generating wealth through private lending

Generating Wealth Through Private LendingSRCapitalManagement.com

Generating Wealth Through Private Lending

Disclaimer…

This presentation and its associated training materials are proprietary to SR Capital Management. Copies may not be made without the express written permission of SR Capital Management. The information contained in this document is subject to change and supplementation without prior notice.

Welcome to Private Lending


During this presentation you will learn how to…

Welcome to Private Lending

Let’s look at the agenda to get started…

PRIVATE LENDING OBJECTIVES Earn high yields, secured by “safe” real estate.

Stay in control of your money.

Receive predictable monthly payments.


How Private Lending Works.4

Benefits of Private Lending.2

What is Private Lending?1

AGENDA

Risks and the Time for Private Lending.5

3Why would a Borrower use a Private Lender?


What is Private Lending?1

AGENDA


What is Private Lending?

STOCKS BONDS

WALLSTREET

CERTIFICATE OF DEPOSIT

Before we get into what Private Lending IS, let’s highlight

what Private Lending is NOT...


PRIVATE LENDINGRefers to an individual making a loan

to another individual with real estate as collateral.

You are the bank. Your name is on the promissory note. Your name is on the recorded deed of trust.

Let’s begin by defining Private Lending...



Private Lending worksjust like a bank using the 3-M’s…

THE 3-M’s MAKING the rules.

MOVING risk to the Borrower.

MAKING money.



Trust Deed Investing Private Mortgage Lending

Private Money Lending

Private Lending isalso known as…



Why haven’t I heard of Private Lending?

BECAUSE

Wall Street and Financial Institutions…

Don’t make money from it.



Benefits of Private Lending.2

AGENDA


BENEFITS Investment is continually secured by tangible property which has a greater value than

monies invested. This ensures that your money is well protected by a very conservative loan to value (LTV).

Relative safety as it provides a lower risk investment when compared to other investment opportunities.

Delivers greater returns than other investment opportunities while still providing excellent downside protection.

Provides predictable monthly payments where you, as the bank, receive payments first. If the Borrower doesn’t pay you get the property.

Deals are short term which keeps you in control of your money.

Let’s start by going over the benefits of Private Lending…

Now we’ll look at examples of each benefit…

Benefits of Private Lending


BENEFIT 1 Investment is continually secured by tangible property which has a

greater value than monies invested. This ensures that your money is well protected by a very conservative loan to value (LTV).

Let’s take a look at an example…



There is a $500k house in the Southern California area.

NO MORE than 65% of the loan to value (LTV)

would be lent against this asset.

VALUE: $500k

PROTECTIVE EQUITY:

$175K (35%)

LOAN: $325K (65%)

“Protective Equity” The cushion which protects the Investor’s loan during potential

downward cycles.

Private Lending Example


BENEFIT 2

Relative safety as it provides a lower risk investment when compared to other investment opportunities.

Let’s take a look at how Private Lending comparesto Stocks and Conventional Banks…



PRIVATE LENDING STOCKS BANKS Immediate passive cash flow

generator. Not good for cash flow. No cash flow.

No costs involved. Costs involved. No costs involved.

Working with experienced Private Lending professionals.

Working with experienced, commission based professionals.

Using published bank interest rates and term for yield or cash on cash return.

Short term 6-18 months. Short or long term depending on volatility and speculation.

Minimum 12 months.

Relatively secure as it is backed by “safe” real estate (collateral) that has a value greater then monies invested.

No security, collateral, or protective equity.

FDIC insured.

Higher and more stable returns than stock market.

Much lower returns unless timing is good. Volatile, involves speculation and emotional aspect of other investors. Results in less predictable and inconsistent returns.

Stable but consistently low returns.

Private LendingComparisons


Let’s look at the potential for Private Lending, as well as a snapshot in history of the Stock Market and Bank CD/IRA’s…

BENEFIT 3

Delivers predictable returns compared to other investment opportunities while still providing excellent downside protection.



Private Lending Potential

And sometimes as

high as…

Private

Lending

Interest

Rates

12-15%

7%

10%6%

8%

9%

Typical rates an investment could earn…


Private Lending Comparisons

S&P 500:Volatile/Unpredictable

STANDARD CD/IRA:Less than 1%

Data as of August 2012


Let’s look at the potential monthly payouts based onvarious investment amounts and return percentages…

BENEFIT 4

Provides predictable monthly payouts where you, as the bank, receive payments first. If they don’t pay you get the property.



Potential Monthly Payouts

6% Return

8%Return

10%Return

12%Return

$50,000 Investment $250 $333 $417 $500

$100,000Investment $500 $667 $833 $1,000

$250,000Investment $1,250 $1,667 $2,083 $2,500

$500,000Investment $2,500 $3,333 $4,167 $5,000

Private Lending Monthly Payout Chart…


Let’s look at what that means…

BENEFIT 5

Deals are short term which keeps you in control of your money.



SHORT TERM INVESTMENTS Structured to protect the investment

against potential downward cycles using protective equity and term.

Allows for greater flexibility to reinvest in another high performing opportunity.

