Q1. What is a Private Mortgage?

A Private Mortgage is a security instrument for real estate loans. The specifics of the loan are detailed in a separate promissory note, and the private mortgage is recorded at the county recorder's office. The Private Mortgage serves legal notice to the world that the subject property is pledged to secure a loan. Our marketing name for Private Mortgages is Smart Capital Opportunities in Real Estate (SCORE).

Q2. What borrower pays such high rates?

These loans are short-term bridge loans that are utilized to purchase real estate at a discount. It is not the cost of money that counts but the availability. Many of our properties are from motivated banks, lenders and/or private sellers in which we negotiate very low sales prices by executing accelerated closings.

A great example of this is commonly known as a pre-foreclosure "short-sale" where a bank accepts less than owed for the property in order to sell it quickly to avoid a lengthy foreclosure process or simply to remove any non-performing assets from their books. Often financial institutions such as traditional mortgage companies take 30 to 45 days and sometimes longer to fund these transactions thereby creating a tremendous opportunity for our private lenders to earn such high yields.

Q3. Is this a mortgage pool?

No. Every investor is the sole holder of the private mortgage note on the property. It is important to realize that we operate on the premise of “One Property-One Mortgage-One Investor” for safety, security and transparency.

Q4. Do you have any properties ready today for a Private Mortgage?

Probably yes. We try to keep our current opportunities updated on a frequent basis. Simply call us and talk to us about the current opportunities that may interest you in your state. As expected, some states may have a larger supply of “ready to go” homes but we can always find specific homes that meet our requirements and also meet your needs through our proprietary acquisition process.

Q5. What if the property value drops?

Keep in mind that the real estate that we buy is already deeply discounted.  In addition, our loan opportunities are usually short and intermediate term, 6 to 60 months. Because of these factors, it's unlikely that the real estate would change dramatically within that short time interval, especially in stabilized markets that we focus on.

Q6. Have you ever been foreclosed upon with one of your properties?

No. It’s worth noting that Tetra Homes, Inc. has never been involved in having a property foreclosed. Furthermore, our investors have never lost any money in interest or principal with this fully secured program.

Q7. How do I know that I can trust you?

The good news is: It does not take a leap of faith and there is no guesswork involved here. We inform you on all of the following before you invest:

  • The address of the property and complete legal description
  • The terms of your investment including your fixed yield
  • A complete copy of the market analysis
  • The Title or Escrow Company handling the closing
  • In addition, since your transaction is completed through a third party Title Company, your name appears right on all the official loan documents. And the funds never enter our account until the loan is closed. You will receive the following from our office about 1-2 weeks after the loan closes:
      • Title Commitment with Title Insurance
      • Hazard insurance naming you as the mortgagee
      • Promissory note naming you as creditor
      • Mortgage (securing your investment to the property)
         

Q8. Why haven't I heard  about this type of investment before now?

Big players in the investment world, Wall Street and Mutual Fund Companies, don't talk about this because they would miss opportunities to sell stocks and other investments and lose out on many large commissions. Private mortgages are not a mass produced investment so banks, stock brokers, and mutual fund companies don't offer this type of specialized investment. Also on a historical basis, private mortgages are typically funded by private individuals and not brokerage companies.

Q9. What if I need to pull my investment dollars out of the loan early?

If you need to take your money out of an investment early, we try to simply find another investor that is willing to replace your involvement. We perform this service on a best efforts basis which means there is no guarantee that we can find a replacement. However, if we are successful, this process can take up to 180 days to complete. Then again, unlike a bank CD, there is no penalty for early withdrawal, just a small filing fee required by the county. Just call us, and we'll handle all of the details. But keep in mind, you really shouldn't be involved with the SCORE program if you feel you will need to liquidate early.

Q10. How many Private Mortgages should I own at one time?

For most investors, we recommend one to start with so you can get the flavor of this type of investing, and once you are comfortable, up to five.

Q11. What would my CPA or attorney say about this?

We always recommend that you check with either your attorney and/or CPA before making any major investment decisions. We would also advise you to talk to someone who is familiar with private mortgage investing and has experience in the area of lending on real estate.

Q12. Are there any hidden fees?

No. The only fee that needs to be paid by the SCORE program investor is the normal mortgage cancellation fee that is paid after the resale of the property. Furthermore, since all of the property that is being offered for the SCORE program is held in our portfolio, there are no loan service fees.

Q13. How can I get started now as an investor?

Take the first step: E-mail us or call us about current and upcoming investment opportunities. Feel free to present other questions to us as well. We want you to feel confident about investment decisions.

Q14. Can I use the money in my IRA to use in this program?

Yes, with one caveat: It must be through a self directed IRA.  A self-directed IRA is legally no different from any other IRA. It simply indicates that you, the client, choose your IRA investments. You can invest your IRA funds in a virtually unlimited set of investments, except for those specifically excluded by law. The only general class of assets excluded by the IRS are life insurance contracts, collectibles, and capital stock in an "S" Corporation. You can verify that it's legal to invest your IRA in first mortgages by going to www.IRS.gov and searching for Publication 590. Once there, simply look up “prohibited transactions” in the table of contents.

This is not a new concept. You've been able to buy real estate (as long as it is not your personal property or mortgage) within your IRA since IRAs were created over 35 years ago. However, many financial professionals limit investment choices to funds and products for which they'll earn a commission.

Call us for more details on this and we can help point you in the right direction so you maximize the returns on your IRA funds as well.

 

   Please Note That All Investment Products Are:

Not a Deposit | Not FDIC Insured | May Lose Value  |  Not Bank Guaranteed  |  Not Insured by any Governmental Agency

 

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