He Bought 50 Rentals, Then Stopped to Do This (Makes $5,000/Month Per Deal)

Dave:
Investor Devon Kanart started buying rentals back in 2014 and quickly scaled to 50 properties. The formula was working, but then something changed. As home prices and interest rates rose, his cash flow started shrinking. He needed a business model that worked in today’s market. So he pivoted and ultimately landed on a game changing new strategy, lending out money to other investors. They do all the legwork of pulling permits, managing rehabs, and finding tenants. He just sits back and collects passive 12 to 14% cash on cash returns backed by the properties as he recycles his capital over and over. And I know what you’re probably thinking. I don’t have a giant pile of cash to start lending out. Well, there are ways you can get started lending and follow Devon’s path with as little as $25,000. If you want real cash flow, as much as $5,000 per month per deal, Devon’s giving you his exact playbook right now.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Today we’re talking private lending with Devon Kinnard, so let’s jump right in. Devon, welcome back to the BiggerPockets Podcast.

Devon:
Thank you. It’s been a while. Glad to be on.

Dave:
It has been. We got a lot to talk about, but for people who haven’t heard from you before, maybe just fill us in a little bit about your background.

Devon:
Yeah. So my name’s Devon Kenard. I was a nine-year NFL veteran. I played for the Giants, Lions, and Cardinals. I started investing in real estate in 2014. I built a portfolio of properties up to 50 properties. I also started investing in syndications and funds, and I invested in 50 different syndications and funds. So I was kind of split fifty fifty between owning real estate on my own and investing as a LP in syndications and funds. And then towards the end of my career, I started pivoting and doing some private lending where I was lending to investors and developers and people who are doing projects. And that’s kind of my focus today.

Dave:
Well, we’re going to focus most of the episode on lending because I think this is a strategy for real estate investors that most people overlook.

Devon:
Yes.

Dave:
But I want to sort of talk first just about your journey and how you arrived, because it sounds like you’ve done everything. Yeah. How did you get to lending? So you started first in long-term rentals and you got 50 properties.

Devon:
Yeah.

Dave:
Was that all over the country or where were you building?

Devon:
So I started out in the Midwest. My first property ever was in Beech Grove, Indiana. I bought a large portfolio in Kansas City, Cleveland, Ohio, and a little bit in Tennessee. And I was just scaling, buying pretty much every off season with buying a bunch of properties, just as many as I can get my hands on that I felt were a good deal. I built my core four team, which I know kind of bigger pocket staples

Dave:
From that

Devon:
Day. So I built that team, that’s how I was able to do it in those different markets. And I kind of started doing the syndications because I was getting to a point where the deals started to not look as good of deals. And I felt like things weren’t cash flowing the same way that they were when I first started buying in 2014. So I was like, if the cash flow’s not that much more, I’ll invest passively in the syndication-

Dave:
And do less. …

Devon:
And

Dave:
Get an

Devon:
8% pref. I don’t got to worry about as much. I don’t have to deal with as much. So I started that and I was investing in all kind of different syndications. I was trying to diversify that way with multifamily, single family funds, debt fund. I was just spreading myself out diversification wise. And that was kind of how I built my foundation.

Dave:
When you were doing the individual active stuff with single family?

Devon:
Yes.

Dave:
Just for comparison’s sake, what were you getting cash on cash return in 2014?

Devon:
So I was killing the 1% rules.
So I was buying somewhere between 80 and to $100,000 in blue collar, I would say B minus to B neighborhoods. So not anything great, but good working class neighborhoods, but I was paying $100,000 or less and- It’s crazy. Yeah. And getting $1,200 or more in rent. So I was defeating the 1% rule and I had the cash. So a lot of them I was buying cash. I would refinance later, but I was locking them up cash and I was buying Turnkey, which is another huge event. Oh, really? Oh, okay. I wasn’t trying to buy stuff I needed to renovate because I was worried about Sac and Aaron Rogers. So with my focus being on ball, I was buying turnkey properties. So to think you could buy a turnkey property for $100,000 in cars- 1% rule. 1,200.

