Let’s face it: Leveraging hard money – no matter that it can lead to bigger and better returns – can be downright scary to many investors, particularly newer ones. The reasons (often misguided) are numerous, including:
- “I can get better returns by using my own money”
- “Hard money is too expensive”
- “Hard money lenders won’t fund my deal”
- “Hard money lenders want me to fail”
Wrong, wrong, and wrong!
Yet, we get it; it CAN sometimes be a challenge lining up a hard money loan, given that there are certain qualifications that must be met by the borrowers. But the hard money lenders put those qualifications in place because they want your deals to succeed, NOT because they want you to fail.
At The PIP Group, we also want you to succeed, and toward that end we have partnered with RCN Capital, one of the most well-known and respected private lenders in the industry. This new alliance means greater rates and greater opportunity for both The PIP Group and you, our investors.
How? Because our participation answers one of the challenges that new and inexperienced investors most often come up against: lenders’ requirement that you can show you have experience in successful investing and liquidating in the past. That is the key to getting a good rate on your hard-money loan, and because PIP satisfies that experience requirement (we’ve been doing this successfully for over 20 years), even investors with a short track record can save 5% to 8% on their loan terms with this program.
And why wouldn’t you want to use hard money loans to leverage your buying power, allowing you to invest in more and bigger deals than you could by using only your own money — AND reap great returns at the same time?
Let’s take a closer look at how our new program works:
The salient point is that on your behalf, The PIP Group puts its own skin in the game. In order to procure the best rate for each of our clients, RCN and PIP have agreed that PIP needs to have an equitable interest in each deal. That provides RCN with the security of knowing that PIP’s equitable stake is fractional, but significant enough to perform well on our clients’ behalf. And our clients retain 100 percent control over their passive investments while benefitting from the powers of our experience and leveraging capital. It’s a win-win-win: all three parties to the agreement—you, PIP, and RCN—are protected and comfortable.
As an example, let’s say your investment is $100,000. With our 15 percent sweat equity stake in funding your deal, you are able to leverage that amount into FIVE $100,000 investments.
Step-by-step, here’s the process for clients interested in participating:
- We conduct an in-depth conversation with you to determine your investing goals as well as to explain the opportunity afforded by the PIP-RCN program.
- Once you decide to move forward, you complete the LLC Agreement, picking the name of your LLC and noting any particulars about your investment source (i.e., a trust, self-directed IRA, or another LLC).
- Upon electronic receipt of the necessary paperwork, PIP submits all legal documentation to the state for formation of your LLC (with an approximate turnaround time of 24 hours). At that time, we will invoice you/the LLC for setup of the LLC ($1500). (Note: The setup costs are considered a cost of organizing the LLC and deductible from the profits earned.
- Once Tax IDs and Certificates of Good Standing are received, we will set up an account with our third-party accounting/bookkeeping service. (Note: The accounting/bookkeeping costs are considered a cost of managing the LLC and deductible from the profits earned.)
- The next steps — Ready to Apply, Purchase and Fund — really happen in conjunction with one another. First, we identify a property already on PIP’s books, under contract, or about to go under contract. On behalf of the LLC, PIP completes all the application paperwork. This time-consuming process includes a host of details, including projected repair costs, after-repair values, experience, activity, etc. Because you are the principal investor and controlling owner of the LLC, the application credentials are submitted in your name (for purposes of a credit check). PIP’s experience and activity are taken into account as part of your credentials review.
- Once the appraisal of the subject property is completed, a closing will take place (like most any other normal closing), and the investment will be funded. PIP attends the closing on behalf of the LLC. Typically, loans are provided at 80 percent of the loan value, so you are putting 20 percent down on the acquisition. (Note: You can also leverage your repairs in the loan amount.)
- Now, it’s time to sit back, relax and let PIP do what it does best! We offer true push-button investment servicing for you. Once we have engaged in a purchase/acquisition, we handle all the legal aspects, oversight, repair, rent, redemption tracking, collections, evictions and any other process associated with your investments while you retain 100 percent ownership and direction of your portfolio.
The above steps may seem like a lot, but keep in mind that everything is being done by PIP on your behalf. Through your online portal, you will be able to see every step of the process, from setting up the LLC through the ultimate sale of the property.
Ready to get started? Visit our website at www.PIPGroup.com/contact-us/ or give us a call at 877-335-2529. We look forward to helping you learn how to become a smarter investor and generate passive monthly income by investing in tax liens and distressed real estate properties.
To read our article, “The Hard-Money Mindset That is Weakening Your Portfolio,” originally published in the October 2018 issue of REI Ink Magazine, click here.