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August 3, 2020
Originating Private Mortgages from an SDIRA can initially involve a major shift in your investment philosophy and overall thinking – I know that was the case for me, as it took me years to take the first step and actually fund a Private mortgage.
When performing due diligence on a potential private loan from an SDIRA, some questions you may find yourself asking are: Where do I start? What should be the first thing I look at when vetting a potential loan?
The answer is simple, follow the two ROI‘s.
The first ROI you should be concerned with is the Return OF Investment (ROI-1). By concerning yourself with the security and safety of your money is paramount to success and wealth building. To ensure the return OF my money I require the following from the borrower:
Also, I require the borrower to pay for the following insurance policies to protect the property to which my investment is tied. I live and lend in the Gulf Coast of Texas, and require the following insurance policies before I lend any funds:
Once I have assured the return of my money back to my SDIRA, then and only then do I consider the second ROI, which is the Return ON Investment (ROI-2).
I prefer to look at each loan individually and try to be flexible within the current market conditions when it comes to interest rates and points. However, you should consider charging enough points to cover the cost of a foreclosure up front at closing– that way you can have the funds in your SDIRA and take foreclosure action quickly, so your money is not held hostage by a bad deal!
I hope you have found this helpful, and I wish you safe and prosperous Private Lending.
Host of the Private Lender Podcast
*This site contains educational content provided by third parties. NuView Trust does not endorse, recommend or approve any of the companies or individuals or investment vehicles or strategies that may be discussed. NuView Trust encourages clients to seek legal or tax advice as necessary and to perform their own due diligence before engaging in any investment vehicle or strategy.