Dave:
Insane. We miss those days. We sure miss those days. But as we’re going to talk about in this episode, there are ways to get great cash flow. So then syndications, you sort of evolved, like you said, 8% preferred equity return. That’s just people who invest passively into these bigger syndications, like buying a hundred unit multifamily. You, Devon, would put in money passively and someone else would run the deal. So what was your experience like there?

Devon:
So I loved that, but you have no control or say. So when you’re buying on your own, I get to choose to refinance, to sell, you get to manipulate the deal how you see

Dave:
Fit.

Devon:
And when you start to invest as an LP, you do your work upfront, you underwrite the operator, the deal, and then you pretty much got to sit back and let them do what they do. And to lose that flexibility, I started to not like that as much, especially when deals you thought were going to good, don’t go as good. You thought they were going to pay your pref, but then they say they’re suspending the preferential returns. So you’re expecting 8%, then they suspend the payments.

Dave:
Different

Devon:
Things start to happen and where it’s like, I have no control and I’m just kind

Dave:
Of … It is a hard part of it. It’s

Devon:
Like you’re on a rollercoaster and you’re just like, let’s see what happens.

Dave:
It really is. It’s like set it, forget it. But it’s not even like … You have no control on a stock, but you can always sell a stock. But with the syndication, it’s not even like that.

Devon:
No, you can’t really get out.

Dave:
Yeah, you can’t.

Devon:
Which isn’t to shy anyone away from

Dave:
Investing

Devon:
In them because I still do and I still

Dave:
Will,

Devon:
But it’s definitely a feature that you have to be aware of.

Dave:
Yeah. I think I invest in syndications too. It’s been maybe the majority of the investments I’ve made over the last couple of years, but it’s because I have an active portfolio that I can do it. It’s like a balance. You can’t do it with money you need. So then at what point did you discover lending?

Devon:
Yeah, so I kind of started to look at it and as the years went on and now we’re getting to 2022, 2023, I didn’t see things cash flowing as well anymore. So I cared about cashflow. My career’s coming to an end. I want to get into the position where I got enough income coming in. So with cashflow as a priority, buying single family didn’t make as much sense. I think they’re a great investment for appreciation and for tax benefits, but for cashflow, not so much. So then I looked at syndications and I’m like, there’s an 8% pref, but you got to wait three to five to seven years depending on the deal and they can stop the payments at any point in time if things aren’t going right. So I like them, but I’m like, that’s not also not as great as I anticipated. And I allocated a lot of money there and I’m like, all right, so what else?
And I started to pivot and look, and my career was coming to an end and I’m like, you know what? I’m going to lend to a couple of people. So a few borrowers asked me for some capital if I would consider lending to them. First deal I did. I had no idea what I was doing,
But I kind of learned and I’m like, “You need to tell me you’re buying this property, you need capital to buy the property and renovate the property, and you’ll pay me a set interest rate every month. And then when you sell the property, you’ll pay me all my capital back and then I can go do it again.” I like that. So I tried it. I didn’t fully know what I was doing, did it a few loans, worked out, and then I just started to build it up and I created a business based on it.

Dave:
Awesome. Well, we’re going to talk more about the business and what you’re doing. And we’re also going to talk about how more investors can get into lending than they think. I think this is something, you got 50 grand, even 25 grand, you can probably get into lending. There’s all sorts of ways to do it, but let’s just start with the basics. People call it lending, right? What does that mean? Give us the basis.

Devon:
So essentially when you’re lending, there are people who have deals and they’re looking for capital and they can get capital from a bank, from a hard money lender, or they can go directly to somebody who has a self-directed IRA, who has $100,000 just that they want to take out of the stock market and they’re like, “I don’t know what else I want to do with it though.” And they can come to that individual or that individual can go to the person that is investing and say, “I have this money. Can I lend it to you or on the reverse? Can you lend it to me? You have $100,000 or you have $50,000. Well, you lend it to me on this project, your collateral is the property, so if I don’t pay you, you can take over this property.”

Dave:
Exactly.

Devon:
“And I’ll pay you a set interest

Dave:
Rate.”

