In other words, add revenue that’s almost all PROFIT. How? By bringing a transaction with a VERY LARGE profit potential to your private lender/investor.
You know that working with institutional lenders on traditional, credit, and income qualified loans result in a small to medium commission, and to cover overhead, profit, as well as ROI requirements A LOT of these loan closings are necessary. The PRIVATE MORTGAGE market can result in larger commissions and fees, but is still restricted, especially by the maximum allowed points placed on the transaction by the lenders themselves.
To earn LARGE FEES on a transaction, you must put together a transaction that has so much profit that
Multiple lenders/investors will be heavily motivated to do the deal YOU have already negotiated so that the only work to be done by the lender is to fund the transaction.
The way to do this is to turn a refinancing request into a NOTE PURCHASE opportunity – at a large discount to the principal balance.
Of course, most loan requests do not lend themselves to this strategy.
For a loan purchase at a significant discount to have a chance of success, the following attributes must be in place:
-The borrower is behind on payments, in bankruptcy, or the note has matured
-The borrower has corrected any prior issues, and now has the ability to make monthly payments
-The note is owed to an institutional lender
-The principal balance contains a large amount of back interest, fees, and penalties
-The current note holder wants to avoid foreclosure and get out even if it means “taking a haircut”
You’ll need to get the borrower on board; then negotiate a discounted note purchase with the note holder. Once you have this in place, and the discount is significantly large, you can take the deal to private mortgage lenders, and state your NON NEGOTIABLE fee. Instead of fees of $30,000 on a $2 million loan, you may earn $100,000 – $200,000.
Next post will provide specific examples of transactions like this that we financed.