Hard Money Lenders | Private Money Loans
Real estate investors and developers commonly use hard money loans to fund their
projects because they are easier and faster to obtain than traditional bank loans.
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Project Progression Chart
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01. PROPERTY
Promoter proposes a project (A property). It has to be supported by complete analysis documents. Promoter has to fund the initial seed money (or have some one else do that. Typically minimum $ 2000.00 to register LLC, pay initial payment to attorney and rehabber and to open a bank account). The promoter has to arrange: Minimum 40% of the required capital has to be committed before the ownership LLC may be considered to be formed.
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02. ANGEL PARTNER
Name the Angel partner who will furnish undertaking to the Hard money lenders (If the partners will not be able to fund the project entirely). Typically such Angel partner receives 1% of the sale price. The Owner LLC is formed, All partners sign the documents such as.
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03. ADMINISTRATOR
The Administrator is given the charge of managing the LLC for the owner investor partners. The administrator makes offer to the seller of the proposed property to purchase the property, negotiates the purchase and when purchased; hands over the property to the rehabber. Administrator orders Title insurance and owners builder risk insurance simultaneously before closing. Administrator orders property survey and construction plans if needed. Rehab budget, milestones are drawn up and finalized by the administrator.
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04. REHABBER
Rehabber orders the construction permits if needed and starts the work. Rehabber submits statements for milestones when reached and when completed, the property is handed over to the administrator for resale.
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05. PROFITS
Upon selling the property, the administrator pays 5% each to the selling agent and the rehabber (as applicable), 1% to the Angel partner, and Administrator. Then the net profit is calculated within 5 (five) work days after the funds have been received from the sale of the property and distributed as per the agreement. The administrator files for 1031 exchange as needed and closes the Owner partner LLC after all tax have been paid, and all documents have been filed.
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06. EVENTUALITY
In the event that the property could not be purchased, an alternative property may be proposed and all partners will vote upon to approve the substitution before proceeding otherwise he funds in escrow are returned to the investor partners.
Q & A FOR PROJECT PROGRESSION TIME LINE
As long as the promoter did not reach the point of forming a new Owner LLC, there is no expense incurred and the promotion is canceled / deleted.
Only the cost of creating the Owner LLC (which may be reused for next project), initial deposit to the Administrator may be at risk. All other funds are returned back to the partners.
Promoter may provide a substitute property and the administrator will start over from the very beginning with the partners. Any partner can drop out at the this time and receives his contribution as per the agreement. Administrator can restart only when all conditions are re-met.
Owner partners can decide to keep the property to themselves to rent out.
Yes. All vendors except the rehabber suggested by the platform are for recommendations only. The promoter can use their own administrator and or hard money lenders and or other professionals / vendors. Rehabber may also be replaced upon payment of $499.00 platform fee that the rehabber has paid initially to set up the process.
No. This platform is merely a digital vehicle to conduct the operations and does not propose any partners, and or solicit funding for any one. The properties listed on the platform are simply mirrors of; as found elsewhere on the web. Promoters have to find their own partners among their families, friends, and acquaintances.
Although most known situations have been covered in the documents and provision has been created for any such eventualities. Nonetheless the administrator will be the final authority to act in the interest of the owner partners LLC. Most other known risks are covered by the insurances.
Platform does not insure any investment or guarantee any profits to any one. Past performance is no guarantee of any future earnings. Typically the investment is backed by the real estate. Otherwise the funds are kept in an FDIC insured bank in escrow account. Agreements between the Owner partner LLC and the seller of real estate and the buyer of the finished rehabbed property are standard buy sell agreements in the state. So are the agreement between the owner partner LLC and the rehabber etc. All title insurance and builder risk insurance carriers are as used by others in the market place. One should assume that you may loose your entire investment. To compare how this process compares with other investments, please consult your own financial / legal adviser in this regard. A thorough due diligence / investigation is advised before investing any money. This platform and or the rehabber handle no money transactions for any individuals except the funds as dispersed under the agreement to rehab the property.
EXAMPLE MATH
| # | Operation | Amount |
|---|---|---|
| 1. | Seed Capital | $2,000 |
| 2. | Property Acquisition price | $100,000 |
| 3. | Rehab costs | $85,000 |
| 4. | Soft Costs (purchase attorney fee, insurances etc) | $10,000 |
| 5. | Total Costs | $197,000 |
| 6. | Operating Capital | $10,000 |
| 7. | Total capital needed | $207,000 |
| 8. | About 40% of the Capital needed before application to hard money lender | $80,000 |
| 9. | Hard money lender contribution if used (Approx) | $130,000 |
| 10. | Approximate service fee interest etc to hard money lender over 6 months | $15,000 |
| 11. | After Fix Value AFV | $300,000 |
| 12. | Net received after paying Promoter, Administrator, Realtor and Rehabber | $263,000 |
| 13. | Payoff to Hard money lender, promoters, Angel partners and others | $222,000 |
| 14. | Net profit | $41,000 |
| 15. | ROI $41K net profit before taxes on capital of $82K over 6 months 100% (If Hard money lender is used). Actual results may be very different. If Hard money lender is not used, the ROI will be different |