Devon:
And people think that it’s more complicated than it is, and it’s really just a document. So it’s a loan package, so you have to go through the process of getting a loan package. And so that’s some upfront work there. But beyond that, it’s really just you’re lending them money and the collateral is the asset and they have to pay you back and they have to abide by the terms of the loan agreement. And it’s a great vehicle for cashflow. So I think not only is it a great investment opportunity, I think it should be a part of more people’s portfolio than people consider.

Dave:
I completely agree. I started doing it four or five years ago, and I’ve just continued to shift more and more of my capital into private lending because as Devon said, I just want to make sure everyone understands this. These are loans that are backed by hard assets. This is a thing where, just for an example, Devon gives out a loan, the borrower puts 20% down. If at any point that borrower does not make payments, Devon can take over that property basically for 20% off because he’s already gotten 20% down. So he’s basically paying 80% for this property, then you probably have to finish the project or sell it to another flipper or whatever, but it really limits your downside

Devon:
Risk, right? Yeah, it completely limits the risk because if you’re doing it right, you’re only lending at 80% or sometimes for me, I lend 70% of what the sale price should be. So 70% of the ARV. So as long as I can get it to the finish line, I have 30% of equity in the deal, which is a ton of room to where you can sell for a discount if you need to sell it for. It gives you a lot of leeway to make sure that your capital is protected and that you can make additional money

Dave:
On it. 100%. I

Devon:
Think it’s a great vehicle for that, that a lot of more people who just have 25,000, 50,000, $100,000, you got to take some time to learn how to do it. But once you learn it, it’s one of those things you learn once and you can kind of repeat and do it over and over again.

Dave:
Yeah. And it’s not as unique every property. Once you learn how to underwrite them, you could just kind of rinse and repeat it. You still have to get deal flow and do your due diligence and stuff. I would

Devon:
Say the deal flow is the hardest part because you got to find operators who need the money. But if you can build the relationships, go to some real estate meetups, meet, find out who’s doing good projects, who could use some extra capital. And then you find a couple people and you lend them the money over and over again and you build a good relationship and they’re incentivized to do right by you because they know you’ll keep doing business with them. A

Dave:
Hundred percent. I

Devon:
Feel like it becomes a great tug and pull relationship. So for those who need cashflow, at least for a portion of their investment portfolio, it is a great vehicle. So I think a good supplement is like, I buy assets for appreciation for the tax benefits. So I can 1031 into other assets down the line and play that whole game, but they’re not cash flowing

Dave:
Great.

Devon:
So I’m also putting some money in lending that is giving me a double digit return on my money that the borrower is doing all the work. They’re showing me why the deal makes sense. All I have to do is review it and make sure they sign the documents.

Dave:
That’s absolutely right. I think about it exactly the same way. And I want to talk more about how people can get into this because you can get into it, even if you think you can’t right now. There’s a lot of ways to do this, but I want to talk about that cashflow and how much you’re actually earning because you said double digit cash flow, which it’s very, very difficult to find in rental properties right now. So we’re going to hear about what Devon is actually making and how you two can get into lending right after this quick break. Stay with us. Welcome back to The BiggerPockets Podcast. We’re here with Devon Kinnard talking about how he’s really shifted a lot of his portfolio and investing style more and more into private lending. Talked about cashflow. I agree one of the best ways, maybe the best way to make cashflow in real estate right now.
Do you mind sharing with us what the returns are for you?

Devon:
Yeah, so for me, I charge 12% and one point, but I also charge a 995 processing fee and a $500 doc prep fee. So essentially I’m making $1,500 from processing and doc prep. And let’s say it’s a $500,000 loan that’s $5,000 plus 1,500. So $6,500 when the loan is closed, plus I’m charging 1% interest, so they’re paying on a $500,000 loan, $5,000 a month. Wow.

Dave:
Unbelievable.

Devon:
And then where it gets really interesting is I have no prepayment penalty because a lot of fixed and flippers, they want to get in and out of

Dave:
Properties.

Devon:
We’re both really good friends with James Danner,

Dave:
For

Devon:
Instance. He doesn’t want to take a full year on a project. If he can get in and out in four to six months, he’s getting in and out. So if I find someone like him, I can do that same loan twice. So I do $500,000 and I charge 1% origination fee and $1,500 in extra fees, and then I do it again a second time.

