC structure must comply with ERISA rules and many of the lawyers who set these up without ERISA experience, are unable to advise their clients on the types of investments that are allowable by the IRS.  If the IRS decides to do an audit, you could pay severe penalties and taxes if you’re not in compliance. Investors beware – you must do your homework and find a self directed administrator that understands ERISA rules and reviews them with each transaction. If you choose the route of a custodian, then be sure to find a lawyer with ERISA experience and be prepared to pay for their knowledge, and you will need to have the lawyer review your transactions for compliance.

 

The IRA/LLC structure also allows investors to invest in anything allowable by the IRS.  Gold is a popular investment and a commodity that has limited resources. There are custodians who will not allow for investments in gold.  The IRA/LLC structure allows you to invest in anything allowable by the IRS. Detailed reviews of each proposed transaction to ensure its compliance with IRS and ERISA rules are very important.  Custodial companies review transactions internally for company acceptance and not so much with the client’s investing in mind.  The IRA/LLC structure is the most elegant and flexible structure for an investor who wants to take advantage of all the investments that are allowable by the IRS and ERISA.

 Guest contributor:

Satchie Carvounis

Regional Manager

Security Trust Company

“Unleash the Power of Your IRA”

www.securitytrustcompany.com

satchie.carvounis@securitytrustcompany.com

301-356-8989 

 

 

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3 Ways to Establish Your Success Path For Real Estate Investing

By Jim Ingersoll
Are you ready to crush it with some great investing strategies?

The middle of each year is the perfect time to amp up your
focus and execute your plans to gain momentum from day one.

Here is how to do it:

1.  Write down your goals.  Doesn’t that sound SO EASY.  It is SO EASY that only
the top 3% ever actually do it.  Start with a transparent look at where you are at right now.

Do you need more money?
Hate your job?
Saving for retirement or your kids education?
Worried about preserving your capital in tough times?

The truth is every person reading this posting has needs.  Some people do not have enough money and others
have a LOT but are really worried about lack of returns in CD’s and their ability to preserve their capital during
our challenging times.

Now that you know exactly where you are starting you can formulate your goals. Break your goals into short-term and long-term
needs.

2.  Invest in yourself.  I am a life-time learner.  I didn’t stop learning once I had my Masters in Engineering Management.  Regardless if you
have a high school diploma or a PhD or are serving our country in the Military, you can commit to investing in yourself.  I have recently received
a number of emails from people who read my books over the holidays.  I love to interact with readers!  It lets me know you are serious about
investing in yourself.  Commit to read or listen to a book every week.  Immerse yourself into the articles I have written for you.
Participate in a real estate forum and ask questions.   Here are links that will help you with each of these ways to invest in yourself:

Real Estate Investing Forum

Real Estate Investing Blog

Real Estate Investing Home Study Training

3.  Transactional or Passive Income Streams:

Now that you know where you are at, where you are heading and have committed to invest in yourself you can determine
if you need transactional or passive income streams.

Are you a brand-new investor?  If so, you should learn to wholesale houses.  This is a risk free way to invest in real estate and learn to
do deals while creating a nice stream of income.  It is the income stream that allowed me to leave my corporate America job several years ago.
Here are some wholesaling houses resources for you.

Wholesaling Houses Free Training

Maybe you are ready to fix and flip a house this year.

Here are some fix and flip resources for you.
Flipping Houses Free Training

If you have already started investing, now is the best time of our generation to buy and hold real estate assets.  The key to buying
rentals is to eliminate banks and succeed massively.

Here are private lending resources for you so you can fire your bank this year and build a portfolio of rental properties:

Free Private Lending Free Training

Joint venture real estate Free Training

Private Lending Video training

Read through the materials, join me in the forum at CREonline, watch the YouTube videos and formulate a detailed plan that meets your investing needs.
Shoot me an email if you want a copy of my private lending special report or you have specific questions on investing.

jim@investingnownetwork.com

Your plan needs to be detailed and specific and ultimately lead to your financial freedom!

