Posted almost 5 years ago

Confessions of a Private Lender.

I am a private lender, have been for nearly 4 years. I am not wealthy. The first deal I funded was for $50,000. That may seem like a lot of money right now but I assure you that if you follow a real estate investing plan you may soon find yourself in control of considerably more than that. I don’t care who you are, you probably come into contact with many people every day who have $50,000 and many of them will be happy to lend to you if you find an appropriate deal and present it correctly. Really.

Why Do I Lend?

The easy answer is to earn a good return on my money. On that first $50,000 deal I earned $920, ~1.8%. The original loan plus the interest was paid back in 32 days, an annualized return of nearly 21%--definitely a good return. This return was earned in my Self Directed IRA (SDIRA). My SDIRA is a Roth IRA. This means that my return was not taxable—a considerable advantage. You know people who have IRAs and though they may not have them structured as Self Directed IRAs it is very easy to convert an IRA to a Self Directed IRA. If you help someone learn how to do this they will need to find vehicles to invest in. They may be open to investing with you.

I am also a real estate investor and lending makes me a much better investor. My real estate portfolio contains single family homes, multi family property and vacant land. I have done rehabs to sell and rehabs to hold for rental income, purchased REOs and short sales. I am currently involved in my first new home construction project. I have funded short sales and REO purchases. Some of my partners (borrowers) are flippers, some buy and hold. Real estate investing is a rapidly evolving field. Regulations, building codes, lending guidelines and housing outlook all are in an almost constant state of flux. It helps to be in the market to keep up with the changes. With my deals and my partners’ deals I am always in the market. My partners have introduced me to some novel ways to profit from opportunities that I may not have seen as clearly or as quickly on my own. My partners share many details of their business models with me. Most are very good models or I would not have partnered with them—some are excellent. I have participated in dozens more deals with my partners than I would have by myself. I gain insight into improving my business and instead of paying to attend a seminar I get paid. This is my favorite way of learning.


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Comments (5)

  1. I do this too, Jeff!

    1. Of course, you do. I am not surprised.

  2. Hello Jeff, I always enjoy reading your writing. You have a great means to learn a a few different markets in the Detroit Metro area, I should be asking you were to invest next instead of clinging so tightly to my area. 

  3. Jeff, very interesting way to keep abreast of market trends...and you get paid to do it!  I always enjoy the read. Thank you.  

    1. I appreciate that.