Sylvester the Investor

WHAT IS PRIVATE LENDING?
1. What does it mean to become one of your private lenders?
When we have a need to borrow money, acquire a property or borrow against the equity in a property we own, we give our private lenders an opportunity to make us the loan; and earn high interest rates that are double or triple the rates you can get on bank CDs.
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HOW IS THE MONEY USED?
2. How will you be using my money?
As a professional real estate investor we need to fund new purchases, raise money to fix up, maintain and occupy our properties plus cover the other costs associated with buying and selling houses. For properties we already own and manage, there are times when we want to convert some of our equity into cash -- without selling the property. This cash may be used to fund our house buying business, pay off other real estate notes that come due and handle unexpected cash needs.
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WHY?
3. Why should I be a private lender?
Many people do not have any desire to become a landlord or to manage rehabilitating a property for profit. As lucrative as it can be to purchase and sell real estate right now, it is not possible for all investors to spend the time it can require to purchase and manage real estate projects. As an alternative, you can lend money to experienced real estate investors who are capitalizing on the current market. We are buying deeply discounted properties and are willing to pay higher than CD interest to private lenders willing to fund our acquisitions. There are opportunities starting with as little as $20,000 and it is possible to use monies currently residing in qualified retirement accounts.
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4. Why don’t you go to banks or mortgage lenders?
A private lender is like having your own personal bank in hand when looking for real estate opportunities. The main reason is Speed and Limits. Speed - Banks and other lenders require applications, approvals and must follow regulatory guidelines imposed on the banking industry. In addition, the time it takes for their approval process is never certain. Limits - Banks and many other Lenders are limited in the number of loans they are able to make to any one company or investor. We can move much faster without these limitations by using private lenders. This allows us to negotiate more profitable transactions while offering property owners a quick and easy solution without new loan or deal breaking contingencies.
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5. How can you afford to pay double or triple CD rates?
We make our money by providing valuable services to the sellers, buyers, renters and private lenders we work with. By cutting out the middlemen, we can avoid the costs normally paid out for real estate commissions, mortgage broker fees, loan fees and property management fees. We also know how to get full appraised value from our buyers and avoid making price concessions. We can purchase and repair homes quickly to minimize holding costs and we know how to maintain and manage properties for less money then most people must pay. We always formulate our purchase offers so that our buyers and sellers get a great deal. We won’t buy a property unless it makes sense for everyone involved.
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HELP FOR BUYERS AND SELLERS
6. How do you help sellers?
A lot of sellers today are having trouble finding a buyer when they decide to sell. And there are typically a lot of hassles a seller must endure to get their home sold. Using a long-term investing approach, we can offer sellers an attractive price, close or take possession whenever they want and give them an opportunity to avoid all the hassles of selling a house.
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7. How do you help buyers?
Buyers today are finding it more and more difficult to qualify for loans. We offer a much needed opportunity for many buyers - this includes owner financing, sweat equity, and other strategies. Our programs help buyers get into a home they want to purchase allow them to start building equity for the future and help them realize homeownership.
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8. How do you help renters?
Tenants today face more restrictive rules and application requirements laid down by landlords and property management companies. We have positioned ourselves to be very flexible and creative in getting nice residents into our homes, thereby providing a much needed service. We can even rent to folks who recently had a bankruptcy or foreclosure.
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MARKET CONDITIONS
9. What kind of homes do you buy?
We buy nice homes in nice neighborhoods. They may be of concrete block or wood frame in construction, and perhaps may not look so nice when we initially buy them. We look to acquire homes with a sound structure, updated (or easy to update) floorplans, and in need of minimal repairs. We formulate our offers based on these (and other) criteria to minimize risk and maximize our buying power. You can see some of our rental homes here. You can click here to see some before and after pictures of our Rehabs.
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10 . Aren’t you concerned about housing prices going down today?
We’re prepared to hold the properties we buy for 5, 10 even 15 years. We are not as concerned about near term price fluctuations (and the fear and irrational behavior it brings) in home prices as other investors are. Price and value are NOT the same. Most of our investing plans are determined by the income we expect the property to produce now and in the future. If we think a property may go down in value then we make any adjustments needed upfront before making an offer to buy.
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RATE AND TERM
11. What interest rate do you pay your private lenders?
Each loan is individually negotiated depending on your and our needs. We currently pay between 2 and 3 times rates offered on 5 year, FDIC insured CDs. As of March 2010, the national average for a 5 year CD is about 3%. We currently offer our lenders 8% to 10% interest on notes secured by real estate. You can research nationwide CD rates by visiting www.bankrate.com and selecting the CDs & Investments tab. You’ll always know exactly what interest rate you will be locking in with us prior to making any investment.
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12. What determines whether you pay me 8% or 10% interest?
The interest rate paid depends on the transaction. Each transaction stands on its own merits. What that means is that each deal is a stand alone deal. Depending on the individual structure of each deal, we may be able to pay 8% to 10%.
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13. How long will my investment funds be tied up?
Most of our private loans are structured for a 60 month (5 year) term. However it depends on what you want and need and what we want and need. So depending on our plans for the property, we might be able to offer you a 36 month (3 year) term or we may ask if you’re willing to commit to a longer term if that’s our preference. Regardless, you’ll always decide what term works for you on any note invest in.
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14. What if I don’t want to go longer than 3 years?
Real estate notes are illiquid investments. However, our policy is to pay off (or replace) any private lender who requests an early payoff whenever we can. Sometimes a partial early payoff meets the lenders needs, allowing the rest of their money to continue to earn a high rate of return. We ask that you give us advance notice, preferable 60 days, so we can do whatever we can to meet your request. We would attempt to meet such a request by refinancing the property, selling the property or, most likely, finding another one of our private lender who’d like to take over your position.
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15. What if I commit to 10 years and then need my money sooner?
Real estate notes are illiquid investments. However, our policy is to pay off (or replace) any private lender who requests an early payoff whenever we can. Sometimes a partial early payoff meets the lenders needs, allowing the rest of their money to continue to earn the high rates. We ask that you give us advance notice, preferable 60 days, so we can do whatever we can to meet your request. We would attempt to meet such a request by refinancing the property, selling the property or, most likely, finding another one of our private lender who’d like to take over your position.
