Want To Lend, But No One Is Interested

[Eric B.]

I am interested in being a private lender for investors who need to get their deals funded. But in my 401k, I only have $3000. Now I realize that's a small amount, but aren't investors looking for their deals to get funded trying to create a pool of many lenders? Doesn't seem to be that way with the people I've talked to. Nobody seems to want to talk to you until you have at least $20,000 to lend. Why can we who have less be private lenders?

[Jean Bolger]

I'd say by far the majority of deals are funded not by a pool, but by an individual lender. The simplest explanation is that the lender will want to have a first position lien on the property. That way if the borrower doesn't perform then they can foreclose and become the owner of the property. In a situation like that-- if you have fifty guys who have all put up 3k then you're going to have a mess on your hands. Plus, even if all went well with the deal it would be a ton of hassle for the person doing the borrowing.

There are a lot of rules and regulations about lending and pooling funds as well. The rules have changed recently which has added to the confusion. There are now crowdfunding sites for real estate, but on almost all of those you need to be an accredited investor, which means you need to have (not sure I have the exact numbers here) verifiable income over 300k a year or a net worth of at least a million. These restrictions are supposed to keep people from getting scammed and losing money that they can't afford to lose. (One could also be of the opinion that these restrictions are simply helping rich keep getting richer to the exclusion of the little guy... but that's a different discussion) Have you considered doing funding through a peer-to-peer lending site like Prosper.com or lendingclub.com? Some of those loans are for real estate or business, although most are consumer debt consolidation loans. The initial amount required there is very small.