Jim Ingersoll

Author, Real Estate Entrepreneur and Coach

 

 

 

 

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Case study for cash flow and equity

By Jim Ingersoll
When you eliminate the bank from your investing equation, there are only two relevant parties in the transaction–the investor and the private lender. The real estate investor is the “catalyst” who does all of the work for the investment including:

  • Find the property and negotiate the sale at a great price
  • Manages the closing
  • Completes the property fix-up to make it “rent ready”
  • Manages the property (landlording)

The private lender is completely passive and does no work, but supplies all the money for the investment up-front at closing for the catalyst.  The funding includes all closing costs, all repair costs, and all funds required for the acquisition, so the catalyst has no money out of his own pocket.

When the catalyst works directly with private lenders,you have a winning combination for cash flow using a joint venture arrangement.  The best part of this joint venture is that both parties are critical to the overall success of the investment.

A Case Study for Cash Flow & Infinite Returns

The catalyst markets and finds a great deal on a 3 bedroom, 2 bath home at a 40% discount price point (60% loan-to-value ratio).  What that means is the purchase price and all fix-up costs will not exceed a total of 60% of the after-repair-value of the home.

Purchase price: (includes closing costs) $ 40,000
Fix-up costs: $ 20,000
Total investment required: $ 60,000
After repair value: $ 100,000

The total investment required is $60,000 and the after repair value of the property is $100,000, which leaves $40,000 of equity once the fix-up is completed on the property. The catalyst found the deal, negotiated it, and performed the fix-up, while the private lender funds the entire transaction expense of $60,000.

In my market here in Richmond, VA, a house like this one will be a typical 3 bedroom, 2 bath house in a working class neighborhood. This house in Richmond will rent for $950 per month creating a nice income stream for the joint venture investment.

The catalyst used none of his own money to get monthly cash flow and an infinite return.

The primary on-going expenses associated with holding real estate are taxes and insurance. In Richmond, the taxes and insurance combined will be about $150 per month for the house in this example which leaves $800 net rental for the on-going monthly income stream for the joint venture.

The $60,000 investment has now been used to pick up $40,000 of gross equity and a $800 monthly income stream. I hope you are wondering how this gets applied back to the members of the joint venture because the answer is… any way that the Private Lender and Real Estate Catalyst come to terms.

For simplicity sake, let’s assume that the two joint venture members agree to a 50/50 split in this venture.

With a 50/50 split, the $800 monthly income stream is split so that both members receive $400 each month; along with this monthly income stream both members also will share the upside equity at some point in the future.

What Did Each Member Earn?

Let’s make one last assumption to show how the ultimate return can be easily calculated for both members of this joint venture.

Let’s assume that both members hold onto this investment property for five years then sell it for $100,000, which is today’s value of the house. What did both members earn on this joint venture?

Private Lender earnings:
$400 per month for 60 months: $ 24,000
Upside equity split of the total $40,000: $ 20,000
Total return over the five years: $ 44,000
Total investment made: $ 60,000
Annualized return for private lender: 14.66%
Real Estate Catalyst earnings:
$400 per month for 60 months: $ 24,000
Upside equity split of the total $40,000: $ 20,000
Total return over the five years: $ 44,000
Total investment made: $ 0
Annualized return on investment: Infinite

Everyone Is Happy

The private lender made a very strong return of 14.66% annually and his $60,000 investment turned into a $104,000 at the end of the five years.

The real estate investor (catalyst) used none of his own funds, enjoyed $400 per month in cash flow and an overall return of $44,000 over the five years. The catalyst enjoyed an infinite return because he used none of his own money in the investment.

How many houses would you want to buy and hold this year and earn $400 per month on each house? I challenge you to establish a plan and invest in yourself, so you can easily structure investments similar to this one.

 

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Mastermind with Jim Ingersoll real estate and investing training

Over the past couple weeks I have received inquiries from people wanting the information on my Mastermind Meetings…. Thank You!

I don’t push the coaching or masterminds, but I do love watching investors work directly with me and begin to experience the success that comes with it!

My Mastermind is a nice mix of folks who want to invest passively, folks who want to invest actively and some of us who like to do both 🙂

We focus intensely of eliminating bank financing, structuring joint ventures that work for everyone involved and

building long-term cash flow and equity by investing into real estate assets.  I have accumulated quite a few testimonials and such but will only share a couple of them today:

“Hello Jim
Just wanted to let you know we signed a contract for $206,000 this afternoon.  That gave us a $37,728 profit.  We owe a great deal to you.  Jim, you provided me with the direction and network that we put into action, resulting in a tremendous success!    I am very fortunate to have made your acquaintance to which I say THANK YOU.”  Chris

Hi Jim

We are putting in offers on two rental properties today! Getting this party started!