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16. Do you guarantee my interest for 10 years if I get into a 10 year note?
Your interest is fixed and locked for as long as the note is out. However we may sell or refinance the property before the full term is up. You’ll always earn your note interest until it’s paid in full. But we do have the right to pay you off early.
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17. What if you pay me off only a month after I invest with you?
We realize that you may be liquidating other investments or foregoing another investment program to take advantage of our high rates of returns. Therefore we agree in writing, spelled out in your note, that you’ll receive minimum of 6 months interest. So if we needed to pay you off sooner than expected, we would either give you the opportunity to move your mortgage to another property, or pay you off in full including a minimum of 6 months of interest earned.
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18. Will I receive monthly payments?
In most cases you can receive monthly payments of interest only. Interest only payments keep your entire initial investment working for you each month.
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19. Can my interest accrue and grow if I don’t want payments?
In many cases yes, but it depends on the deal. We prefer to make monthly interest payments to maintain a protective cushion of equity in the property over time. However, on smaller second mortgages, we may prefer to let the interest accrue if that works for you. That way we can simply our bookkeeping and at times avoid a negative cash flow. We understand that each private lender has differing tax strategies and investment needs. We can structure your loan to take advantage of income tax guidelines for short term or long term benefit. This can be quite attractive when utilized within a tax deferred or tax free program over many years.
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MINIMUM
20. What is your minimum investment?
We prefer to borrow at least $20,000 when working with our private lenders. The average loan is about $45,000.
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GUARANTEE
21. Is your investment program insured by the government?
No. There is no government backed guarantee on these privately held real estate notes. Your main protection and security is the amount of equity in the property that secures the note. With enough equity a lender can use a legal or voluntary process to take ownership of the collateral (if needed) and then (if desired) sell the property to recapture the money invested plus any costs incurred in doing so.
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APPROVED
22. Has the IRS approved your program for retirement accounts?
The IRS does not approve or endorse investment programs. However, they do establish guidelines that must be followed in order for you to invest in real estate notes in a tax deferred or tax free manner. You may need the services of a custodian to invest with retirement funds on a tax deferred or tax free basis. We have been pleased working with The Entrust Group (www.TheEntrustGroup.com). There are other self directed IRA custodians such as: Equity Trust Company in Ohio (www.trustetc.com), Lincoln Trust Company (LincolnTrustCo.com), Pensco Trust Company (PenscoTrust.com) and others. We’ll be glad to answer questions about this or help get you setup right.
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LOAN TO VALUE
23. How do I know if there’s enough value or equity in the property to sufficiently protect my investment?
It’s our policy not to borrow more than 75% of the value of a property using private lender money. Most deals are financed at below 50% of the value of the property. That leaves at least a 25% to 50% cushion of equity. We will provide you with full details on the value, status and condition of the property whenever we present you with an opportunity to lend to us.
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COST AND INSURANCE
24. Do you provide title insurance?
You can always buy title insurance if you want. We will buy you a lender’s title policy if you get involved in funding one of our new purchases. However, if we are refinancing a property we already own then we don’t usually offer title insurance.
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25. What are the upfront costs involved in investing with you?
It is our policy to pay for all the closing costs so that your entire investment goes to work for you. We will pay for the closing agent, doc prep fees, notary fees, overnight mail fees, bank wire fees and recording costs. We do not charge any fees or commissions to our private lenders.
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26. What happens if the property burned down?
We’ll always keep a valid hazard insurance policy on the property to protect against causalities. You’ll be named as a mortgagee and notified if the insurance was ever not kept in full force. Insurance distributions would be used to rebuild or repair the property, or used to pay off your loan.
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LOAN POSITIONS
27. Will my money be pooled with other investors?
No. We do not pool funds. Your funds will fully fund one real estate note secured by a deed of trust on a property with sufficient equity as protection.
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28. What is a junior lien?
It’s a loan secured by real estate that is positioned behind a senior mortgage (usually a 2^nd mortgage positioned behind a 1^st mortgage). In the case of a default, a lender can seize the property through a simple deed transfer or through the legal foreclosure process. Junior lien holders need to payoff or protect any senior lien holders in order to protect their position.
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29. How and Why do you use junior liens?
Junior liens (2nd, 3rd or farther) can be an attractive way to acquire properties in an unconventional way. These junior liens can sometimes be bought or paid off at a steep discount (often, pennies on the dollar), thus freeing up equity in a property that previously did not exist. Sometimes we will take a junior lien position to an attractive (rate and term) senior lien in order to acquire a property.
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30. How do you protect a senior lien?
You can either pay them off in full or bring their loan current (making up any back payments if needed) and then making any other payments that come due. This helps to stop or prevent a senior lender from foreclosing, allowing the junior lender to foreclose or take possession of the property from their position.
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31. What happens if I don’t protect a senior lien holder?
If the senior lien holder foreclosures then junior lien holders could lose their secured position on the property, putting their entire investment at risk. This added exposure to a junior lender is why we very selectively utilize this methodology, use smaller amounts of funding, and offer a higher interest rate due to the additional risks. Many lenders are fine being in junior positions because they get higher interest, are protected by the equity cushion and typically have enough faith in the borrower to take such risks.
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COMMON CONCERNS
32. If you default and don’t keep all your promises, how do I get the property?
We can’t make any guarantees but if we were in a position were we could not keep our agreements, we’d simply transfer ownership of the property to you if possible. If we did not (or could not) then you have all the legal rights of a secured lender. The best way to legally protect your interest in case of a default would be to hire an attorney. They normally would seek to get your investment back, any unpaid interest, any collection costs, all your attorney fees and maybe even more. A legal representative could advise you if it makes sense to foreclosure or seek ownership the property to protect or recoup your investment.
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33. How is my money protected?
Your funds are protected in several ways:

