I'm brand new to REI. Would someone's first splash in REI as a private money lender be a bad idea? If I could find someone who could use my cash better than I could, what would be a pitfall of pushing this strategy? If I could get 8-12% per month in this market (San Diego) and save I would think its a safer play. Anyone have thoughts or opinions on this?
If your goal is to get 8-12% on your money then this is probably a great idea. All you need is someone you trust with a good deal to loan the money too. Maybe you can watch what they do to learn. Hard money is very expensive so you're in a good place to lend. Usually, folks are borrowing quite a decent chunk of cash from hardmoney lenders, especially in SD. I'm not sure what you've got but it might not be enough to pay for the house and renovations. Alternatively you could lend a smaller amount just for renovations in a second position.
Yes as long as you "lend" "all" of "your" "money" to "ME"
Well, first, you won't get 8-12% per month, you'll get that as an annual rate. As a beginner you don't know how to evaluate a deal. When you lend, you give up control of a deal that you probably don't have a full grasp of in the first place, and your remedies when things go bad are usually found in the court system, which is slow and expensive at best.
You then have a whole other set of laws and rules to learn and comply with, both lending and securities laws. One of those "You don't know what you don't know" situations.
This thread has some information, as well as links to more threads, spend some time reading.
When I started lending, I made tons of mistakes, and we paid dearly for them. The field of private lending is not forgiving.
Start networking, look for others that are doing what you want to do and ask questions like your money depends on it. It's a process and find a good attorney and talk to them about paperwork etc and costs associated to draw up paperwork.
There are loan brokers that specialize in these sort of things and helping private money investors lend their money ... they find the borrowers, do all the underwriting and due dilligence, etc. and you just cut the checks. Of course, as always, you want to "trust but verify" their underwriting, but this can be a great way to get started by having somebody more experienced do some of the heavy lifting (for a fee, of course). The Norris Group is one that comes to mind ... they have been doing this in the SoCal market forever ... once you get your feet wet on a few through these brokers and get some experience under your belt, then you can venture out on your own more. I'd advise against going in on a fractionalized loan or in 2nd position to start out though ... you want to be in 1st position and own the entire note IMO.
San Diego is a great market to be a private lender. Attend the San Diego Creative Investors Association (www.sdcia.com). They have meetings on the 2nd Tuesday of every month. You will be sure to find some great potential partners.
Before the meetings, a lot of the attending meet at "Bully's Sports Bar," which is right down the street. That's where you get to know a lot of the investors in the San Diego area.
You can search other real estate clubs in the area on www.Meetup.com... just search "Real Estate Investors San Diego"
Here is a list of all of the Real Estate meetup groups in San Diego: