Why Be the Bank?

Why not? Especially if you can become the bank at discount. Obviously, banks make their money through lending. But, here are some other fun facts about the way banks do business. Did you know that a 30 year, $250,000 mortgage at 5% pays $483,000 to the banks over the term of the loan? Also, did you know that most of all the principal and interest (P+I) payments in the first 10 years are mostly interest? And, did you know that most 30 year mortgages are held for less than 10 years? Not a bad business model, huh?

But why stop there, might as well make a killing with little or no risk too. This is where larger down payments and crazy underwriting standards are now the norm. The banks are still not providing very much liquidity to the market. Just try getting a loan if you're self employed.

So, now you know why I had to figure out a way to become the bank. Personally, I started out lending "private money" to Real Estate rehabbers from my lines of credit and from my self- directed IRA accounts that I had rolled over from "Corporate America". Although I made a pretty safe, secured return on first mortgages (15-18% + points), it wasn't long before I ventured into institutional delinquent mortgages that were purchased at even deeper discounts. At first, the perceived risk appears to be dramatically higher but then again so is the reward. The returns are so lucrative on distressed debt that I've never even dreamed about looking back. Folks still call me once in a while to do a 1st mortgage or investor type of construction loan, but I have to turn them down. It's not even in the same stadium as the institutional loans that I buy at steep discounts directly from the banks.

As you can see, "it really does pay to keep the Home Owner in their home." This is especially true when dealing with delinquent 2nd mortgages, where the biggest risk is exiting the deal through the property. If you'd like to learn more information on how you too could get started by "being the bank," go to www.pprnoteacademy.com

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.............by Dave Van Horn

To learn more, check out www.pprnoteacademy.com