Looking to start private lending!

[Jobby John]

Hey all! My wife and I have capital that we were planning to invest into expanding our current business portfolio but plans have shifted and we want to put it into private lending. I've joined a Facebook group for private lending but there are tons of messages on there and i'm not sure what's legit or not. Any advice on where to get started or how to get connected with folks looking for capital?

Appreciate any help!

[Jeff S.]

This is a pretty popular question, so you might do a search here, @Jobby John. Here’s a recent response: https://www.biggerpockets.com/forums/517/topics/1265597-looking-to-become-a-private-money-lender

I’m frequently asked this question in person, and it’s almost always from those who don’t have enough money to make a first-position loan, especially in Southern California. I caution everyone to avoid 2nd position loans since they are easily wiped out in foreclosure, and to especially avoid them in Southern California due to AB130 which, until resolved, makes many 2nds essentially unenforceable. In addition, since this is a relationship-based business, I also recommend only lending locally to those you’ve personally met and gotten to know against homes you've physically walked through. That is our process.

Home prices in the Inland Empire are relatively inexpensive, so you might be in a good spot, Jobby, but it depends on the amount of cash you have to lend. You didn’t say. If it’s less than say $250k, I recommend participating in a few fractional loans. Many CA licensed real estate brokers originate these and will do all the vetting and loan servicing for you. Unless you know someone specifically, one place to find CA brokers who originate fractionalized loans is through the California Mortgage Association. Full disclosure, we are members, but are licensed CA finance lenders and not licensed brokers, so we cannot fractionalize our loans.

Do a search on the Member Directory using the word “Fractionalize” and some members who make these types of loans will appear. There are more, but the search bar is not perfect.

Last, now that you have posted publicly that you have money to lend and no experience, everyone and their brother will be soliciting you for a loan. Until you get your feet wet, I suggest you ignore these requests.