Private Lending Mistakes

[Bill Gulley]

For you "private lenders" what mistakes have you made? I'm wondering if private lenders are 1. willing to disclose mistakes and 2. what they did to correct it, if they did at all.

I just read about private lending, the lender claimed to be a private lender and not lending to non-owner occupied, leased properties, leads be to think they meant owner occupied.....then claimed to be in the business of lending. So, is there a mistake there?

Then, there was a comment about charging loan fees (or points) on a private loan, is that another mistake for a private lender?

So, what is a private lender? :)

[Account Closed]

The biggest mistake I've made is not analyzing the borrowers deal, and making sure there is enough reserves (which they resent I'm sure). I now have a spreadsheet that calculates rehabber (borrower) profit and cash they need. If borrower is not going to make a profit, I say it right up front. Saying no, by the way, was very hard for me, but I've learned. You can't imagine how many rehabbers think they have a deal but don't.

If the deal is bad for the borrower, it's a disaster for me. I know everybody thinks the lender makes a killing if borrower defaults, that's just not true. The last thing I want is to fix the borrowers mess. I want a borrower that is successful every single time so I can lend deal after deal after deal and not be involved in the rehab, at all. Unfortunately, I had to foreclose recently, I rushed around and finally found a local rehabber and sold the loan to him a few days before the scheduled trustee sale. He, I'm sure, will make a good profit, me, I'm glad to have my principal back. If I wanted to be a rehabber, I'd be a rehabber, not a lender. Driving to the rehab site every day, being sticky hot, listening to contractor bs lies, dealing with blood sucking government officials, historical societies, standing in line at HD, owner liability ... need I say more.

This is a great thread by the way, BP tends to focus on the greedy lender, but there are two sides to that story.

Another thing I've noticed: Everybody should be concerned about costs, if you aren't your not a good business person, plain and simple. On the other side of that same coin is the person that is overly concerned about fees and loan amount. When a potential borrower starts drilling down on fees and wants 100% of the purchase price and 100% of the rehab costs, and simply doesn't understand why that doesn't work for the lender, I just want to run ... that to me is a clear sign of a beginner. I have never had a successful rehabber drill down on the stuff, never.

Being on the lender side of the rei fence, the difference between a beginner and experience is as big as barn door. I smacks you up side the head in the first few minutes of the conversation.