The AREI Private Money Lending Process
John Larson and the Real Estate Cowboys talk passive income real estate investing.
Hear new episodes every Sunday morning at 8 a.m. The Cowboys talk about the private money lending process; what to expect and how passive it should be.
Keep the #CowboyCoffee hot while listening to John, and the Cowboys talk about how to #BeACowboy and earn passive income in real estate.
Keith Weinhold: Hey, this is Keith Weinhold from the Get Rich Education podcast. You are listening to my friend John Larson and the Real Estate Cowboys. Don’t quit your daydream.
Robert Helms: Hey everybody, it’s Robert Helms, host of the Real Estate Guys radio show, and you are listening to the Real Estate Cowboys.
Announcer: Have you thought about becoming financially free through real estate investing, but don’t have the time or knowledge to get started? Welcome to the Real Estate Cowboys podcast. Each week we discuss passive income investment opportunities in the red hot Texas market. John Larson and the Real Estate Cowboys will show you how to leverage their team to build wealth in real estate through passive investment opportunities. And now here’s John.
John Larson: Hello my Real Estate Cowboys and cowgirls. This is your host, John Larson. Welcome to another episode of the Real Estate Cowboys podcast. This week we are going to be talking more about private lending. Our private lending program is just catching on like wildfire. Most of our clients are moving towards being lenders as opposed to property owners and I believe it’s due to the fact that there’s just a higher yield there and a more passive experience for the investor. Also, if you’ve been listening to the show, we’ve been talking about how you can lend money through your self directed IRA or 401k and the monthly dividend that will be paid to you will go back into your retirement account, either tax-free or tax-deferred, depending on the type of account that you have set up. If it’s a Roth, it’s going completely tax-free. If it’s a self-directed IRA or a solo 401k, it will be tax-deferred.
So first and foremost, just want to let everyone know that because we publicly solicit all of our offerings, all of our investors must be accredited. If you read the rules under the Regulation d, You will see that the new 506(c) rule allows you to publicly solicit your opportunities. But if you do so you must make sure everyone is an accredited investor. So that’s number one. But private money lending is an extremely passive form of investing that can earn a fixed double-digit rate or return depending on the individual project. Our projects thus far have ranged from 10 and a half percent to 12%. Our current offering right now is 12% and that’s very, very hard to achieve in today’s market, especially with single family homes due to the increasing interest rates, although I’ve seen them slightly come down recently, but it’s very, very tough to achieve.
And then also with single-family homes, it’s really, I know a lot of people preach that it’s passive, but it’s really not that passive when you get down to it. Dealing with the city, dealing with, uh, you know, rental licenses and things like that. For example, I’m dealing with a house right now in North Dallas where the city’s coming back to me for an addition that I didn’t even put on the house. I bought it with an addition. But now I have to go back and do all these things that the city’s asking, um, to the addition, which is mostly cosmetic. And it’s all because, uh, it was not permitted and so on and so forth with the previous owner. But now here I am and my investor, we’re dealing with the issue of trying to get this property, a certificate of occupancy in this area of North Dallas. But I cannot do so until I do some work to the addition that I didn’t even… And, and nothing structurally wrong with it, but I didn’t even put this addition on the house. But here we go.
So those are just kinda some of the things that pop up. Not only that but evictions and missed rental payments, late rental payments, maintenance, so on and so forth. Private lending takes all that out of the equation and just pays you a monthly paycheck and it’s a fixed monthly paycheck. So when you’re owning your rental, a lot of times you’re looking at your uh, property management statement, uh, each month and expecting a certain number and it’s less because there was a plumbing issue or there was this or there was that, right? Not with private lending. Private lending, you give us $100,000, it’s a 12% return. You are going to receive a check every month for $1,000 and it’s extremely hands off and passive.
Our only communication will literally be one time a month, my accountant sending you a paycheck. So what is private lending? Private money lending is an investment where you act as the bank. You help fund a development or project or enterprise. In return, you receive a guaranteed rate of return on your money. You receive a monthly dividend that you can count on at the end of the term. Our terms typically range from anywhere from 12 to 24 months. You receive your principal investment back and at that point, you have the option to reinvest those funds into another opportunity and just keep your money working for you. That’s the goal, right? We want to live our lives, get our money working for us, and plain and simple get that return on life that we’re looking for. Right? So next question would be what guarantees come with private lending?
