question about private lending

[Rocky Verteramo]

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

[Darren Eady]

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.