Confessions of a Private Lender Part 1
I Have A Few Confessions To Share.
I am a private lender, have been for nearly 8 years. I am not wealthy. The first deal I
funded was for $50,000. That may seem like a lot of money, but I assure you, if you
follow a real estate investing plan you may soon find yourself in control of considerably
more than that. I don’t care who you are, you probably come into contact with many
people every day who have $50,000 and many of them will be happy to lend to you if
you find an appropriate deal and present it correctly. Really.
Why Do I Lend?
The easy answer is to earn a good return on my money. On that first $50,000 deal I
earned $920, ~1.8%. The original loan plus the interest was paid back in 32 days, an
annualized return of nearly 21%– definitely a good return. This return was earned in my
Self Directed IRA (SDIRA). My SDIRA is a Roth IRA. This means that my return was
not taxable—a considerable advantage. You know people who have IRAs and though
they may not have them structured as Self Directed IRAs, it is very easy to convert an
IRA to a Self Directed IRA. If you help someone learn how to do this they will need to
find vehicles to invest in. They may be open to investing with you.
I am also a real estate investor and lending makes me a much better investor. My real
estate portfolio has contained single family homes, multi-family property and vacant
land. I have done rehabs to sell and rehabs to hold for rental income, purchased REOs
and short sales. I have been involved in a couple new home construction projects. I have
also funded short sales and REO purchases. I hold land contracts on homes that I have
sold to landlords. I like exploring new avenues and different deal structures Some of my
partners (borrowers) are flippers, some buy and hold. The more techniques I learn, the
better able I become at recognizing deals and crafting terms that fit my partner’s needs.
Lending allows me to participate in diverse deals and to refine my skills.
Real estate investing is a rapidly evolving field. Regulations, building codes, lending
guidelines, and housing outlook are all in an almost constant state of flux. It helps to be
in the market to keep up with the changes. With my deals and my partners’ deals I am
always in the market. My partners have introduced me to some novel ways to profit from
opportunities that I may not have seen as clearly or as quickly on my own. My partners
share many details of their business models with me. Most are very good models or I
would not have partnered with them—some are excellent. I have participated in dozens
more deals with my partners than I would have by myself. I gain insight into improving
my business and instead of paying to attend a seminar, I get paid. This is my favorite
way of learning.
I was pleased to be invited to contribute to this redesigned site. This is the first entry in
what I hope will be a long series of posts. Some of my posts may be familiar to some of
you as they were previously posted elsewhere. They have been updated, and/or rewritten
before they appeared here. There will be new posts, but it seems appropriate to retell
some of my stories to introduce myself to new visitors and reintroduce myself to some
old friends. If I touch on a subject that interests you and that you would like me to expand
on, or if you would like to suggest other topics, please leave a comment and let me know.
That may become the theme for a future blog or podcast. If you think I have missed the
mark completely, go ahead and tell me that also. You won’t make me cry and it may turn
into an interesting discussion. Please join the email list, follow on facebook, and add on twitter.