Dave:
So

Devon:
Now in a year, I made 12% interest plus

Dave:
Two

Devon:
Points because I did the loan twice and another $3,000 in fees.

Dave:
Yeah. So you turn it twice, basically. Turn it twice. Twice twice. So you get double the fees over the course of a year.

Devon:
So essentially on $500,000 in that example, which you can mitigate that to $100,005. But on that example, you can really annualize 15, 16% on your return

Dave:
On your money. Unbelievable.

Devon:
So how many investment vehicles that are collateralized by real estate can give you that kind of return?

Dave:
No, I mean, none. Find me another property. Right now, without doing heavy value add, you’re not finding that kind of cashflow anywhere. And even doing heavy value add, it’s pretty hard to find that. I do want to tell everyone though, the one caveat to this is unlike cashflow you get from a rental property, it is subject to ordinary income. Now, if you do it from a self-directed IRA, that’s kind of a bonus way to do it where you can get money and put it back into your 401k. Or if you have real estate professional status, there’s ways to do that. But you should know that unlike there’s no depreciation offsetting that income, so you do pay tax on

Devon:
It. And I think that’s why it’s a great strategy to have in conjunction with buying real estate

Dave:
Because

Devon:
If you’re buying assets and they’re not cash flowing that well, but they have great tax benefits and the appreciation is wonderful, offset it with some private lending, that cashflow’s great, but now you got tax penalties. And now since you own, you can run cost segregation, you can do things to wipe

Dave:
Out 100% that earned

Devon:
Income and really make them work in tandem with each other.

Dave:
Isn’t this the fun part of real estate investing? I love this part where it’s like the portfolio strategy where you’re sort of like, oh, this deal will check these boxes for my portfolio, the tax benefits, the appreciation, the amortization. Not every deal is going to give you all of that plus cashflow. You turn to private lending, you get cashflow, maybe you don’t get the tax benefits, but when you marry these things altogether, that’s what gives you sort of the full compliment of benefits from that you get from real estate investing.

Devon:
Absolutely.

Dave:
So let’s talk a little bit about different ways people can get into this because you’ve talked about doing direct loans, there are debt funds. What are some of the different ways our audience should think about getting into private lending if they’re interested?

Devon:
Yeah. So first few that come to mind is one, you can learn to do it direct and that’s the one that’s going to be most profitable. So that’s why I’ve created a business around what I’m doing and why on my own dollars I can make 15, 16% annual,
But I’m operating it as an actual business. It’s more an active income for me at that point because I’m operating a full business. But if you go that route, you can use your own money. If you have line of credits, you can raise other investor money, so you can turn it into a legitimate operation and do really well. That’s the first way. If you want to be more passive, you can invest in private debt funds, which essentially does what I do, but they pay you a coupon. So they pay you eight to 10% depending on the fund and all of that. And it’s the same structure, but you just get a smaller piece because you’re investing in the fund. So that’s the second way a lot of people do. And then I guess kind of an in between is a lot of people do it through self-directed IRAs and self-directed even 401ks.
And there’s different ways to where now you can do it and do it tax-free. And now you’re allowing it to grow within your self-directed program. So you can invest in debt funds that way, you can do it direct that way. So I wouldn’t say it’s a separate way to do it, direct versus a fund,
But the self-directed is just a way you can avoid taxes-

Dave:
Yeah, which is awesome

Devon:
And can do it. So if you have that, it’s a good way to leverage.

Dave:
You can’t use it just so everyone knows. It’s just like a 401k or IRA. You still have to wait till you’re, whatever it is, 62 or whatever it is before you pull it out without penalty, but it allows it to compound way faster. So if you can wait, that’s really the way to do it in my experience. There’s also one other way to do it. I’ve done, I don’t do a lot of it, but you could actually buy individual notes that other people have originated. So if Devon, just as an example, he made a loan to a Flipper and he is like, “I don’t want this one anymore. Dave, do you want to buy it? ” I could buy it from him. Usually you get somewhere between what Devon earns on his private money at 15%, the eight or 9% of a fund, you can get 11% on some of those loans.

