Ever see the TV show Storage Wars on A&E?
You’ve got just 30 seconds to size up the contents of an abandoned storage locker – stuffed to overflowing with someone’s forgotten treasures – in order to determine whether or not you’d like to place a bid.
If you’re lucky enough to win the foreclosed unit, you have the delightful task of digging through the dusty memorabilia like a modern-day pirate on the prowl for gold. Most of the time, these units are chock-full of seeming garbage – a prom dress circa 1982, cheap kitchen appliances, old toys, partial furniture sets, missing car parts.
But a resourceful buyer knows he doesn’t need to find a unit full of diamond necklaces in order to be successful. He knows he can make a fabulous living by re-selling everyday items like tables, chairs, and bed frames for a tidy profit.
In the realm of private lending, S.I.L.’s (Straight Interest Loans) are like the mundane, household artifacts. Definitely not the diamond necklace an S.A.M. (shared appreciation mortgage) is. But when seen for their real value, S.I.L.’s could be your meal ticket to private lending success beyond your wildest dreams.
What is a Straight Interest Loan?
Unlike a typical 30-year mortgage, where interest is calculated monthly, a Simple or Straight Interest Loan (S.I.L.), accrues interest daily. The term “simple interest” means the interest rate isn’t compounded.
These types of loans are attractive to borrowers because they aren’t paying interest on top of interest. And the amount of time required to pay off the loan is usually much shorter.
Sure, a Straight Interest Loan isn’t nearly as sexy as uncovering an authentic, Civil War era bayonet in your storage unit. But just like a stack of unassuming, quirky, collectible G.I. Joe action figures, a slew of S.I.L.’s in your back pocket could be just as profitable.
Why is a Straight Interest Loan so valuable?
Too many new private lenders pass up real money making opportunities because they don’t want to “settle” for Straight Interest Loan deals. But this is a costly mistake, because you’re sacrificing the chance to make better returns on your own money (or OPM) right this minute.
A Straight Interest Loan is the best way to keep a new OPM or money partner’s investment safe. That’s because there is less risk associated with an S.I.L. than with the more complicated loan types, like a Shared Appreciation Mortgage.
The borrower only pays interest on the premium, and these types of loans usually pay off more quickly. Additionally, the rate of return has no ties to the current state of the market, so you don’t have to worry about losing your partner’s investment if the property value tanks.
Here’s one more reason to love S.I.L.’s…
Like furniture, clothes and toys are the bread and butter of successful resale shops, Straight Interest Loans are to private lending. You should expect to close approximately two-thirds of your deals with S.I.L.’s. This is the kind of action that will quickly build your all important portfolio. Plus, it’ll attract other borrowers who are willing to pay a premium for more customized loans.
Still, aren’t I wasting my time with these small-fry deals?
It’s easy to get ahead of yourself and go straight for the storage unit with just a few visibly high-dollar items, skipping right over the one that’s full of unopened boxes. But this strategy is unwise. Remember, like Storage Wars, the everyday items like clothing, dressers, and power tools can haul in just as much cash (if not more) than just a few larger ticket items.
Why? Demand: people will always need clothes and furniture.
Same with loans. There’s ravenous demand for S.I.L.’s. That’s why every successful private lender has Straight Interest Loans as the foundation of their portfolio. Of course, you’re free to just go after the Faberge eggs and Rolex watches of the private lending world. Just know that if you don’t take advantage of S.I.L. deals, you’re leaving some major money (and major clients) on the table.
Keep your eye on the Straight Interest Loan prize, and you can’t fail
The winners of the private lending world have one thing in common. No deal that will make money gets overlooked, regardless of how homely it may look at first blush. It’s like buying your first storage unit at auction only to discover boxes and boxes full of old, push-style lawn mower parts. Not sexy, but you know you can turn them into cash with a few quick phone calls.
Because of their stable nature, Straight Interest Loans are key to having the financial freedom you seek. It also does two other critical things for you right away. First, it instantly gives you a steady influx of passive income you can count on every month.
Second, it helps you build an impressive portfolio to discuss with money partners and OPM sources. This naturally leads to loads of referrals and more exotic deals.
Who would have ever thought choosing the boring path in the private lending world could be so profitable?