Principal funds are deposited back into your bank account immediately.

CONTROLLING YOUR MONEY

Reduces overall risk of the principal investment.

Short term deals (6-18 months) are desirable because…

When the term concludes or the home is sold…



AGENDA

3Why would a Borrower use a Private Lender?


“Why would a Borrower choose a Private Lender and be willing to pay as high as 12%, or even higher, instead of using a Conventional Bank with lower rates?”

BENEFITS FOR THE BORROWER

To answer the question, we need to look at the benefits for the Borrower…

IMMEDIACY Access to capital much faster than conventional lenders.

ASSET BASED UNDERWRITING Borrower qualifications can be subordinate to value of the property.

TIMELINESS Conventional lenders are not fond of short term loans.

IMPROVEMENT COSTS “Rehab Loans” can include the cost to improve the property, thereby increasing equity.

NUMBER OF LOANS Traditional lenders limit the number of loans.

A common question is:

The Borrower andPrivate Lending


How Private Lending Works.4

AGENDA


THE 5 STEP PROCESS

REMEMBER: YOU ARE THE BANK

Borrower Requests

Loan & Submits

Documents

Lender Assesses Project &

Establishes Terms

Investor Introduced to Project &

Commits

Escrow Initiated to Completion

Investor Payout

Simple, we break it down into…

How Private Lending Works


What does it cost the Investor to participate?

Unlike financial institutions,e.g., Morgan Stanley, Goldman Sachs,

Charles Schwab, etc.

Charges No Investor Fees…. EVER!


SRCapitalManagement.com


INVESTOR DEAL POINTS 25% - 70% loan to value (LTV) which translates to a

protective equity of 75% - 30% on the monies invested. 6 to 18 month term.

1st or 2nd deeds of trust depending on deal structure.

6% -10% interest rate.

Types of properties: Non-owner occupied, 1 - 4 unit residential properties. System in place for Borrower rehab loans for fix & flip deals

that pay a bonus to the Investor after the sale.

A typical investment…



PARTIES INVOLVED TO PROTECT THE INVESTMENT TITLE COMPANY Issues title insurance to insure the loan and works with escrow for bank to bank wiring for the Private Investor.

ESCROW COMPANYManages the paperwork and the process. Records the deed of trust against the property.

LICENSED APPRAISER/REAL ESTATE BROKERVerifies a conservative value of the property with an appraisal or broker price opinion (BPO).

LICENSED MORTGAGE BROKEREnsures proper documentation is complete and laws are maintained.

FORECLOSURE COMPANYHandles delinquencies for the benefit of the investment.

How is the investment protected?



The Private Lender collects a spread between what is collected from the Borrower and what is paid to the Investor.

How does the Private Lender make money?

SR CAPITAL MANAGEMENT Analyzes the prospective

opportunity. Structures the deal.

Coordinates, monitors, and facilitates the entire process from start to finish.

Protects your interests every step of the way.

Gives you the majority of the profits.

It’s simple…



AGENDA

Risks and the Time for Private Lending.5


What if the Borrower has a latepayment?

What if the loan defaults?

Why will very few make it all the way to aforeclosure auction?

One of the most important things to look at ina deal is the value of the property. How doyou know that the value of the home we arelending is not an inflated value?

The Risks & Mitigations

MITIGATIONSExpect that the Borrower will have at least

onelate payment. You get paid more fromBorrower penalties. Some loans will default and go intoforeclosure. Very few make it all the way to aforeclosure auction.

There is simply too much protective equity tolose by the Borrower. Remember, when westructure deals we are moving risk to theBorrower, just like the banks.We cross verify the value of the home by anindependent, licensed 3rd party valueanalysis, providing an appraisal or brokerprice opinion just like a bank would require.

RISKS

Every investment has risk…


What happens if we experience anotherreal estate crash like in 2008?

What is the risk for the Borrower?

What if we have to foreclose?

What does a foreclosure cost theInvestor?

The Risks & Mitigations

MITIGATIONSWe mitigate the time that the note is exposedto the market by creating short term loans.

The Borrower has to bring cash or propertycollateral to the transaction. Again, we arealways moving risk to the Borrower.

A foreclosure takes about 90-120 days and will

result in the Borrower losing any interest andequity in the transaction.

Nothing. SR Capital Management handles thecharges upfront and recoups the fees aftertaking control of the property.

RISKS

Every investment has risk, continued…


The “Perfect Storm” has been created by current

economic challenges…

Time for Private Lending

Tight credit markets.

Home values down.

Increase in foreclosures.

Distressed banks.

ECONOMIC CHALLENGES

Limited opportunities for Borrowers to purchase properties.

The timing and conditions for Private Lending are ideal…


Contact SR Capital Management to take advantage of this unique economic environment to start generating wealth with Private Lending.

The “Perfect Storm” has created this limited window of opportunity. Don’t miss out… Take action today!

THE TIME FOR PRIVATE LENDING IS NOW

What are the next steps?

David Stromswold949-929-7355

[email protected]

Time for Private Lending

SRCapitalManagement.com