Devon:
And that’s a great example because I have a lot of investors who want to do that and some people will call it an assignment. So I have this loan and they understand I’m running a full business. They’re like, “Can I buy all or a portion of your loan? You just did

Dave:
This

Devon:
Million dollar loan. Can I buy $100,000 of it and get payments on that? ” And we work it out. We do what they call an assignment agreement and I pay them their portion of the interest on their $100,000. So there’s a lot of people who really like doing it that way because it’s not going full debt funds because a debt fund, you’re kind of tied to the business overall and the fund overall. It’s more direct like, okay, I’m connected to that one deal when that deal’s paid off, I get my capital back and there’s some investors who really like that model instead. And it’s a good way to where you can, if you only have 25, if you only have 50, if you

Dave:
Have

Devon:
100, you can

Dave:
Buy a

Devon:
Portion of somebody else’s loan and get a really good return on it without having to do a lot of the work and with a smaller dollar amount.

Dave:
Some investors say, “I don’t want to invest in a fund because I don’t know the assets that are backing every loan in that fund, but I’ll buy this loan from you, Devon, because I’ve seen that house, I know that operator, I’ve underwritten this deal and I know this is a good one.” And so that’s a really good way to do it as well. Let’s talk a little bit about what does it take? What’s a good deal? Tell me what you look for in a good loan.

Devon:
So there’s a few things. The first thing I’m looking at is what’s the purchase price, what’s the as-is value, and what’s the projected ARV? And ARV is just after repair value. Those are some of the most important metrics. And if you know those numbers, for me, I want to make sure that they always have at least 10% down of what they bought it for, and I want that to be at least 80% of what the as-is value is.

Dave:
Okay. I see. So

Devon:
If a property is worth a million and they’re buying for 800,000, I like that because-

Dave:
You got an equity cushion. They got

Devon:
200K of equity cushion, and then they’re still putting down 100K. So my loan on that would be 700K. So it’s worth a million today. I’m bringing 700, they’re bringing 100. The as is 800. That is a very safe loan. For

Dave:
Sure.

Devon:
And then the ARV is one four, and they plan on putting 200K into it or something like that. I’m just-

Dave:
That’s a good way to do it.

Devon:
So those are some of the numbers. So if I find out what the as is, what the ARV and what the purchase price is, I can back in to what I’m comfortable with. And granted, if it’s a super experienced operator that I’ve done 10 deals with, I can move my numbers in favor to them, give or take, but that’s my baseline.

Dave:
And trust them. That makes so much sense. Yeah. I mean, just so everyone understands, Devon’s talking about lending to a flipper. And so he’s just trying to find a way that if he has to take back that property, in this example, he could go and sell it for a million bucks and he only lent 700,000 on it. Obviously, as large numbers, you’d have a $300,000 cushion there. Same thing goes, if it’s $100,000, 70,000, you’d have a $30,000 cushion that protects you in case the person doesn’t actually wind up paying. Now, you didn’t mention repair budget, renovation budget. Do you think about that at all?

Devon:
Yeah. So let’s just go with that same example. And you guys can crunch the numbers down or up based on that, but it’s a $700,000 loan, and let’s say it’s $100,000 rehab. So they’re going to put $100,000 into it. It’s all cosmetic and it’s worth a million today, but they’re going to sell it for one, two in four or five months. What that looks like is I’m funding 700 today and I’m holding back a hundred for the rehab. So they have to bring a hundred for close plus fee, all the fees that

Dave:
We talked

Devon:
About and all that. So it’s really a little more than a hundred, but let’s just keep it simple. A hundred for close. And now they’re in a position where they have to have the money to complete some of the project. So they do demo and they order cabinets and they start to lay the new floor and then they send me pictures and invoices that the work is done, that they paid for everything, that they paid all their vendors, and I released the fund. So let’s say that first draw is 25,000. We did demo, we bought new flooring, here’s all the receipts, here’s all the pictures, and I give them that so they can move to the next stage of the renovation. Now, I’m able to charge as much as I charge at 12% because I can do it faster than bigger lenders.

