How to start a lending business

[Greg Moran]

Howdy BP people, 

I'm looking for anyone who has "been there, done that" with private money lending, and has put the business framework around that activity. I already have a personal self-directed IRA set up; I have a real estate deal pipeline lined up with a rehabber; but now I'm wondering if I need to make my lending activity more formalized by establishing a business entity.

What have other people done? At this point, I'm also looking for only the most passive investing strategies, because my full-time Active duty military assignment takes significantly more than a 40-hr work week. Eventually (in 2+years) I will be looking to scale up. 

Thanks for any of your suggestions! 

[Stuart Grazier]

@Greg Moran I'm active duty as well and have done quite a bit of private lending for flips and also own a portfolio of long term mortgage notes. I originally started doing them in an LLC, but am now primarily doing them through my self-directed IRA. One lesson learned for me was that once I started making quite a bit of money at it, I found my annual taxes go up signficantly, as there isn't much you can deduct on your taxes when just owning notes. When doing the lending through an LLC, everything gets passed through to your personal tax filing and it creates a larger tax burden, without much to deduct. I've asked many CPAs how to change that, and the only answer is to buy more physical rental property to find more tax writeoffs. Hence, I've started doing all of my lending now through my SDIRA and owning actual real estate in my LLC. Let me know if I can help in any other way.