Private Money Lending

[Tyler Bougie]

I’m interested in doing private money lending and was hoping to get some insight from people with experience. I don’t have a lot of money to be handing out and want to know if and how to to lend with a small budget. I’m open to opinions and ideas so anything would be appreciated. Thank you

[Jody Sperling]

I've considered lending myself, but most recently, aka today, I'm receiving a private loan of $25,000. We offered on an off-market single-family house that cost $70,000 and had fifty in cash. In order to cover closing, we needed another twenty-five. I called everyone I knew whom I suspected had the cash. One person verbally accepted the offer. The following day, he cooled significantly.

I called others and lined up two separate loans, one for ten and one for fifteen. We drafted a promissory note using Legal Templates online. You can get a free seven-day trial to see if it works for you, and notarized the note at my bank. The terms of the note were that I would pay interest only for six months with no penalty for early repayment. I agreed to no points and 14% simple interest. The first lender came through.

The key here is, I got a slightly better deal than hard money, for a heck of a lot more effort.

Would I do it again? You bet. But it sure would be nice to know who the potential lenders were out there so I could avoid some of the awkward phone calls. 

Beyond the mechanics of the loan, I can share with you that you should announce your desire to the world to privately lend money. Tell people to PM for details if you get interest. A great way to jump in is to buy car notes and become the person's bank, buy credit card debt, or finance part of a flip, like my private lender did.

Hope this helps, and best of luck to you!