Dave:
Interesting. So

Devon:
The bigger lenders who are doing it a hundred million dollars alone, they are going through draw process extremely long. They’re

Dave:
Making- How long? Literally weeks. I think it’s like two weeks that’s costing

Devon:
Them money.

Dave:
For sure. For

Devon:
Me, I’m like, you show me pictures, you show me invoices and I can ensure that they’re

Dave:
Paid.

Devon:
I’m releasing in 24 hours. That’s allowing you to move to the next stage of your rehab, which is allowing you to go to market faster. So people are always asking me, how am I able to charge so much? I mean, not everyone wants to pay that much, but they see the advantage of being able to operate that fast and get through the project and back to market.

Dave:
You can earn bigger returns. You’re talking about 14%, 15% versus eight, 9% with a debt fund, but there’s other parts to this business. And I want to pick your brain about how passive is this really, how much work you have to do. We got to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets Podcast. Devon and I are here talking about how private lending can be a cashflow machine for your real estate investing portfolio. Before the break, Devon was talking about his underwriting process and how he protects himself against losing money on particular deals. But I want to talk about operations because you were talking about draws. Yeah. You also have servicing, right? So talk us through the lifetime of a loan. Once you fund the loan for the purchase and acquisition, you talked about doing that drop process. What other work are you doing throughout that project?

Devon:
So you have to monitor it all, but what a lot of people who aren’t in the industry don’t know is because of AI, because of software, there’s now tech that automates all of this for you. So for instance, on my website, borrowers submit a loan application, it comes in, it processes it. I have notifications. I get a text message and email that a new loan came in. It automatically populates the ARV and the as is based on what the borrower’s numbers are. My wife who runs internal valuations gets an email and she confirms the price of the property. So it’s kind of streamlined-

Dave:
Oh, that’s awesome.

Devon:
… with the correct software. So people always ask, how does that work? And even with the rehab draws, they are submitting all-

Dave:
Through this stuff. Yeah. I mean, that’s awesome.

Devon:
Submitting pictures,

Dave:
Submitting pictures. Oh, that’s so

Devon:
Much easier. I’m getting a notification and I go, I look at it, check it, approve, and the money gets sent.

Dave:
Oh, that’s awesome. And then I get a

Devon:
Notification if a payment doesn’t come through. And then people are like, “Oh, is that expensive?” I mean, once you’re scaling, it’s $1,000 a month for this software.

Dave:
And that’s the kind of standard to work totally worth it.

Devon:
When you get to a point where that makes sense. So some people will do it just in Excel and they

Dave:
Do their

Devon:
Own thing. And I know you’re good on Excel.

Dave:
Not that good, not like that.

Devon:
But for me, I’m like, I’ll pay the thousand dollars a month for the

Dave:
Software

Devon:
That automates the entire, from beginning to pay off, it’s automated. So that’s one thing. And then with loan packages, there is a software/attorney company called lightning docs.ai that’s powered by FortraLaw, which is a big hard money lending

Dave:
Law

Devon:
Firm in California. You can get a full loan package in whatever state you’re in and you got to pay $500 upfront to get access and then $500 per loan file. That’s it.

Dave:
Awesome.

Devon:
And it’s a full 300 page loan package like you’re a big lender- That’s

Dave:
Awesome. Yeah, sure.That stuff’s just become commoditized. You don’t have to pay … I think back in the day you’d probably take 10 grand for that law package, right?

Devon:
Contact an attorney and figure it out. And they got to … You can literally get

Dave:
A full

Devon:
Loan package even if you only have $20,000 to lend and have a full loan package.

Dave:
That’s so awesome. It does make it so much more achievable. Yeah. Even if you want to do one deal, you can go out and do that. It makes it … Back in the day, if you were going to do one deal, the loan docs would probably eat up your whole profit, but you do this, it makes a lot of sense. So just give us on an average deal, how much time does it take you underwriting and then the servicing, how passive is it?

Devon:
I would say on any one deal, I probably spend of actual work three hours

Dave:
Matching. I hate you.

