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Posted over 9 years ago

Insane Profit Bridge Loans... 40% Return!

Can you imagine earning a 40% return safely, and the borrower being happy to pay it?  It might sound crazy, but this is exactly what happened to me on a recent bridge loan. First,  I learned a long time ago that people buy homes and invest based on emotion and greed.  They are either emotionally involved and love everything about the home, or they see an opportunity with so much income potential, they are willing to overlook obvious negatives.  

I was getting ready to do an easy off-market flip. A Realtor friend of mine had a seller who just wanted out of their rental property that needed work, and they were willing to sell cheap for a quick cash close.  The numbers and comps looked great and I would make a quick $30,000.  Then the phone rang. The voice on the other end was a good friend of mine who said, "I need $300,000 right away, or I will lose the deal of the century!"  We talked a little about the deal and I told them that while I really wanted to help, most of my money was currently loaned out, and my last $300,000 was being used to purchase an easy flip.

They literally begged me to loan them the money, and asked me if I would consider it for a really high rate of return. I said, "Yes, for $10,000 per month, I will loan you $300,000 on a 90-day bridge loan, but you need to find another investor to pay me off by that time."  They jumped at my offer and we closed a couple of days later.  I held the loan for 3 months and made $30,000, or 10%, which is a 40% annual return!  

I love teaching and training Realtors and industry professionals about private money! Real estate professionals, like Realtors and lenders, have a hard time grasping the world of yield and private money, because they deal with clients all day who complain about a 4% rate and 1 point. They can't fathom someone ONLY caring about making the deal work.  This is what makes private money so exciting and what keeps me going and passionate about the next opportunity.  


Comments (2)

  1. @Jeff Rabinowitz 

    Great points!  The person who borrowed the money from me stands to make several hundred thousand in profit.  They purchased a 1.3 acre lot that is can be split and already has 2 homes on it.  They do a lot of this type of rehab and new construction and this is a great opportunity for them.  They were glad to close the deal and pay me 40%!  


  2. Too many potential borrowers focus on the high interest rate instead of the profit they could earn on their deal.  You don't mention it but I suspect your friend earned considerably more than the $30K he paid you.   

    I have been involved in situations where, not only, would the borrower lose a great deal if they couldn't close in 2 days but they would also lose a significant earnest money deposit.  The deals I am thinking of were considerably smaller than yours (the cost to the borrowers was <5K) but it was a high percentage rate that the borrowers were happy to pay.  Yes, they made much more than $5k and would have lost ~$5K had they not closed.