Well, when you invest in private money lending through our company, you are guaranteed a fixed rate or return on our current raise. That rate is 12% as I said, other raises in the past have also been in the double digits. The other guarantee you will get with private lending through AREI and the Real Estate Cowboys is a first lien position, just like any bank would. So that collateralizes your loan because you hold first lien on that building, the project, the land, whatever it may be, you hold first lien. So if we as the borrower or any other borrower that you’re dealing with defaults, as long as you have first lien position, you can go forward with the foreclosure and assume ownership of that property. Now with our debt syndications, it’s a multilevel deed, which means there’s many people on that deed and each person has a specific beneficial interest in that project.
So someone who invested $200,000 will have a stronger beneficial interest then one that has $50,000 in the deal, but you would group together and you would file the foreclosure and go through the foreclosure process with an attorney in the state where the project is located. So you’re always protected with that first lien position. And like we’ve discussed before on the show, real estate never goes to zero. Okay. So even if that project becomes unfinished or, or if you foreclose on the project before it is finished and completed, the project’s still worth something. Okay. So at that point, you could decide, do I just want to sell it as is? Do I want to finish out the project and sell it based on the projection that we received from the sponsor? It’s your choice, right? It’s your property now. So just like a bank would foreclose on a property, you would foreclose on a property.
A lot of people ask me, how does private money compare to the stock market? So to say, people always relate real estate and stock market. What’s the better option? Both options can be good, right? I mean, I believe in diversification. I don’t believe in putting all your eggs in one basket. I’m a real estate guy, so I’m a firm believer in taking your money from Wall Street and putting it in Main Street, but people, I know a lot of people that do make money in the stock market, but they are watching it every day. They’re trading every day. They’re very involved in it. It’s not very passive. So private money lending has a number of advantages, I would say, over investing in the stock market. For one thing, the stock market is very volatile. One minute your money’s worth a certain value, and by the end of the day it’s something different.
For another thing, investing in the stock market requires a significant amount of babysitting if you’re going to do it right, right? You have to watch it every day. You got to wait for the right time to buy and sell so you don’t lose your retirement money. Right? And then there’s outside things that can happen that could really, really have a negative effect on your stock market investments. I’ve had family members that have lost tons of money. 911, for example, uh, was really bad. And then you know, I had some of my family members lose almost all of their retirement savings from 911. Then you look back at the great recession, there was a lot of money lost in the stock market at that time as well. So I would just say it’s, it’s definitely, you know, a more passive experience with private money lending and it will get you double-digit returns. Whereas, you know, talking to my uncle a couple months ago, I asked him how his investments were going in the stock market and it’s very passive for him. He doesn’t really watch it. He has a broker that kind of watches it for him. But he said he’s been averaging about 6% a year on his money. I’m offering a deal right now that can pay you 12%, so that’s double right? With private money lending, you do all the due diligence up front and there’s really almost no volatility and definitely no babysitting required by you. It’s definitely one of the most passive income models that exist today. So I hope that gives you a kind of a clear understanding of how the private money lending model works. Now after our commercial break, I want to get into what is the process of private money lending at AREI. Okay. And the Real Estate Cowboys, American Real Estate Investments. I’ll walk you through the process and how it works right after the commercial break.
And welcome back from the commercial break. This is your host John Larson. This week we are discussing private money lending. What is private money lending? How does it work and what is the process to get involved in a private money lending opportunity at American Real Estate Investments and with the Real Estate Cowboys. First and foremost, the private money lending process at AREI is fairly straightforward. We’ve made it really easy for our investors. Uh, the first thing that has to happen is the investor obviously reaches out to us at any one of our websites, AREIUSA.com or RealEstateCowboysDFW.com and let us know that you’re interested. Provide a good contact phone number, email for us to get in touch with you and set up an appointment to talk about our current offering.
