The Dangers of a Private Loan

[Jason Merchey]

I am getting into private lending slowly but surely. I'm really a newbie. I'm discussing with a rehabber team about a loan, they're local, and I like them and am willing to meet them more than halfway to earn their business. My stock broker cautioned me against loaning on a rehab, saying that a major change in the ARV of the house could spell pain for me. I wonder what you think about how loans to qualified rehabbers locally would fail such that I find myself standing when the music stops. It seems like that it would take a certain set of variables all going bad for a rehab team with experience and (apparently) character to walk away and leave me with a house that I have to finish and sell for a 30% loss. What are some scenarios, some variables, that make PML risky (or, I guess "low risk" [vs. say a bond or buy and hold] might be the exact phrase I'm looking for).