question about private lending
Hi guys!
I have an investment opportunity that I would appreciate your expert advice on. Sounds like a no brainer, which is why I am extra questioning it and making sure I don't miss anything that could screw me!
A friend of mine who I invest through has another group of investors that needs $20,000 for a reno project on one of their rental properties. They will be paying me 10% on that 20,000 for up to 3 months. They are putting two of their properties up as collateral. If they don't pay me back in full with the 10% in the 3 month contracted agreement, Those houses would be mine, each valuing between 25,000 - 30,000.Deal or no deal?
Thanks for any advice or input in advance
Rocky
Most Popular Reply
This size loan is more dependent on your trust of the borrower than the cross-collateral for three properties. I had a deal that I took 10 properties as cross-collateral and found out later that ALL of the properties had major issues and I couldn't collect on any of them after the borrower defaulted. Even though I had placed liens on those properties, other investors also had liens placed afterward. Plus, a $20,000 investment is fairly small, so if you didn't trust the borrower and things went bad, you would spend more than $20,000 trying to get your money back. I'm not saying that it's not a great investment, just beware that you are not going down this road with someone that hasn't performed for you, or others you know, in the past.