Can I be a lender with 20k?

Question

If I am interested in REI, but don't actually trust myself to do a flip yet, and only have 20k to invest, can I lend this to someone else who is doing the flipping and get a return? I know that isn't much, but do investors ever pool investments from multiple lenders who only want to invest a certain amount, similar to if I were to put money into a money market or HYS account? In other words, can I use flippers as investment accounts to build wealth that I don't already have? Or are private lenders always people who have huge wads of cash? And If I can, what could I offer as leverage to entice a flipper to borrow such a small amount of money?

Nicholas L. · Answer

@Rachel Zluhan

NO.  100% no.  this makes zero sense.  no experienced RE investor should want 20K from a random person.  anyone who would take it is not someone you should be lending to.

Aaron Zimmerman · Answer

I would echo the other house hacker comments. That $20k will take a long time to compound vs house hacking, you can dramatically  impact your financial position.

Amit Patel · Answer

Hi Rachel! Where are you located?

Yes, you can lend your $20k to experienced flippers as private money and earn a solid return (typically 9–14% interest-only with points). It’s a real way for newer investors to get into REI without flipping yourself, and small amounts like $20k do get used — sometimes as part of a larger loan or for gap funding.

But you need to be VERY careful. This is not like putting money in a money-market or high-yield savings account. You’re taking on real risk: if the flip goes wrong, repairs run over, the market dips, or the borrower defaults, you could lose some or all of your $20k. Private lending is not passive or guaranteed.

Only do this with proven, local flippers who have a strong track record (check references, past deals, and their own skin in the game). Get everything reviewed by a real estate attorney — proper promissory note, mortgage/deed of trust, and clear lien position.

If you want to move forward safely, I’m happy to share what to look for or how to structure it. Just message me. FYI I am in Chicago-IL.

G. Brian Davis · Answer

Alot of investors start by passively investing in other people’s deals before doing projects themselves. You do not need huge amounts of cash anymore.

Our group has done flipping projects, where investors participate with around $5,000 at a time and spread money across multiple deals instead of risking everything on one project. It’s a good way to learn deal analysis and risk management while staying hands-off operationally. You’d be welcome to sit in on one of our deal discussion calls sometime if you want to hear how investors evaluate these deals.

Travis Timmons · Answer

Agree with @Nicholas L. - that's a really bad idea. If you want to invest in lending or debt funds, maybe, but anyone who would take your $20k probably has no other options. It's like the old Yogi Berra quote - "I would never want to be a part of a club that would have me as a member." You don't want to loan to someone who wants $20k from a stranger.

There is also a strong likelihood and risk that both you and the investor you loan money to run out of cash. If, for example, it is on a flip that goes only a little sideways, there is no more money to finish the project and you just set that $20k on fire.

The best use of $20k is a house hack or just tossing it in index funds and forgetting it is there.

Erik Estrada · Answer

You can probably help in smaller markets or with closing costs. But it might not even be worth the risk unless you are recorded as a lien holder on title.

Caleb Brown · Answer

What about doing a house hack?

Michelle Pepe · Answer

You sure can! You never know what people need the money for - land, covering costs on the bigger loan while they flip/build, etc. Sometimes $20-30k can fund the flip itself for people who use all their capital buying the property!

Can I be a lender with 20k?

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