Uh, you can also, if you’re not sure if you’re accredited, you can still get our marketing package. We always have like an easy to read, um, nice marketing package that will talk about the high-level details of the deal. And if you are accredited, we will then provide you with the PPM, the private placement memorandum. Okay. And that will line out all the details of the project as well in more depth and give you the opportunity to do your due diligence before you move forward with the deal. Okay. What to expect on your first phone call with our team would be, you know, asking what your investment goals are. And I would say almost 99% of our investors say they’re looking for cash flow. Okay. Well, with private money lending, I don’t know a better option out there, uh, that can provide you the type of cash flow that our investors are looking for, and the high rate of return that you’re looking for.
If you’re looking for solid, consistent cash flow, private money lending is your program. If you have an IRA or 401k that’s not self-directed, self direct it. Start growing your retirement account by 12% fixed. But number one is going to start with your goals. We’ll discuss what you’re looking to get out of the investments, what are your expectations and this helps our team member best match you with the investment that will meet your goals. As you know, we do commercial properties here. We do, we’re firm believers and cash flowing real estate. Uh, I just locked up four four-plexes, uh, that I’m going to purchase in Irving that are great cash flow generators. Those are really, really tough to find in today’s market. And I would say they’re in like a C plus to a B minus neighborhood, um, that I could bring up that I could bring the building quality up to about a B.
Um, I’d say they’re about C pluses right now, but really, really solid cash flow generators, right? And so I just locked those up. So obviously we’re really big believers in cash flowing real estate, of course. But for our investors that are looking for a high rate of return and solid cash flow and are protected by first lien position, right? Private money lending is your program for sure. So, but on that first call, we want to find out what your goals are. Okay. If the tax benefits and tax savings and things like that are your goal, then private money lending is probably not for you. Right. But like I said, if you have the IRA or 401k if it already is self-directed or isn’t self-directed, get it self-directed, put that money into a program like private lending for your IRA or 401k for sure. All right.
You also want to discuss your past history with investments and your cash position. Okay. This is to ensure that you are an accredited investor. Most people already know they’re accredited, they have the paperwork, the documentation, a letter from their attorney, a letter from their CPA, whatever it may be. Some people they’re accredited and they don’t know. So we might walk you through that process, um, of how to go about getting proof that you’re accredited, so on and so forth. If you’re not accredited though, we still have options for you here. It just won’t be on our private lending side and it’s really due to the fact, like I said, that you know, these are multilevel deeds, there’s more than six lenders on the note, money is crossing state lines and then obviously we’re publicly soliciting these opportunities right on our podcasts, sending out email blasts, so on and so forth.
But that part of the process of discussing your past history really protects helps protect your interest as well as our own interest and legal responsibilities as a company that offers private lending opportunities. And our team member is going to ask if the funds are going to be coming from retirement account or if the account is already self-directed. If it isn’t, we can help direct you to partners that we work with that can get your IRA or 401k self-directed so you can invest in real estate and do private lending. Going back to taking your money from Wall Street and bringing it Main Street, Russ Gray from The Real Estate Guys, that’s something that he likes to say a lot and I’m a firm believer in as well. Um, and we’re leading that charge. We’re giving our investors alternative investment options that gets you much better yields and make you wealthy. You know that is our goal here. We are your partner. It is our job to bring you wealth and we can do that with many of our programs, but right now, spotlight’s on private lending. And like I said, I’m very passionate about it and a very big believer in that program. Um, and at that point, once we identify where the money’s coming from, is it cash savings? Is it coming from an IRA or 401k? Our team member will send you the private placement memorandum, the PPM, which will have all the details of the current private money lending opportunity and you’ll have adequate time to read over that PPM at your leisure, uh, and also discuss with your financial advisor or your attorney. Um, so you’ll have time to do that. If the PPM looks attractive to you and it looks like it’s going to be a solid deal, then you would contact our team member again to let him or her know that you’d like to move forward. And our team member will give you the details for transferring your investment to the escrow account. So your money will sit in escrow at a title company here in Texas, Community National Title’s who we use, and your money will start to earn interest immediately even while the raise is still going. So that’s a beautiful, beautiful thing too. Once you sign that PPM and send your money in escrow, your money is already going to start accruing interest. So when we close on that project, you’re going to get a lump sum payment from for however many days that money sat in escrow. So it’s already going to start earning that 10 to 12% depending on the deal, whatever it is, while the money’s in escrow. So you get that lump sum payment right at close, and then your monthly payments will start on each month after that, right?
