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Index  Spotlight Article Misc - Mortgage |
| Pushing The Accelerator Past Full Throttle…Your Private Lending Business On Steroids |
| October 23, 2007 | ||
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The “Expert”Third Approach: Pushing The Accelerator Past Full Throttle… …Your Private Lending Business On Steroids (...this style of business is the seasoned originator’s, “perfect early retirement strategy.”) By Pete Brady, President, One Touch Lending and 1Million Liquid  (This is part 3 of a 3 part series - see below for links to parts 1 & 2) If you can originate both institutional, brokered business and private money loans in conjunction with each other, you have arrived at my favorite scenario If you can make the private loans with your own funds, you have spread the icing on the cake - I call this the “Originator-Investor-Servicer” approach, or O.I.S. In my office, we also describe it as the Optimal Income Strategy.
the seasoned originator’s, “perfect early retirement strategy.” Your goal should be to set up several systems allowing you ultimate flexibility and limited work.This is the expert approach, the final business model to Private Lending. These are the methods used to propel your new business straight past the ozone layer and into “Hyperspace.” This model is Private Money Lending on Steroids. In my opinion, this style of business is Markets, Marketing & Results Designing the right marketing campaigns will produce an abundant flow of hungry borrowers who essentially want and need your money. Your target client doesn’t necessarily need to be a sub prime borrower with a pending foreclosure. I have plenty of “alt-A” type clients who are considering home improvement projects, need debt consolidation or want construction loans. Repeat clients will also find plenty of surprising ways to utilize your funds as well. As proof that clients want to use your money (outside of just saving their home at the final hour) many of my clients with conforming first mortgages have happily accepted 12% second trust deeds with six points and a three year prepayment penalty. These loan terms also carry a late fee provision of 6-10%. These loans usually payoff in 6-15 months, often pushing the total yield past 30% annually. This assumes you can successfully rotate the money every 12 months. Also, if you can perform this within a tax qualified plan, the payments and payoffs can return to the same plan. This strategy becomes a high octane investment when the money grows this fast tax free. Your Perfect Retirement Plan Emerges You’ll discover a very lucrative and entire business within a business, when your marketing continues to effectively produce institutional leads and private money leads, almost accidentally. Your private lending business will then become a natural result or by-product of your institutional business. In that way you can look at your return on marketing dollars differently. You can effectively apply those marketing costs to your institutional originations, thereby looking at the P&L on your private lending portfolio as pure profit. This is a much different, and in my opinion, more cost effective way of doing business than the traditional hard money model described earlier.As a Business Within A Business Private Lending is Power Positioning Major advantages exist when you are working with your own funds. You dramatically enhance your positioning in your market. Your dialogue with your prospects naturally changes. You have the speed advantage that nearly all of your competitors lack. Given the right scenarios and your “gut level” underwriting, you will eventually gain the skills and confidence to be more aggressive with your funds and attain higher yields and faster turnover of your funds. Said differently, you will be the only source and choice for financing in the eyes of your borrower. In the end, you will be working with larger sums of capital. As long as it makes sense for your client, you will prefer a private loan solution to satisfy your client’s needs before an institutional solution. At that point in your career, you’ll recognize a private loan is better at pushing your real agenda, your ultimate goal – an easily manageable loan portfolio that produces a comfortable, consistent amount of predictable cash flow. (This article is part 3 of a 3 part series. You can read part 1 here and part 2 here) Pete Brady is President and co-founder of One Touch Lending. Pete and his partner have over 35 years of combined lending experience, which they have applied to develop an elite team of mortgage consultants who concentrate on residential financing that can hardly be considered "Plain Vanilla!" They love to teach their associates the compassion required to help people with extra special circumstances when financing their home. OneTouch Lending is a group of specialists concentrating on financing credit challenged borrowers and making their dreams of home-ownership & financial independence a reality.
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