Lender · Dayton, OH · Member since 2008 · 1k+ posts · 705 votes
As a private lender, I'm suddenly getting a lot of requests for three things that concern me.
1. Lending the Downpayment (behind another hard money lender) 2. Lending all the borrowers closing costs 3. Lending funds for putting up earnest money
Personally, I think putting up money for those items as a lender is EXTREMELY HIGH RISK. Out of 500+ loans I've done, only a very few have had problems. Every one that had a problem had one common feature, the borrower had little to none of their own money in the deal. (Early ones, I didn't know better. The couple recent ones, the borrowers lied about it, and I found out later. Those borrowers made the forever banned list. Not because the deal went bad, but because they lied about the source of funds, and ghosted everyone went the rehab got hard)
Is there someone out there teaching this as a strategy to borrowers and potential lenders? Are people really making these loans? AND getting paid back? Am I missing something here?
@Chris Mason, That's a good thought. I always ask those questions. So far the answers are pretty consistent, they heard to do it from some podcast/youtube/facebook source. A couple "guru" names like P.M. have come up a couple times, but nothing consistently. I suspect it may be a couple people "teaching" it, and then it get's endlessly and breathlessly spread in the various forums.
There hasn't been anything tying back to me specifically other than I'm easily being found as a private/hard money lender.
Several local wholesalers and a couple local banks do call me out as a resource, however, we id those calls pretty easily. They're more typical inquiries anyway.
On a side note J Norton is my personal sh** list. He took a blog post I wrote, then read it almost verbatim and recorded it as a video and posted it as his own content.
Wow, that's how people get their content, unfortunately. But thank you for your response; perspective is everything now I see why it matters.
As a private lender, I'm suddenly getting a lot of requests for three things that concern me.
1. Lending the Downpayment (behind another hard money lender) 2. Lending all the borrowers closing costs 3. Lending funds for putting up earnest money
Personally, I think putting up money for those items as a lender is EXTREMELY HIGH RISK. Out of 500+ loans I've done, only a very few have had problems. Every one that had a problem had one common feature, the borrower had little to none of their own money in the deal. (Early ones, I didn't know better. The couple recent ones, the borrowers lied about it, and I found out later. Those borrowers made the forever banned list. Not because the deal went bad, but because they lied about the source of funds, and ghosted everyone went the rehab got hard)
Is there someone out there teaching this as a strategy to borrowers and potential lenders? Are people really making these loans? AND getting paid back? Am I missing something here?
Darrin Carey
If I'm being honest here, I've seen these people who don't put any money down and it does make sense on how the do it.
they find a deal usually something that has equity (building needing work) or under managed.
they run the numbers to see if the deal makes sense with the loan(s). Refi and pay out the loans, buy out any partners.
usually the jv partners or other people's money comes from their network.
I've done 2 deals this way so it is possible, but the numbers have to make sense and communication is a must and expectations should be clear.