Wrote Another Mortgage-12% Plus 4 Points-NO TENANT HEADACHES

[John Thedford]

For those contemplating alternate investments, I highly recommend considering hard money lending. I started in 2012 with little knowledge or information. At that time we didn't have Dodd-Frank to be concerned with. Four years later, the laws have changed, but the returns can still be very appealing and you don't have to deal with broken toilets or evictions. I wrote another loan this week. Investors purchased a package of lots in Cape Coral. The purchase price was in the 170K range. I provided 110K for a 1st lien position. That is roughly a 65% LTV. Terms are 12%, 4 points origination fee, one year, interest only. I also have buy and hold SFR, and the two investments have their advantages and disadvantages. If you have 40, 50, 100K--whatever and are wondering where to start investing, you should consider private lending. Whatever your seed capitol is, bank the interest payments in a segregated account. When the loan matures and you are paid off, you will have the interest earned on the note plus the original capitol to invest in your next one. If the notes pay off early, your ROI goes substantially higher. You will have to find new borrowers but they can be found. I generally use a few simple guidelines:
1. loans to entities only (S corp, LLC, etc)
2. 1st lien position only
3. 65% LTV
4. I prefer 1 year terms but will go up to 2 years (with higher points)

Bottom line: this can be a lucrative investment. I ALWAYS use an attorney to draft the paperwork and run all transactions through a title company. Borrowers pay all closing costs. There may be some that say I over-simplify the process! As long as your can get a reasonable determination of property value, keep your loan at a safe LTV, and only take 1st position there is little risk. These returns are contractually guaranteed. NEVER let the borrowers get delinquent. Please chime in with your ideas or experience with private lending. It has been good to me and I believe it can be good to you as well. 16K profit expected with little work...my kind of "job" and this is just one of several loans I have originated this year.