WHY I LOVE PRIVATE MONEY LENDERS

[Don Scott]

I started investing in real estate over 8 years ago and I have done all kinds of deals.  

I started as a landlord and buying Rentals.  Then, I started wholesaling and flipping properties (currently doing about 50 transactions a year over the last couple of years).  

I have also Owner Financed a couple of properties, own some Multi-Family (currently have a deal under contract and looking to close 3-4 more before the end of 2020), and a co-owner in a Tiny Home Park.  There is more, but this post isn't about that LOL...

I didn't actually start using Private Money until only 3 years ago!  I had a very good friend, who flips over 50 houses a year, tell me about Private Money Lenders and I haven't looked back!

Now, I fund the majority of my real estate deals with Private Money.

I’ve borrowed & repaid millions of dollars from my investors.

Not all of my deals have gone as expected, but if you do enough deals then you understand that is a part of the game.

I’ve lost money on a few here and there and I'm sure it will happen again.

But here’s what I’m most proud about in my real estate career: MY LENDERS HAVE NEVER LOST A PENNY!

So even when I’ve taken hits on some of my deals, my lenders have always received 100% of their capital AND Interest that was promised to them.

*And I will note that I have a fairly conservative/cash-flow approach to real estate and always have at least 3 exit strategies on every deal, just in case…if you're considering becoming a private lender, I would strongly encourage you to get to know your borrowers AND their investment strategy [critical]

**I apologize for the long post, I just wanted to share how my Private Money Lenders changed my life as an investor.

[Don Scott]

Originally posted by @Chris Lockwood:

I would like to get some clarity on a hypothetical situation. None of these numbers are real, but I think this will help people like me put it all together as I have read this thread. Let me also say I have not used private money, but I do have a few interested parties who are willing to help me, but have no clue what to do either.

Situation: SFH for sale $59,000. Needs $20,000 in repairs. ARV $120,000. As the investor I need to borrow the purchase and reno costs. Here are my questions.

1. What is the typical range of the percentage rate?

2. Can I borrow the full amount?

3. What will I pay the lender to the until I refinance or sale?

4. How much over the initial loan will I have to pay?

5. How much cash would I need to ring to closing?

I know these figures will very, just looking for a general idea. If I'm not asking the right questions or express myself clearly please let me know. That is for any response.

 @Chris Lockwood those are some good questions to be asking.

1. That is going to vary, but everything is negotiable.  Most of my deals are in the 7-10% range.

2. I typically borrow the full amount, but I've had deals in the past, where I've only borrowed the purchase price from the lender and paid the repairs out of pocket.

3. That is negotiable, but most deals I see are interest only deals. So, if I borrow $120,000 at 10% interest only for on a 12 month term.  I will pay that lender $1,000 every month until I refinance or sell the house and the lender gets their $120,000 principle returned.

4. I think answer to the question above answers that (let me know if I interpreted correctly).

5. The cash to closing depends on so many factors: how low you buy the deal, renovation costs, how much money you borrow from the lender, your exit strategy (flip or rental).