It's because they prefer to be a passive investor.
The same reason people invest in syndications and notes.
A lot of private money people have “day jobs” and buying properties, improving them, and managing them is a lot of work. Your money can go to work for you by lending it out to someone else for a %. Plus, if that person defaults they get the property as collateral, so it’s a nice deal either way.
Bottom line, not everyone is cut out to do the flipping, and there are many ways to make money. It’s like the gold rush story... more money was made selling the shovels than actually digging for gold.
@George Cavazos When you hold paper, you don't have to deal with "tenants or toilets." Too much work in my opinion, even when you have a property manager and even if your properties are in good neighborhoods. Property managers still need managing and need guidance on bigger issues. I've been much happier since switching over to notes, although that has its own headaches. Personal preference. When I get tired of even that much work, I'll switch to lending out money to eager, go getters who do all the work. I'll be happy to collect a little something that's "mailbox money."
Originally posted by @George Cavazos :
I'm not looking to get into private lending. A big reason is because I don't have that kind of money. I'm just wondering why people get into private lending. It seems like BRRR is where you make good money and get a lot of enjoyment from searching for and improving a home.
So I am wondering, why people here like to do private lending over BRRRing?
Different folks have different skill sets. Here's a good example: My husband was been a defense contractor that specialized in renovating government buildings. He was excellent at job coordination, making sure the jobs came in under budget and on time and managing the bureaucracy that is government contracting; the endless progress meetings, inspections etc... One day we were talking about this very thing, buying some fixer uppers and either flipping them or holding them for cash flow. I said "You're handy, you're in construction, we could do this" and he said "Honey, like I tell the government inspectors that come on the job, if you see me with a hammer in my hand, something has gone horribly wrong." He went on to say he could tell me how to do the job, how long it would take and the materials that were needed, but when it came time to using his tin snips to construct a metal framed wall or core drill through a cement floor, it just wasn't his forte.
Not to make too much of a generalization, but there are different aspects of investing like the construction piece, that don't work for some and work great for others.
One girl's opinion
Updated almost 3 years ago
Sorry for the typo. He was a defense contractor.