Devon:
It’s work that needs to be done, but a lot of it is

Dave:
Kind of- It’s automated. Yeah. That’s so cool. So it’s like,

Devon:
I got to make sure that this happened. I got to check this. So when you compile all the minutes, if I had to guess it’s under three hours per

Dave:
View. Believable. This is why it’s so great. You’re getting 14% cash flow working three hours per deal. You’re obviously investing other time. I don’t want to build … Deal flow is hard. Yes. Making those relationships is hard. It’s something you got to do, but I would imagine it gets easier over time too. I would

Devon:
Say even operating it as a business like I am, it is a lifestyle business.

Dave:
Still.

Devon:
At this point, I have 12 million assets under management that I’m operating and I work less than 25 hours of intentional hours. Amazing.

Dave:
That’s the dream spot. I think 25 hours is perfect for the amount of time we want to work. That’s awesome. And

Devon:
That’s because I want to, deal flow and I want to keep growing, but if I wanted it to be less, it could be.

Dave:
That’s cool.

Devon:
So scale that back if you just want to do a couple of loans. It’s like you’re just going to do loans when you have available capital, you’re talking a couple of hours and you’ve done it. So honestly, I don’t think it’s something that the only thing that everyone needs to do, because I do other things. I own real estate, I’ve invested in syndications, but I think it’s an underrated vehicle that not enough people are tapping into.

Dave:
Yeah, for sure. Yeah. And just want to reiterate for everyone, there are different ways to do this. You can go full business, like what Devon’s doing. This is basically being an active investor in loans. You gave us a number around 14%, probably you need 12 to 14%, let’s say you can earn on that, but you’d have to do the deal flow yourself. You need to do the origination, but as you’ve shown us, that’s not that hard. If you want to do a little bit more passive, you can do in debt funds. You can probably earn eight to 10% pretty because that’s the rate. I invest in a few. Eight to 10% is about where it is, or you can buy individual notes, or you can also just make individual loans to people you know. What Devon’s saying, he’s scaled up this whole business, but if you want to just dabble in this, you can find an investor either who does a rehab project or wants to flip and lend them 50 grand.
That is an absolutely feasible way to get started, right?

Devon:
Many people do that. I know a lot of guys who just, they have a little extra money and they have one or two people that they lend to whenever they have money available and that they’re the only people that they lend to because they built a relationship and they’re comfortable and it’s a great side hustle.

Dave:
Is there a minimum amount you think people need to get into this?

Devon:
Personally, I would draw the line at 50,000 just It’s like it starts to … If you got 25, I guess you could do it. If you

Dave:
Got

Devon:
10, if there’s somebody who wants it that bad, I guess

Dave:
They’ll

Devon:
Take it. But to start for it to be meaningful

Dave:
To

Devon:
You and to the investor who needs the money, I think 50,000 is a good number. So if you can build up to the point where you have $50,000, there’s an investor that would value that and pay a healthy interest rate to you for it.

Dave:
That makes a lot of sense. Yeah. I will say though that there are now funds that you can put in five grand into. And that’s good because Divine makes a good point. If you’re going to try and lend five grand to a flipper, they’re going to have to do that 20 times to raise a hundred grand to flip a house. They’re never going to do that. It doesn’t make any sense. But if you just want to get a taste for this, learn a little bit about it, or 10 grand, you want to make a thousand bucks a year just in cash flow off of that, you can look into debt funds as well. Do your due diligence on all of those things, of course, but you can get in for even less, but it’s a good point. 50 grand makes sense if you’re going to do the direct lending thing.

Devon:
Absolutely.

Dave:
Well, this has been awesome, Devon. Thank you. Any last advice or thoughts here for people who are considering this?

Devon:
I mean, reach out to me. You can reach me at [email protected]. That’s my email. If you have any interest in lending, happy to help the BiggerPockets community. I’m an author for BP. So my book is Real Estate Side Hustle. I talk about all the ways to have a nine to five career while still investing in real estate. So we cover everything we talked about today, investing in single family properties, investing in syndications, and getting into private lending. And I dive into all three in real estate side hustle. So I’m happy to be a resource to anybody out there interested in any of that.

Dave:
Awesome. Well, thanks so much, man. Appreciate you being here. Always a blast, man. And thank you so much for watching this episode of the BiggerPockets Podcast. We’ll see you next time.