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Warehouse Line Alternatives for Private Hard Money Lenders - YouTube
Channel: Private Lender Link
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for many private and hard money lenders
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the ultimate capital source for funding
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loans
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is a bank warehouse line of credit but
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they are difficult to qualify for
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and not many banks offer them for
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lending nationally
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in this video i'll tell you about two
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alternatives to warehouse lines you
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should consider
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and how to find companies that provide
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capital for private lending
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i'm rocky botani ceo of
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privatelenderlink.com where investors
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and brokers can easily find direct
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private hard money lending companies if
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you're in the investment real estate
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business
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and want to gain insights into private
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mortgage lending subscribe to our
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channel
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and get notified every time we release a
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new video
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this video's topic is mainly applicable
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to loan originators
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including private lending firms and
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mortgage brokers who want to become a
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lender
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if you're a real estate investor you
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probably won't find this information to
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be useful
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unless of course you're planning to
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start a private lending business
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for loan originators who operate with a
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business model of funding loans
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and then selling to the secondary market
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bank warehouse lines are typically the
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ultimate capital source
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because they are the cheapest cost of
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capital available
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the challenge for most lenders is being
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able to qualify for these bank warehouse
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lines
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you typically need to pledge an existing
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portfolio of loans
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worth several million dollars just in
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order to get the line
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another downside to warehouse lines is
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the risk of it being pulled
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if there is a major economic event while
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the likelihood of this happening
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is very slim if it does happen it could
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kill your entire lending business
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many local community banks offer
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warehouse lines but they typically
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restrict the geographic areas where you
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can lend
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for example a community bank in texas
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typically won't accept
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notes in which the collateral is located
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outside of texas
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or a bank based in new york may not
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accept collateral outside of the
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northeast
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so you can't use community bank
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warehouse lines to lend nationally
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and the line amount you get from a
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smaller local bank
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may not be enough to support your growth
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if you are unable to get a bank
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warehouse line to support your private
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lending business there are two
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alternatives you might consider
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the first alternative is what i call a
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pre-takeout warehouse line
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this is a very unique product offered
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only by a few companies in our industry
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these capital providers have
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relationships with multiple
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institutional loan buyers
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so long as the loan you're originating
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will be sold to one of those approved
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institutional loan buyers
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the pre-takeout capital provider will
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allocate a certain amount of money to
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you based on your average loan volume
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at closing they'll fund 80 to 90 of the
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loan amount
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and you need to contribute the
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difference of 10 to 20 percent
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the cost for the short-term capital will
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likely be in the range of 50
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to 100 basis points and the key to this
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program is the loan must be sold to the
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institutional loan buyer within 15 days
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there are lots of other aspects and
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insights about this unique capital
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program i can get into
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but i'll make a separate video to cover
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this topic in detail
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the second alternative to bank warehouse
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lines i want to cover
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is a liquid mortgage fund so you would
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form a mortgage fund
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just for the purpose of funding loans
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that will be sold to the secondary
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market
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the fund won't hold any loans for more
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than 30 days
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the key selling point to potential fund
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investors
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is that no lock-up period would be
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enforced because you'd be cycling the
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funds once or twice a month
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you can allow the fund investors to pull
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out with a 30-day notice
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and that low commitment could make it
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easier to raise capital
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when compared to the pre-takeout
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warehouse line alternative
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the main benefit of the liquid mortgage
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fund is you're not limited to a small
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number of institutional loan buyers
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you can sell loans to other types of
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capital providers
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such as insurance companies family
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offices
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and even individual note investors they
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likely won't be as efficient
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as the institutional aggregator but at
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least you have more control
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and flexibility many private lending
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firms
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use multiple capital sources it's
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possible you may have a bank warehouse
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line
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manage a fund sell loans to
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institutional aggregators
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get some loans table funded by
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individuals and also use a wholesale
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partner for unique loans that are
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outside of your wheelhouse
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it's a good idea to explore all of your
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options
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and you can use our website
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privatelenderlink.com as a resource to
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find capital providers
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as well as law firms that specialize in
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setting up mortgage funds
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from the main menu click services to
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access our service provider directory
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then click capital browse the main list
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or filter by category
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warehouse lines funded loan buyers
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wholesale lending etc
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click on each company's profile to learn
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about the program then click the green
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contact button to find their phone
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number
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an email form and a link to their
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website to find attorneys that can help
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you create a new mortgage fund
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click the services link on the left side
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select legal
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and then click the fund advisory
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category when you reach out to a law
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firm or a capital provider
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please remind each company that you
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found them on privatelenderlink.com
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if you found the content in this video
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to be useful please click the like
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button
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and be sure to check out our other
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videos about private and hard money
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lending
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thank you for watching and see you in
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the next video
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