Should I invest in asset based lending?

[Ujwal Velagapudi]

Hi BP! 

I have finally divested in nearly all of my real estate portfolio this year, along with a couple of my businesses. After years of re-investing every penny, I am liquid. I sold since I got excellent deals on all the assets, relocation across the country, and wanting to cash out during a hot market. This of course leaves me with little passive income for the time being.

My mindset right now is simply to make small passive returns (5-10+%) on some of the cash I have for the next 6-24 months. The shorter the investment term, the better. The goal is to be liquid when I find new investment opportunities during the next market downturn (real estate & small businesses). Until then, I'd like to collect more than the 1.6% interest that my SoFi money account pays. What is the best way to do this?

I have sold one of my businesses with seller financing. I got 30% down, and get 10% interest on the rest with a 5 year amortization. However, the buyers do plan to refinance soon, providing me full liquidity on this sale as well. This was great for me as it gave me a decent return for cash that I had no other plan for but to sit in the bank, and it gave me a quick exit as the buyers are motivated to refinance to better terms. This was also my business and I knew the financials, and knew it was/will do well for me to have very low risk in providing this loan. Recently a real estate investor that I know had put out the idea of a short term loan backed by the real estate as well. Performing notes with short terms left are another thought I had. 

Not exactly interested in getting heat for why I sold my investments, recession timing, when to invest, etc., but more so what medium I should invest in right now given the returns I am looking for in the short term. 

What are your thoughts on these asset based loans as a private investor? Any good/bad experiences doing this? Best approach to finding these deals? How tough is it really to go through the process of gaining control of the asset if the lendee defaults (real estate)?

Thank you all in advance!