One of the big reasons JWB has become a vertically integrated wealth creator is raising its capital through hard money loans. Since 2006, JWB has developed a $400M+ portfolio by raising private capital to fund their real estate investments, but how do they do it? Jaime Crawford shares how private money lenders are an integral part of JWB and the great reasons to use hard money loans!
Jamie Crawford is JWB’s Senior Loan Coordinator and is responsible for the private lending program. Jaime shared a bunch of information about hard money loans, including:
- What to expect in private lending opportunities
- How to protect yourself from risk when lending hard money in real estate deals
- How private lending compares with rental property investing
JWB built a machine that can raise $300M and always pay its investors back through private money lenders!
What are hard money loans?
Real estate investors who cannot buy properties outright or through traditional loans can purchase an investment property through private money lenders. The hard money loans tend to pay a higher interest rate to the lender, so investors like to provide short-term loans. Many hard money loans cover fix and flip costs or build new rental property construction.
Traditional lenders are different from hard money lenders in that they have specific approval process requirements before offering a bank loan. For example, a traditional loan requires a credit score, a close look at the personal finances of the loan applicants, and provide limited loan options. Hard money loans, however, do not have rigid requirements in place.
If private lenders want to lend $50,000 cash to build a new house within a short loan term of 3 years, money investors do not have to jump through as many hoops to lend their money. As a result, private money lenders can expect a 10% return on their hard money loans.
How did Jamie get her job with JWB?
She started in the leasing department and worked her way over to the private lending group. Her role in that department became full-time, and she’s the person who runs the private money loans department, which finances the new construction JWB is doing.
In today’s discussion, we’ll learn what it takes to raise private money and how to lend private money.
What is the difference between private lending and turnkey property purchases?
Your returns and your taxes are truly the difference. You don’t receive the tax benefits with the hard money loans, but you get a guaranteed 10% return per year. There is a limited downside with hard money loans. However, turnkey rentals give you tax benefits, appreciation, and higher rents as inflation increases.
Can you use your SDIRA for private money loans?
Yes, you can use your retirement accounts to do a private money loan. If you have funds in your IRA that you want a return of 10% per year, you have that option when you lend money.
What is the average return on hard money loans?
10% per year. Hard money lending programs are between 8% – 12% per year.
Are lien positions based on first- and second-position?
Yes. If we have two different closings on the same property, the first position gets paid first, and the second position gets paid next. Sometimes, Jamie doesn’t need all of the money on the first day, so she can pay out the loans at different times depending on the project’s status. As you can see, this is quite the jigsaw puzzle for Jamie, but she handles it flawlessly.
Is there a great arbitrage opportunity with credit card balance transfers?
In theory, you could borrow 2% and lend at 10%. For example, you can get a 0% interest on a credit card for 1.5 years with a 3% fee, and you can lend that money to get 10%.
Does the second-position lender have a different ROI since it’s less risky?
No, it’s still an annual return of 10%.
Do you need homeowners insurance for the property you’re lending money to?
No. As the lender, you don’t need to worry about the insurance. The company building the homes obtains property insurance, and the construction also has insurance, so the house being built is well covered.
How do I catch previous episodes of the Not Your Average Investor Show?
If we want to hear the Not Your Average Investor Show via podcast, here’s the link: https://podcasts.apple.com/us/podcast/not-your-average-investor/id1511631649
Here is the YouTube account link for JWB’s Not Your Average Investor Show: https://www.youtube.com/channel/UC0afx1zGhSTyF_ssY1h2Y7Q
To join our NYAI Facebook Group and see the Facebook Live replays, visit here: https://www.facebook.com/groups/rentalpropertyinvesting.
What other questions should I ask about hard money loans?
Jamie was on the hot-seat today! She crushed it with all the questions pouring in about private lending. To hear all of the rapid-fire questions that Jamie Crawford answered, listen to the full episode.
If you are interested in being a hard money lender, look for a good company that will do the following:
- Have clearly defined loan terms
- Has all of the necessary paperwork overseen by a law firm
- Places the loan on a specific property rather than multiple properties
- Answers all of your questions and outlines what to expect during the loan term
How Do I Find Out More About Investing In Turnkey Rentals With JWB?
Contact the JWB team to begin the discussion. If you want to invest in Jacksonville real estate, now is a great time to jump in. Go to www.ChatWithJWB.com and find out how we can help you reach your financial goals through turnkey single-family rental homes.
If you want to become part of the JWB online community, join us in the JWB Facebook Group at https://www.facebook.com/CashFlowProperties.
You can also go to www.JWBInventory.com to see what properties are currently available. We encourage you to contact the JWB team for a consultation to determine how our turnkey rental properties can deliver positive passive cash flow.
We hope you enjoyed hearing what Jamie Crawford had to say about hard money loans and how private money lenders benefit. If you are a real estate investor who wants to purchase a rental property from JWB, contact us today at www.ChatWithJWB.com. Jacksonville is on track for continued growth, and JWB is excited to help many investors grow their wealth through turnkey single-family rental homes.
To Your Success,