Becoming A Short Term Lender?

[Ray Hernandez]

I have some money to invest but just recently started thinking of being the "bank" instead. I've never looked into it so I don't know much about it from the lender's pov.

All I know is I am interested in doing short term loans so I guess that would make me a hard money lender?

Some questions I have are:

• Would 3-6 month loans be feasible?
• Can you make good money doing this if you consistently lend compared to owning a buy and hold prop?
• Is this better or worse than buying and holding or can they not be compared?

For my last question, the reason I'm wondering if you can compare the two is because I don't know if I should pick one over the other. I'd assume holding a rental property long term would be better for net worth over short term lending but maybe income is better as a lender? I don't know. I'm unsure if this decision would be based more on a "whatever fits your goals" kind of thing.

I appreciate any and all feedback :)

cheers

[Jay Hinrichs]

@Account Closed  absolulty I would in no way advocate second position or gap funding in any way.. for those that do not have extensive real estate and construction experience.

[Ray Hernandez]

@J. Robert Santos Yeah I'd have to start purchasing re first then upgrade.

@Account Closed I don't have extensive experience so I'll make sure to stay away! I'll keep learning about buy and hold, syndication and lending.

Thanks for all the feedback, everyone!

[Will Barnard]

Originally posted by @Ray Hernandez:

@Will Barnard Thank you for your honest advice! Means a lot to me.

Yeah I can't believe I hadn't thought about the little to no tax advantages with lending. I was so focused on the liquidity of it. 

I'm very interested in apartment complexes and have been trying to learn as much as I can about investing in them. That said, if you were in my shoes would you advise looking into syndications or trying to find deals to buy and hold myself? I have the time to try and find deals myself so that's not necessarily a problem. I don't mind if I'm not 100% passive. Just want some good returns.

But doing both does seem like a great way to diversify. I get the tax benefit of rentals and more liquidity of lending. Good idea. And yeah I have tons to think about lol. Thanks for giving your input!

 Honestly, as sexy as it sounds to be active and go after them on your own, as a rookie, even with some book education, the real world can knock you on your azz so I would suggest going with a very experienced and proven sponsor. You won’t hit a homer most likely but you will be safer and then learn from the real world experience. Perhaps after that you can try one on your own or with a partner.

So then the trick is, which sponsor to work with. That itself is no easy task for someone without experience. So for that, I would recommend getting a referral from someone trusted, someone without an agenda and someone who is not getting paid to refer you to the sponsor.

[Michael Reyes]

Hi J. Robert Santos ,

I see you’re in Austin. May I ask what your background is? I’m traveling to Austin this week on business. Looking to possibly meet up with someone local who knows the MF market. I have to fly out Wednesday afternoon, but have some availability in the morning.

Thanks for your time.

Cheers,

Michael

[J. Robert Santos]

@Michael Reyes, I hope you are well! Yes, I sure am. I own a business brokerage firm, Stratton Business Brokers, and am a commercial real estate agent at Commercial Market Exchange. What are you looking to do within the MF market?

Thank you

[Alina Trigub]

@Ray Hernandez

I would reinforce what @Will Barnard said above and try to apply this strategy to both options. If you want to try lending and do some buy&hold, then 1) find an experienced HML/Agency and lend through them a few times (they should be able to get you a decent return even after fees) & 2) leverage an experienced syndicator and join their deal as a passive investor - you can always learn about syndication through this "back" door if you will, while making some passive income and enjoying tax benefits of buy&hold investing.

If you'd like to speak about it further feel free to PM me.

Good luck!

[Ray Hernandez]

@Will Barnard Sorry for the late reply, just getting over a cold.

Good point. I'm pretty inexperienced. Depending on how good the returns are when I find the right sponsor and I start to get a feel for everything I may or may not go out there and try finding deals myself. How passive syndication is is pretty amazing!

And I'll start looking for referrals. I'll have to ask around to find someone without an agenda.

@Alina Trigub Thanks for the info! I'm wondering whether I should try to find 2 great sponsors and invest between them instead of just 1. To compare the returns and diversify a bit. Or find 1 sponsor and invest a lot there and then try lending a bit. And thanks I'll be sure to pm you if I have any more questions, I usually do lol.

[Alina Trigub]

@Ray Hernandez Research multiple sponsors (at least 3 plus.) Invest with the one(s) where you believe the investment is solid based on your valuation and long term goals. [Solicitation Removed by Moderators].

[Jonathan Chan]

Quote from @Ray Hernandez:

I have some money to invest but just recently started thinking of being the "bank" instead. I've never looked into it so I don't know much about it from the lender's pov.

All I know is I am interested in doing short term loans so I guess that would make me a hard money lender?

Some questions I have are:

• Would 3-6 month loans be feasible?
• Can you make good money doing this if you consistently lend compared to owning a buy and hold prop?
• Is this better or worse than buying and holding or can they not be compared?

For my last question, the reason I'm wondering if you can compare the two is because I don't know if I should pick one over the other. I'd assume holding a rental property long term would be better for net worth over short term lending but maybe income is better as a lender? I don't know. I'm unsure if this decision would be based more on a "whatever fits your goals" kind of thing.

I appreciate any and all feedback :)

cheers

This is a very old post, but bumping it to the top. I do short term lends as my main focus and it's been going well so far.