Private Lending Secured by Real Estate
Private Lending
Through Private Lending, individuals lend money to an established residential real estate developer at a fixed rate of interest for a term of two to five years, with each loan secured by a certified Deed of Trust and/or Mortgage Note on a specific residential property. It is not FDIC insured and funds are not liquid during the term, so it may suit people who want fixed interest on a portion of their savings that they are confident they will not need until the term ends. Key Financial Group of Florida, Inc. is an authorized advisor for the program in Florida.
The Borrower
Who You Are Lending To
The borrower is an established residential real estate developer with more than twenty years of operating history. Its work covers building, redeveloping and holding residential property.
Like any developer, it needs capital to acquire land, build and hold property. Rather than raising all of it from institutions, it borrows part of it from private individuals and secures each loan against real property. That is what Private Lending is.
The Structure
How It Works
- You lend at a fixed rate for a fixed term. Terms run from two to five years. The minimum loan is twenty five thousand dollars. Current terms and rates are available on request.
- Your loan is secured against a specific property. A certified Deed of Trust and/or Mortgage Note is recorded against a specific residential property. If that property sells, the note is transferred to another property, so the security follows your loan.
- Your funds move through third-party escrow. Money goes through independent third-party escrow and title companies rather than directly to the developer.
- You choose how interest reaches you. Either paid to you monthly, or deferred and compounded quarterly across the term.
- Interest comes from the whole business. Payments are drawn from all of the developer’s income sources, not only the property securing your note, and are backed by a promissory note.
- Retirement money can be used. Existing IRAs and old employer 401(k) accounts can fund a loan. We will explain what that involves before you decide anything.
Be Clear-Eyed
The Risks
This is a private loan to a real estate developer, not a bank deposit. It carries risks that deserve to be stated plainly rather than buried:
- Your funds are not liquid during the term.
- This is not a bank product and is not FDIC insured.
- Real estate values can change.
- Interest rates can change at renewal.
- Past performance does not indicate future results.
Funds are locked for the full term. In a genuine hardship the note can typically be liquidated at a market discount, which means receiving less than the full principal. For that reason this is only ever suitable for money you are confident you will not need during the term.
Lien Position
Where You Sit in Line
Lien position determines the order in which lenders are repaid if a property is sold or liquidated. It is one of the first things worth understanding, because it varies with the size of the loan.
Loans under one hundred thousand dollars are typically secured as secondary liens. Loans between one hundred thousand and two hundred thousand dollars are typically primary with one joint lien. Loans above two hundred thousand dollars are typically a sole primary lien. We will tell you plainly which position applies to any amount you are considering.
Working Together
How We Help
Key Financial Group of Florida, Inc. is an authorized advisor for Private Lending in Florida. A. Michael Trombino is an Insurance and Retirement Advisor licensed in Florida, North Carolina and South Carolina.
What we bring is a plain explanation of the structure, the paperwork and the risks, and the patience to work through it at whatever pace suits you. Most of the people we talk with hold the majority of their savings in insured and guaranteed accounts such as certificates of deposit and fixed annuities, and consider a private loan for a portion rather than the whole. We would rather you understand it completely and decide it is not for you than sign up unsure.
Answers
Common Questions About Private Lending
What is Private Lending?
It is a program in which private individuals lend money to an established residential real estate developer with more than twenty years of operating history, at a fixed rate of interest for a term of two to five years. Each loan is secured by a certified Deed of Trust and/or Mortgage Note on a specific residential property. Key Financial Group of Florida, Inc. is an authorized advisor for the program in Florida.
How is my money secured?
Your loan is tied to a specific residential property through a certified Deed of Trust and/or Mortgage Note recorded against that property. If that property is sold, the note is transferred to another property, so the security follows your loan. Funds move through independent third-party escrow and title companies rather than directly to the developer.
How and when do I get paid?
You choose. One option is to receive interest payments monthly. The other is to defer the interest so it compounds quarterly over the term. Interest is paid from all of the developer's income sources rather than only from the property securing your note, and payment is backed by a promissory note. Current terms and rates are available on request.
What is the minimum, and can I use retirement money?
The minimum loan is twenty five thousand dollars. Lien position varies with the size of the loan: loans under one hundred thousand dollars are typically secured as secondary liens, loans between one hundred thousand and two hundred thousand dollars are typically primary with one joint lien, and loans above two hundred thousand dollars are typically a sole primary lien. Existing IRAs and old employer 401(k) accounts can be used, and we will walk you through what that involves.
What if I need my money back early?
Funds are locked for the full term, because the whole structure depends on the money staying in place. In a genuine hardship the note can typically be liquidated at a market discount, which means receiving less than the full principal. That is why this is only ever suitable for money you are confident you will not need during the term.
What are the risks?
Your funds are not liquid during the term. This is not a bank product and is not FDIC insured. Real estate values can change. Interest rates can change at renewal. Past performance does not indicate future results. We would rather you weigh these openly than discover them later.
How do I learn more?
Schedule a free consultation. We will walk through the structure, the paperwork, the current terms and the risks, and you can take as long as you like to decide. There is no obligation and nothing to prepare in advance.
Understand the Program Before You Decide
A free, no-obligation conversation is the simplest place to start. We will walk through the structure, the terms and the risks together.
Book a Free Consultation