Using a heloc to become a lender

[John Paul]

Just got approved for a heloc on my rental property my primary purpose for this was to use it towards real estate deals (fix-flips, str,etc) but someone suggested I use it for lending . No experience in lending never even thought of it but how do you guys feel about that

[Lane Kawaoka]

You're looking at a potential 12-15% return, and maybe an extra point or two if it's a first or second lien. It's all about how long you're willing to let your cash play the field—could be half a year, could stretch to a few years.

But you've gotta watch out for the risks, right? Especially the counterparty meaning if the guy steals your money - that's why I would be careful to lend to anyone with a net worth under 1-2M. 

You'll be paying the bank around 6-8% on the home equity line of credit (HELOC) side, so you've gotta know eyes wide open about the arbitrage.

Some folks reckon it's too risky. That's investing for you—it's not everyone's cup of tea. It's definitely not a game for the faint of heart. Financial independence is not on the cards for some people.