1. Your funds stay in your account until requested to be placed in escrow in preparation for closing on a transaction.

2. When funds are transferred to escrow, interest payments begin to accrue until the date of closing and then are paid along with the 1st month’s interest payment. Your funds are always at work for you.

3. We DO NOT take direct possession of any funds. Your funds will always be held by a licensed escrow agent, title company, or the closing attorney.
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34. Can my CPA or Attorney review your documents?
Absolutely. We welcome any CPA or attorney generated questions. We can provide sample Note and Mortgage documents for your review.
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35. If you rent the property out, what happens if your tenants trash it?
We’re the property owners and it’s our responsibility to protect our property as well as to protect your collateral. We’d fix it or take care of it and you should never have to get involved in such an incidence. It would only affect you if we were in default and you repossessed the property to protect your interests.
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NEXT STEP
36. What happens next if I want to get started?
Once we know when you want to begin getting a higher rate of return and how much you have available to invest, we will begin looking for a deal for you. When we select one that meets your goals and investment needs, we’ll give you all the details and then you can decide to participate or pass. Get started here.
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37. Can you work with people I know who might be interested in your program?
We prefer to establish a relationship with each of our lenders. You can certainly refer potential lenders to us and we will be happy to explain the program and begin to learn more about their investment needs and goals. Once we get to know them more then there is a good chance they can also become one of our private lenders.
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P.O. Box 1609
Clearwater, Florida 33757

Phone: (727) 492-4045
Facsimile: (727) 499-9502
info@SylvesterTheInvestor.Com