Thanks! Barb & Kevin

I have also enjoyed watching some young people in there 20’s get started.  They are succeeding and learning to buy houses without banks in the best market of our lifetime.  Personally, I wish I was in my 20’s and could start in a market like this one.  Like my friend David Phelps says “I could start over today and rebuild my entire portfolio in less than 5 years in today’s market.”

IF you are interested in joining our private Mastermind Group, please EMAIL me so I can send you the information you need to attend next weeks meeting with me. 

Email:    Jim@investingnownetwork.com or jimingersoll@verizon.net

Next week we have a 3 hour session planned.  Every meeting is part networking with like-minded investors and partly direct teaching from me.  I will be sharing case studies on joint-ventures, houses bought without banks for both flips and for long-term rentals as well as the documentation packages that support the entire joint venture.

Don’t delay, this is a private group that is growing fast, if you have interest please email me now

jim@investingnownetwork.com or jimingersoll@verizon.net

I included both emails since I have had some recent challenges with my emails.

Thanks and to your SUCCESS!

Jim

 

 

 

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How to make alternate investments with your IRA

By Jim Ingersoll

How to make alternate investments with your IRA

The Individual Retirement Account (IRA) was introduced in 1974 by Congress to help encourage those who did not already have a retirement plan or pension at work to save for their own retirement.

The mantra of the day was to encourage individuals to save for their own retirement. The original plan would allow individuals to open an IRA providing they did not already have another company-sponsored program established. In 1981 the IRA was expanded to include everyone, whether or not you already have another retirement plan or pension at work.

According to the IRS, code sec 408(a) the official definition of an IRA is a trust or custodial account, created or organized in the United States for the exclusive benefit of an individual or his/her beneficiaries.

Types of IRAs

There are two primary Types of IRAs. Each has the following characteristics:

1. Traditional IRA – A Traditional IRA generally allows tax deductible contributions. There are factors that affect the “deductibility” such as if participants are already using an employer pension account. The earnings from the IRA investments are taxed when distributions are taken after reaching at least 59 ½ years old.

2. Roth IRA – The Roth IRA was created in 1997 as part of the Taxpayer relief act. The major differences compared to the traditional IRA are that the contributions are not tax-free, but the distributions are tax-free.

Advantages:

One major advantage of using an IRA to save for retirement is that the IRA account is held separate from and the account holder cannot easily access the funds without paying taxes and penalties. This is an advantage because it makes the removal of the funds more difficult which forces most account holders to leave the funds separate from their every day lives and allow the earnings to compound until they are ready to retire.

In essence the account is designed to be held until retirement, which is a good thing as many people today would access their IRA if it were easy to do so. In most states the funds in IRA’s are also protected from all potential creditors.

Opening an IRA

You can open an IRA at a wide-variety of institutions including banks, brokerage firms, credit unions and even insurance companies. Nearly half of all IRA assets are held with banking institutes and the most popular banking institute investments are Certificate of Deposits (CDs) and money-market type accounts. Account holders feel comfortable working with their banks and the FDIC insures them up to $250,000.

The challenge with investing in CD’s is that the rate of return is currently very low and there are early withdrawal penalties that can be costly. Credit Unions also provide IRA accounts and generally offer slightly better rates than most banks. Brokerage type accounts are available at both banking institutions and actual brokerage businesses. Brokerage accounts work well for the account holder who has an appetite for investing in the stock market. These types of accounts allow the account owner diversity in investing in mutual funds, US stocks, natural resources, etc.

Alternative Investments with a self-directed IRA

If you want to invest your IRA into alternative investments beyond the traditional CDs, stocks, bonds and mutual funds then you will want to explore the upside potential of using a self-directed IRA. Many banking and brokerage businesses advertise that their accounts are self-directed and they give the account owner the flexibility to self-direct their accounts, but in reality the vast majority of these IRA institutions only allow investment in their products of the traditional stocks, bonds, CD’s and mutual funds. If an account holder desires to invest their retirement funds into investments such as:

Oil and Gas – Production, royalties and mineral rights can create huge returns for the investor who understands the oil and gas investing models.

