Question about Private Money Loans for Real Estate

[Harold Wimberly]

I have been reading about attracting private money investors for real estate. I wanted to know if anyone has had success attracting private money. Also, I'm thinking of running an ad for private money and I wanted to know if my loan terms were attractive for potential investors. I have invested in Real Estate and I was a Mortgage Broker.

$50,000 loan secured by a property in the suburbs of Cleveland. This property sold for $85,000 in 1999 and listed for $110,000 in 2008. It's ready to move in and needs very little sweat equity. I will live in the property.

$50,000 for 18 Months. Interest only with 6 months pre-paid upfront. $50,000 Balloon payment due in 18 months. If I refinance or sale the property in less than a year, you're still guaranteed to get the 12% return for the year.

This is a better return than any bank, CD, money market account or stock return in this volatile market.

How does it sound?

[Don Konipol]

Harold Wimberly, It's hard to believe your experience in real estate and real estate finance. I'll be blunt - you're lack of knowledge and insistence on being right is FRIGHTENING. No, the person or institution who finances a property - whether a car or real property - does not OWN the property. Your arguments to the contrary, or soft back pedaling, make you look inexperienced, unknowledgeable and just plain ridiculous.

The reason private lenders do not want to lend on owner occupied homes is that those loans must comply with the SAFE act, resulting in burdensome regulations, increased costs, and greatly increased risks of litigation. Further, it is much more difficult to foreclose on a owner occupant than on an investment property.

I am afraid you're not off to a very good start at BiggerPockets. Your first post asks for opinions as to the quality of your proposed ad; when opinions are given you "disagree". One wonders why, if you are not open to opinions, you have asked for them in the first place?

While an ad such as you are proposing might not draw the attention of the SEC or a state securities board, it is in all probability a violation of the prohibition on general solicitation and advertising for private placements. However, we need to wait for clarification of the interpretation of new legislation passed last year that might allow such advertising within specific guidelines.