Information on how to become a lender

[Jen Roberts]

Hi all, I'm a newer investor. I haven't found many properties that match my criteria, and I am looking into private lending as I have some capital. I'm trying to educate myself in the best way possible to learn more to see if this is a potential avenue for me. I would love to draw on the experience and expertise of other private lenders, know what to look out for, where to start (thinking smaller loans), and be savvy about this fluctuating market and the potential for refinance not to go the way some investors anticipate. I'd appreciate any info you have. I would love to start this conversation. I'm all ears!

[Doug Smith]

Hi @Jen Roberts, I've been a lender for 32 years and I've literally (not figuratively...I really mean literally) have made tens of thousands of credit decisions in my career. It is both an art and a science and I learn something new every single day. When I was first out of college, I started in a consumer finance branch calling customers who were 15-days past due on their loan. That was intended teach me how loans can go bad quickly. I learned from managers and mentors over all of that time. I love to teach the loan officers and staff that we have her in our company. I say all of that to impart that it's not just "she's a good person, I'll give her money". There is a lot that goes into it. We have several private lenders that we've vetted deals for and brokered deals through. We pull credit reports, we analyze documents and create paper trails, we review title reports, cash flow tax returns, analyze appraisals and condo docs. It's the equivalent of waking up and saying "I think I'll remove someone's appendix today." There is a lot that we do that is tough for a new investor to do. I would implore you to get a great mentor with a true formal credit background...not just someone that's made some loans out of their IRA. I'll get on my soapbox a bit. There are a couple of "gurus" out there that teach you how to be a private lender. He has zero formal credit background, but "students" pay him to teach them. I've seen him present and he hasn't the foggiest idea of how to make a loan and manage risk. Please don't waste money by doing too much yourself. Find a great, experienced mentor with a formal credit background and tools to properly analyze credit. Get yourself a phenomenal closing agent that can help you perfect title...that might or might not be a real estate/credit attorney. Build that team. I'm happy to answer questions if you get stuck, but I wish you success in your new venture.