being a hard money lender

[Jake Langley]

Hello, I have fixed and flipped about 6 properties, done a few mortgage wraps and I have an opportunity through a broker to lend 100k to a borrower to purchase a great rental property at 12% 60 months interest only. I would purchase the rental unit myself if the borrower didn't have it under contract. I have done all my homework and it looks like an easy deal, and I don't have to deal with any problems. I am working with a reputable broker and can't see any negatives in this for me. What is your opinion #1 on things I should be looking out for and #2 am I better off to continue to loan money for other people to fix and flip properties rather than do all the work myself?

[Don Konipol]

@Jake Langley, After completing over 500 private mortgage loans, I can tell you that lending at 12% in the situation you are considering is a no brainer - the VERY BEST private loan to make is one where (a) you are familiar with the subject property (b) you are knowledgeable about the market the subject property is in and (c) you would like to own the property.  Further, 12% in today's low interest rate environment is excellent. 

That being said, the real question is if you can earn MORE money with the $100,000 with a different investment with the given level of risk adjustment and personal time involvement.

As @Patrick Desjardins states above, passive vs active is a major consideration.  Investing in notes is generally a passive investment; flipping and renovating houses is an active BUSINESS; and investing in income producing real estate is usually and active investment.