You Can Legally Rob the Bank
Don't Use a Gun
Do This Instead!
Slick Willie Sutton was famous in 1951 for robbing banks. When he was asked why he robbed banks he said, "Because that's where the money is."
Sutton spent about half his adult life in prison for robbing banks. Today, the average bank robber makes about $4,300 when he dashes out the door of the bank after a holdup. Of course, most of them get caught soon after and then spend ten years in jail for their $4,300 pay day.
Did you know that there is a 100% legal and ethical way to rob banks that won't have you looking over your shoulder for the FBI?
Those who work in the banking industry know that banks work hard to turn your money into their money. That is the dirty little secret of banks.
Banks make much of their money by lending the money people deposit in the bank to other people who want to borrow money. It works something like this:
Aunt Alice wants to have her money make money for her.
Aunt Alice just became a widow and got a $500,000 life insurance payment she is taking to the bank. She thought about putting it into stocks, but she didn't want to risk losing her money on a gamble. She knows the the stock broker makes money whether she does or not.
She plans to put $200,000 into a certificates of deposit (CD) and leave the rest in her checking account. These CDs pay her a paltry interest rate from less than half of a percent up to four percent. But, she can't cash in that CD without incurring a penalty which means the bank knows she is going to leave it with them for anywhere from six months to five years.
Let's say Alice puts $200,000 into a five year CD at 2%. The banker gives Alice a piece of paper saying they promise to pay her 2% interest if she leave her money in the bank for five years. As soon as Alice walks out the door with her CD in hand, Bob comes in.
Bob Wants to Buy a Home
Bob needs to borrow $200,000 to buy a house.
The banker checks Bob's credit and determines that Bob has a decent job and will likely make the payments on the loan. So, the banker gives Bob $200,000 of Alice's money and charges him fees and interest. A lot of fees and interest.
On a $200,000 loan the bank is likely to collect anywhere from 1% to 6% in fees just to make the loan to Bob. On $200,000 that means the bank just made anywhere from $2,000 to $12,000. For the sake of discussion, let's say they collected a 1% loan origination fee and 2% in something they call points. This gives them a cool 3% or $6,000. And they didn't use any of their own money. They used Alice's money.
Bob signed a mortgage note for the $200,000 loan and promised to pay it back over 30 years along with 4% interest. If Bob fails to make the payments, the mortgage Bob signed gives the bank permission to kick him out of the house and sell it to someone else to get back the $200,000 they loaned. This is called foreclosure.
Each month Bob pays the bank $954.83. At the end of five years, he will have paid the bank at total of $57,289.80. Of that, more than $38,000 is interest and he will still owe $180,895 on the loan.
The Banker Made Alice's Money Make Money for Him
If Alice comes in at the end of five years and takes her money out of the bank, they will pay her about $20,000 so, she takes her $220,000 and goes on her way. Never realizing that the bank used her money and she missed out on a bonanza.
When Alice takes out her money, the bank has already pocketed $38,000 in interest and $6,000 in closing costs, for a total of $44,000. After they give Alice $20,000 the banker takes home $24,000. If Bob isn't paying off his loan yet, the banker will just put someone else's money into Bob's loan and do this again for another five years.
The Banker just legally robbed Alice.
The Banker and Alice have a Win-Lose Deal
What if Alice and Bob got together instead of going to the bank?
Even if Alice gave Bob the exact same deal he got from bank, he is no worse off and Alice now has $44,000 in hand. In fact, Alice has been getting a steady cash flow of $954.83 every month from Bob, and he still owes her either 25 more years of that, or he can give her a lump sum of $180,895 and their deal is done. Alice will have turned her $200,000 into $244,000. That is a 22% return or 4.4% per year. More than double what the bank was giving her.
Alice and Bob just legally robbed the bank.
Alice and Bob have a Win-Win Deal
Alice gave Bob a mortgage and if Bob failed to pay she could do the same thing the bank does. Take his house away and sell it to get her money back. She has the same financial security the banks enjoy. She has the law on her side. That is a win-win for Bob and Alice.
Alice just legally robbed the bank, instead of letting the bank rob her.
What if Bob's credit wasn't great? He would have to pay more in fees and a higher interest rate, if he could get a loan at all. If all it cost him was that full 6% of potential closing costs, he is out $6,000 right up front. If his interest rate is higher it will cost him tens of thousands of dollars.
If Alice looks at Bob's credit and still gives him a loan at 4% and only charges him 3% in closing costs, she has already saved Bob $3,000. Bob just got to rob the bank. The $3,000 in extra closing costs he didn't pay is almost as much as the average bank robber makes, and Bob won't have the FBI looking to lock him up over that $3,000.
Alice and Bob have a Win-Win deal.
This whole concept is known as private lending and it existed long before banks were around and is a multi-billion dollar business just here in the United States of America.
If you have as little as $10,000 to lend, I can teach you how to rob the bank legally as a private lender.
But that isn't all.
Just like that late night Ginzu knife ad, there is still more to this story.
Suppose Alice didn't have that nice insurance payout. All she has is that big $250,000 home she used to live in with her husband. Now, it is too big for her to maintain and she wants to downsize. She can still rob the bank.
She can sell her home to Bob for $250,000 and Alice can kick the bank out of the deal.
Bob pays her $50,000 cash as a down payment, along with $3,000 in closing costs and Bob promises to pay Alice just like he would have the bank: $954.83 per month for the next 30 years.
Alice gets a steady cash flow every month, plus $53,000 up front. Bob gets the home of his dreams. That is a win-win.
If Bob doesn't pay, Alice can foreclose, take back the house, and sell it again, without giving Bob back any money he has paid.
Alice and Bob just legally robbed the bank.
Alice and Bob Have a Win-Win Deal
This sort of banking is called seller financing. It too has been around longer than banks have existed. The transaction I described is just one of dozens of ways Alice and Bob could have arranged seller financing to create a win-win solution.
Seller financing and private lending are simple ways to rob the bank legally without doing anything dishonest or unethical.
If you are interested in getting started with private lending or seller finance, let me know. I can help you by either guiding you through it, or doing it for you, all for less than 1% of the value of your deal. Contact TSheppard@ADBProperties.com for more information.
If you want to learn more about seller finance, either as a seller or a buyer, here are a couple of very inexpensive books that will teach you what you need to know.
