Frequently Asked Questions
WHAT DOES IT MEAN IF I AGREE TO BE A PRIVATE MONEY LENDER (PML)?
Once the land is under contract, but prior to when we close on the purchase, we present our private money lenders (PMLs) with an opportunity to invest. This means our PMLs will fund the purchase of the land or down payment required by the lender, and/or all of our holding costs during the project. Our PMLs also have an opportunity to earn double digit returns, unlike the returns we typically see in the bank, stock market or retirement accounts, with a protected, secured and insured asset.
HOW DO I KNOW THIS ISN’T A SCAM?
The proof is in the paperwork we use to protect, secure and insure each of our private money lender's investments. All of the contracts have been reviewed by our attorney and the recorded mortgage which secures your lien position will be signed and notarized by the County Clerk, and Time & Date stamped at the time of filing. Also, as we continue to educate you on our strict due diligence process which includes 12 different credibility pieces, your confidence in investing with us will continue to increase.
HOW IS MY INVESTMENT PROTECTED, INSURED AND SECURED?
We provide a promissory note summarizing the terms and conditions of your loan, we obtain a builder's risk insurance policy listing you as a beneficiary/loss payee, and we record a mortgage against the land with your name on it so that we can’t sell the property without your consent.
HOW ARE YOU ABLE TO OFFER YOUR PMLs DOUBLE DIGIT RETURNS?
Our development projects usually produce 20-30% returns for us which allows us to offer a healthy return on our investors capital while still leaving plenty of profits for Nexora.
HAVE YOU EVER LOST MONEY ON A DEAL?
Yes. However, when that happens, we do whatever we can to cover the loss out of pocket so that our private money lender isn't even aware of it and they are paid back in full. Even if it's coming out of our personal assets. However, all that said, there are still no guarantees but the probability of us taking a loss is not likely based upon our buying/building criteria.
DO YOU GUARANTEE YOUR RETURN ON INVESTMENT (ROI)?
We can’t guarantee anything. Worst case scenario, you have to be ok never seeing this money again. HOWEVER, the probability of that happening is low for the reasons we’ve already discussed. Remember that we build in high traffic areas, our strict buying criteria is based upon historical data, we work with a team of experts who have been in business for 15+ years and we focus on strategic markets where demand is high and inventory is low to moderate. On the rare occasion that a deal doesn't work out, all of the projected profits are gone and we're no longer able to cover your investment out of pocket, then you have a legal right to foreclose on us since we will be recording a mortgage against the property with your name on it. But in our experience when a deal “goes south,” all it means is we simply didn’t make as much profit as we forecast after paying back our lenders/investors.
WHAT IS THE DURATION OF OUR LOAN AGREEMENT?
All of our contracts are set up with a 12 month term but our goal is to pay you back ASAP. As soon as the property/project sells, you will receive your principal plus interest back in one lump sum at closing. Your name and balance due will be captured on the HUD statement as a lender. Also, we will take care of filling out all of the loan docs on your behalf so that all you need to do is review and approve them. They are very straightforward and easy to read.
DO YOU PERSONALLY GUARANTEE THE INVESTMENT?
Like all investments, there is always an element of risk associated in the transaction and there are no guarantees. However, our job is to minimize that risk. When someone borrows money from the bank, they ask the borrower to sign a personal guarantee, but they only offer them a 3.5% ROI and a 10 to 30 year term, fully amortized. We would be more than happy to guarantee the note if you prefer the personal guarantee with a 3.5% interest rate as opposed to 10-12%.
WHY DO YOU USE OTHERS' MONEY? WHY AREN’T YOU PUTTING YOUR OWN MONEY INTO YOUR DEALS?
We absolutely use our own money for certain deals, but we do so at our discretion. We even lend money to other investors as Private Money Lenders ourselves. Using our own money limits how many projects we can work on at any given time. Which is why our business model allows using third party investor capital. With private money, we can buy an infinite amount of land and property, and grow and scale our business much faster.
WHY NOT GET A LOAN FROM THE BANK FOR WAY LESS INTEREST?
We certainly use hard money lenders for new construction loans. Hard money lenders are private investment firms dedicated to lending money strictly to real estate investors and builders. Sometimes we use our own capital for down payments and holding costs and sometimes we use third-party investors like you to contribute the down-payment and holding costs.
ARE THERE ANY UPFRONT FEES?
Nope! We pay for all closing costs, escrow fees, attorney fees and wire fees.
DO YOU POOL INVESTOR FUNDS?
No. Your funds will be attached to one property secured by a mortgage and you’ll have your own separate set of loan docs. On occasion, depending on the size of the deal, we may have multiple lenders on one deal, but each lender will have their own separate set of loan docs and each lender will be assigned a separate lien position.
DO I PAY TAXES ON THE INTEREST INCOME EARNED?
Every year, my team will provide you with a 1099 form for you to share with your CPA or tax consultant. The statement will show how much interest you have earned for the year. It will be categorized as “Interest Income” and you’ll need to pay tax on it unless you are getting paid on money you loaned from your “Self-Directed Retirement” account.
WHAT IF YOUR RESALE VALUE DROPS BEFORE YOU SELL THE HOME?
If you look at historical market trends, you’ll see that massive dips in the real estate market won’t usually happen in a matter of months. Sure, there is always an element of risk associated with every investment made but all decisions made are data driven which significantly reduces our risk and then again, we always protect, secure and insure our investor's funds.
WHAT IF YOUR HOME SELLS SOONER THAN EXPECTED?
If you’d like to keep your money working for you, then we can roll your principal and interest earned into a new project and create a new set of loan docs. Many of our lenders do this. Otherwise, We’ll pay your principal and interest back as soon as the home sells as a part of the closing process.
WHAT IF YOUR BUYER DOESN’T CLOSE ON THE PROPERTY AND YOU GET STUCK WITH AN ASSET THAT'S COSTING YOU MORE MONEY THAN EXPECTED TO MAINTAIN?
You'll get paid whether we do or not. Our job is to make this a passive investment for you. If the house doesn't sell "on time" then once the right buyer comes along, We'll end up making a smaller profit. This is something we also discussed when we walk you through our property analysis template. If you look at the projected profit, you see how much that will drop month over month as the house sits on the market. At the end of the day, our job is to ensure you still get paid. Even if we don't profit on the deal, our goal is to cover the loss out of pocket. Our business model falls apart without our private lenders so we value our commitment to you before anything else.
ALL OF MY MONEY IS STUCK IN MY RETIREMENT ACCOUNT? HOW CAN I ACCESS THOSE FUNDS TO INVEST WITH YOU?
No problem! We can have our passive custodian hop on a call with the both of us and explain the process to you directly. He can help you understand which retirement accounts you can leverage from in order to invest in real estate and he can also help you with next steps if you decide to move forward.
HOW MUCH MONEY DO I NEED TO GET STARTED?
Our minimum investment amount is $25,000.
WHERE DO I WIRE THE FUNDS WHEN I’M READY TO MOVE FORWARD WITH INVESTING?
We will open an escrow account with a title company and we can draw from the account as needed. We will cover all of the fees associated with setting up this account as well. We will begin to accrue the interest as soon as the wire is processed.