So then 30 days after close, you’ll receive another monthly dividend. Okay. Just like a bank would. So at the end of the term, you’re going to have the option to take your initial principal investment back in full. Or like I said, we’ll have another deal lined up that we can share with you, another PPM, more information on another deal, and then at that point, you would have the decision to reinvest that money in another opportunity and just keep it working for you. That’s the beautiful thing about this. It’s a program, as long as you’re willing to keep moving the money and it’s up to us to perform, and I’m very confident that we will. But as long as we keep performing, I would say that you would probably want to keep that money working for you in these deals, right? It’s about building a relationship and once we earn that trust and start building that relationship, there’s just such a great potential to really grow your retirement account, really start to supplement income, replace income, and really just start getting that return on life that you’re looking for, right?
And maybe it will result in you able to retire early or your wife retire early or spouse, right? Husband or wife. It’s just a beautiful, beautiful thing when it all comes together and works together and we work as a team to accomplish our goals. So I’m sure at this point you can see that investing in our private lending opportunities, it’s very straightforward. It’s a very transparent process. Um, at all times you’ll have one of our representatives who guide you through the entire process. And if you’re, even if you’re working with some other company, you should, I planned on doing this episode not only to talk about the process that we have but if you go and invest and lend money to another group, this is the type of process that you should expect. Okay. And, and we always have a representative that will guide you through the entire process.
And so really the way the process works, it can take as little as one or two days before you, even before you start earning fixed double-digit returns on your money. I could send you the PPM today. You could review it tonight. You could let me know if you want to move forward by tomorrow, you could send your money to the escrow account tomorrow and your money already starts earning 10 to 12%. Whatever the opportunity is, it’s already starting to earn money. It’s already starting to work for you. So that’s really got to be, I mean, in my eyes, I mean, it’s just such an awesome, awesome opportunity.
Well, if you’re interested in private money lending opportunities at American Real Estate investments and the Real Estate Cowboys, uh, our current opportunity, it’s almost fully funded. There’s a little bit of room left, but this one is paying 12% for a year. Okay? So simply a $100,000 investment will pay you $12,000 for the year. So if you’d like to learn more, you can visit our websites, as I said, AREIUSA.com or RealEstateCowboysDFW.com. Put your information in the contact form and a representative will reach out to you right away to discuss our current private money lending opportunity.
All right, that’s all we have for this week. I hope you found this episode educational, insightful, and I hope it motivated you to want it to take action and learn more about how the private money lending process works. And one more thing I’d say, you know, we are the Real Estate Cowboys. So another thing that’s really, really great about opportunities is most of them are going to be here in the DFW market, which I believe is the best market in America because, has the most jobs, most people moving here, um, companies are still moving here on, on a daily basis it seems. And so as long as there’s jobs, there’s going to be people moving here and there’s going to be great real estate opportunities and there’s going to be really solid opportunities here, right? Because it’s our job as the sponsor to see that project through and we either have to sell that project at the end or refinance that project. This market gives us the best opportunity to do that for our investors so we can set you up for success. Okay. So like I said, if you liked what you heard on this episode, go on our websites, put your information in. We’ll be sure to reach out to you ASAP. That’s all the time we have for this week. This is John Larson signing off and always remember, what is your return on life?
Announcer: All opinions expressed by the host of the show are the opinions of American Real Estate Investments LLC and do not reflect the opinions of guests or sponsors. No personal or professional advice on this program should be considered an endorsement to follow a real estate financing or investment strategy. Before acting on any information, seek advice from your financial tax, mortgage or real estate advisor, as the information is not guaranteed and investment strategies have the potential for profit or loss.