What would you do with a $100k unsecured loan?

Question

HI BPers,

I currently have a $100k unsecured loan (10%) available to me and was hoping to use it for my first rehab and sell property.  I have not been able to get any offers accepted for the last few months.  The approval will run out within the next month and I recently had to reapply for the loan because the last one ran out.  The bank won't give an extension on the approval and I really don't want to keep getting credit inquiries on my report if I'm not going to use the money.

I've been leaning towards and toying with the idea of possibly purchasing a buy and hold property (or 2) to add to my two current rental properties.  My worry is that at this interest rate, cash flow could be a problem.  I know I would have to refi and hopefully get cash out, but I'd have to deal with this interest rate for quite some time, right?

What would you seasoned pros do?

Thanks!

Jon Klaus · Answer

It's funny, when you don't have the money you find great deals to invest in, but when you are flush, the great deals run and hide.

Mike H. · Answer

How in the world did you a 100k unsecured loan in this day and age?

10% sounds like a lot but its cheaper than using hard money.

Any thought to using it as hard money to lend to other investors. I'm not in florida so I'm not suggesting it for myself. But you might want to make that money work for you.4 points and 14% interest rate on a hard money loan?  If you could get that turned over every 6 months, that would effectively be like making 22%. Subtract the 10% you'd have to pay and you'd be making 12% on the bank's money. :-)Heck even if the investor turned it over every 12 months, that would still be an effective rate of 18% so you'd make 8% in profit. If you could lend, say 80k, you would make $6400 for the year or almost $500 a month.Not sure thats what I would do. But just thought I'd throw that out there. :-)

Mike H. · Answer

Sorry. I have no experience lending money. I have a ton of experience borrowing money though.

I don't think I could keep enough money in reserves to have enough left over to lend to someone else for their deals. I'm like a kid in a candy store if I have some money in my pocket. I'd have to go find another deal for me to spend it on. :-)

I'm all about building cash flow for myself and long term buy and hold. The very first deal I ever did was a flip. After that, I have only done buy and hold (at 30 houses today with 31 and 32 that should be closing next month).

Dawn Anastasi · Answer

The lending money part isn't that difficult -- there are TONS of people on the site who would like to borrow money. The difficult part is finding someone who is reputable, reliable, and who will pay you back (aka make you money).  :)

Jesse O. · Answer

@Mike H. You're right.  I'm totally looking for the 'fun' of flipping a house...Seeing my work turn something into some cash.  I'm just getting frustrated by not being able to find something  Do you have experience lending money, if so I'd like to chat offline to pick your brain to see if that's something I'd like to do.

I know what you mean about the buy and hold.  I've got a couple rentals already.

Mike H. · Answer

As a hard money lender, though, you could easily do that. The points and higher rate would definitely give you enough of a float to make it worth your while.

That being said. I just don't think lending money is any fun. Nor does it build any long term wealth for yourself. Flipping would be more fun and, hopefully, after you flip a couple, you might look at using some of those profits to do some buy and hold stuff.

At the end of the day, buy and hold is without a doubt the best way to build long term wealth in real estate.

Jesse O. · Answer

I understand that @Dawn Anastasi   Thanks.

Dawn Anastasi · Answer

The only way that loaning it out would make sense is if you charged a higher rate than you were having to pay and for a shorter term.

Jesse O. · Answer

@Mike H. hahaha.  That's what I was thinking!  But I did it twice because I couldn't find anything to buy with it the first time.  They wouldn't extend my approval and had to open a new line.  I threw out $100k during the application, hoping for about $50k.  I've got excellent credit, a good active duty military salary (19 years) and have been banking with them for 12 years (USAA).   The funny thing is that the people taking my application couldn't believe it either and were VERY curious as to what I was using it for.  But the underwriters approved it twice, so it's definitely not a glitch.

I've thought about loaning it out, but just a bit scared because I haven't done that before.  I placed an add on the marketplace looking for a partner to buy a more expensive flip, but no takers so far (this was about a month ago).  I wouldn't know where to begin trying to do that, either.

I don't want to rush into something, but man, I never thought it'd be this hard to spend the money!

Jesse O. · Answer

Thanks @Jay Whitfield and @Jon Klaus

What would you do with a $100k unsecured loan?

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