Precious metals including gold and silver – Hedge against all political, social and other influences including inflation.

Private and Public Stock – Venture capital type investments

Real Estate – Buy, sell, rent in today’s market can create huge returns for the savy investor.

Notes and mortgages – Lend money on real estate or purchase discounted notes. It is not unusual to purchase notes at 15% discount and create yields of 15 – 25%.

Tax lien certificates – Investing in tax delinquent real estate

These investments extend beyond the traditional stocks, bonds, mutual funds and CD’s that most banking and brokerage institutions offer to their clients. They also take specific knowledge of the account holder in order to successfully invest and make great returns. However, given the market conditions in these investment classes the knowledgeable investor can make some fantastic returns using self-directed IRA’s.

If you are looking for one of these alternate investments for your IRA, you will need to find a truly self-directed IRA plan. A truly self-directed firm will likely not offer any products for you to invest into, but will allow you as the account holder to choose the investment you want for your IRA.

The IRA was created to help people save for retirement and given the uncertainty of long-term social security the IRA is an investment that everyone needs to carefully consider.

Parting Thoughts

“Compound interest is the most powerful force in the universe.” – Albert Einstein.

Einstein provided us with so many great truths but he calls compound interest the most powerful force in the universe and financially speaking he is certainly right on. An IRA account allows people to save today, earn returns that will be compounded for many years and be prepared to retire. The IRA is one of the best gifts that our Government has ever given the citizens of our country and everyone needs to consider using this outstanding retirement vehicle.

If you plan to invest, I highly recommend a Roth Self-Directed IRA.  Once you have it established your IRA can become a private lender, a wholesaler, flipper or buy and hold real estate.  The beauty of self-direction is that the account holder is allowed to make their own investment decisions as long as they avoid prohibited transactions.

What is holding you back from taking control of your retirement?  Invest now and succeed!

How to make alternate investments with your IRA

 

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Jim Ingersoll – Cash Flow Video Blog

By Jim Ingersoll
Hi Everyone

Here is a special video update for you.

I thought this would allow us to connect more personally as I shot this in my office this morning for you to discuss goals, cash flow streams and more.  Leave me a comment and share this posting.  Let me know if you have cash flow questions, like this format, etc….


I have also uploaded a few other new video segments to my YouTube Channel and you can check them out right here.  These are from our boot camp in Richmond… enjoy!

 

Jim Ingersoll Investing YouTube Channel

Happy House Hunting To You!

Jim

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How to pick up a private lender

By Jim Ingersoll
I am sure you know the reasons why to never use a bank for financing investment real estate.

But just in case, here are few reasons:

1.  Cash and credit – Banks expect great credit and they expect a 20% down payment.  How many houses can you buy with 20% down-payments?  For most investors, the answer is “not many” OR “not enough”

2.  Risk – Take time to read through the mounds of paperwork you sign at closing and see you are signing your financial life away should something go wrong.  A personal guarantee is like giving a stranger a blank check with no date on it.

3.  Speed – How long does it take to get a mortgage from a bank?  The answer is always “too long.”  If you have a motivated seller or great deal in general you can’t usually wait 30 – 60 days to go apply for and get a mortgage.

So, how can you find private money for your real estate investments?  What a great question.

The process is completely centered around education.  That education starts with yourself as the real estate investor and continues to your ability to educate potential private lenders.  That’s right it all starts with investing in yourself to learn how to fund your real estate investments without a bank.  The normal process is to go to the bank, meet the loan officer and they tell you all the details.

When you buy with private lenders you need to understand the whole process in detail including:

1.  Terms, rates, amortization, equity participation, etc.

2.  Documentation – Promissory Notes, title insurance, deeds of trusts, mortgages, etc.

Once you understand how to structure the private money, you can learn to present your deal, calculate the returns and provide the information that private lenders will want to see.

Want the rest of the story?

Leave me your comments, questions, etc.

Want more great news?

Make a list of 5 people you know that could become your own private lender.  These could be small business people or corporate folks with retirement money.  Engage these 5 people with the the “how” they can invest in real estate with you.  Invite them to lunch or dinner and begin to tell them what you do and how they can participate in a joint venture with you.

 

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