How to verify a private lender to buy NPN

Question

Hello BP,

I was contacted by few people on Linkedin offering me private money lending to buy Non Performing Notes, for some reason they sounded like scammers, one of the things turned me off is they email me from their gmail account, they ask for an origination fee and in other times insurance fee to be sent over to them, but it can't be deducted from the loan amount, or added on top of the loan. Is there any tips to use in process of vetting private/hard money lenders.

Thanks in advance

Cody Cox · Answer

I use Joint Venture investors that are willing to fund the transaction for a split of the return rather than lend me money. I would not take on a debt partner for note investing. I prefer and equity partner.

Mike Hartzog · Answer

I agree with Brent Coombs & Mr. Christopher. :-).   It's a tired old scam that apparently still works.  "We will lend you money if you will only pay an up front fee."  Yeah right.  The fact that they contacted you is also a major warning sign.  My advice is to cut off all communication with them and move on.

Brent Coombs · Answer

Very pleased that you have seen through the "can't be deducted from the loan amount" origination fee SCAM! Find a Lender who WILL front you the money before taking out ANY fees. (If their argument is: "if you don't pay up front, how can they know that YOU are not a scammer?" then I reckon they're not worth your further time or your repayments-with-interest).

I get that Lenders DO want an "origination fee". BUT, if dealing with any unproven entity, I for one recommend holding onto that fee UNTIL getting the loan amount in full!

And don't fall for the "here it is in our Escrow Account" scam, either. Take care out there...

James Masotti · Answer

Be wary of anyone that you don't know offering you money. If you have a documented track record for success, which your BP profile indicates you do, then you shouldn't have much trouble attracting reasonable private lenders. At the bare minimum make sure you get them on the phone and find out why they want to lend and ask for references of other people they've lent to. They should be asking more about your background as well and for details of your past projects if they're really serious about lending to you.

Christopher Winkler · Answer

I had a difficult time finding anyone to loan money to buy NPNs as we can't put a lien on the property to secure their money, we are buying a lien. Once we start an equity fund, that is different, though i spent over a year looking for lenders and came up short... One thing you can do is right click their picture in Google Chrome and search Google. If they are a scammer, their picture will be on different websites. Also the ones that call me Mr. Christopher are typically Nigerian scammers... 2 good ways to weed out the chaff...

James Masotti · Answer

This does seem to be more the norm with note investing as opposed to actually renovating hard assets.

Christopher Winkler · Answer

LOL!!!

Haitham Elbedawy · Answer

I'm glad that I'm not the only one here thinks of these people as scammers. thanks for sharing yall opinions

Kelly Byrd · Answer

Sorry to take this more off topic, but the story @Brent Coombs told is now becoming more common on various niche hobby forums on the Internet. Scammers will do their homework and either offer to sell or offer to buy some hobby related equipment at a price just a bit too good to be true. They'll have the basic terminology down for the gear but things like "proving escrow" or shipping to odd places not where they are from are common. Other common hints are a brand new profile with a single post being the offer to buy or sell.

Brent Coombs · Answer

Fortunately, not me. But I read a lot, so have learned to be wary, and am appreciative of those who have gone before to warn people to not to be caught like THEY were (or were close to being).

Correction: Years ago, I was selling an expensive Sax for someone through ebay, and was approached by a "buyer" who said they would pay higher than my my list price if I would cancel the ad. And yes, they attempted to prove that the money was waiting for me in escrow, because how could they trust that they would receive it if I took their money before sending it? Here was the kicker: even though the ebay address of that "buyer" was somewhere like the UK, they had an excuse as to why they wanted it sent to (of all places) - Nigeria!

[I did report that scam to ebay, and to that ebay Seller whose account had likely been hacked]...

How to verify a private lender to buy NPN

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