Where to post if I'm a private lender?

Question

I might find myself with $10k, and if I do, I want to be able to use $8K of it be a  private investor because:

a) I feel I can get the return in 90 - 120 day, if it's a rehab project.
b) Duh! It's better then a bank.

But now, I need to know where should I post that I have money to invest?

I don't think Craiglist is the best idea, because there are some scamers out there, but I do want to let as many local reputable people out there know I'm willing to lend my money @ the right return.

Jose Enage · Answer

Considering the amount of money you are lending, I agree with most of our members, $8k may not be enough. You might consider other alternatives still related to real estate like REITs or Tax Liens. You will still get a better return than banks or CDs/GICs.

Ann Bellamy · Answer

All the warnings above are valid, and I strongly recommend that you not try to lend.

1.  The regulations and cost of compliance can cost you much of the 10K as several have pointed out
2.  A borrower who needs 10K is not a well funded rehabber and is likely not a good risk, based on little experience.  (As Bill Gulley mentioned.)
3.  A broker is unlikely to be able to use as little as 10K, and likely won't give you the time of day.  (not to be blunt about it, or anything) 
4.  Even the American Assn of Private Lenders (the organization that Don Konipol and I belong to) is going to cost you a couple grand to go to their events, considering air fare, the conference fees, hotel, transportation, etc, so there goes 20% of your capital.
5.  A fund that invests in loans and real estate projects is likely to require that you be accredited, which I'm pretty sure you're not if you only have 10K (no offense, just a statement)
6.  If you go to the REIA's and try to hold yourself out as a private lender, you'll soon find that you're not taken seriously because you only have 10K

Here is what I'd do, similar to what Bill said in his #4

Go to the REIA and ask around for people who are looking to partner up.  When you find one who can use your amount of money, ask the heads of the REIA what they know about him, and ask as many people as you can about the person.  Ask him for references.  Get lots of them.  Google him. Even though I am a real estate investor and love real estate investors, there are sharks out there:  lenders, borrowers and "investors"

I think your area has inexpensive housing stock.  It may be a good place to start.  When you partner up, contribute more to the project than just your $.  Be the guy who finds the hard money, or be the guy who handles the sale of the property, or who does some of the work, or who is even the gopher.  Be involved in the project so you know where your money is going.

Don't be in a hurry, there is always another guy with another deal.

Lather, rinse, repeat.

Bill Gulley · Answer

Good points, another is that 10K really isn't sufficient for lending unless you are really careful.

1, Who only needs 10K? A small rehaber, that's not much to change value. You're not the lead lender on the place, if it goes south are you willing to payoff the first to get 10K with a questionable increase in value?

2. Who needs 10K, someone who has little in financial horse power, what is thier ability to cover that with limited resources?

3. You need to have reserves to protect yourself as a lender, the ability to take out other liens. Can you afford to foreclose,carry the costs, complete the rehab if necessary and carry out what is necessary to get your 10K back?

4. I'd say it's better to partner and you swing a hammer along side matching funds with someone who can carry a deal with you rather than getting involved as a strict lender and trying to meet the issues mentioned above. :)

Byron Broadnax · Answer

I think from what I've gather, unless I can find someone(s) who I trust to somewhat  "crowd-source" a deal, there are better ways to invest.

I think my best bet is to find to find a deal and use my money as deposit for the deal.

Bill Gulley · Answer

Roy, had he done that 5 years ago a broker probably would take his money and tie it up with a partner. Not today really, not saying one would not, but things have changed. Accredited investors are or should be required, few small offices can accomplish that now and the structure needs to be compliant.

Where brokers or even partners get in trouble is assigning collateral to a group to secure the funds, someone will be last to recover thier money and if there are insufficient funds, they or someone will lose.
As a broker, you really need to be in a position to take any investor out of a deal, you also need to be able to take out the small investors who lack experience as they yell the loudest and it makes an attorney fight harder for the one at a disadvantage.

There are some crowd funding types, a possibility, but I wouldn't do it as the ones doing that, well, I have no idea if they have an idea. I don't see RE as a job producing activity (beyond a few months) under the JOBS Act that allow lenders to avoid SEC regs. If the funds remain as a loan after the work is done, I'd say it is not compliant with the intent or purpose of the exemption.

Besides, 10K might not get you in a true lending REIT,  a registered firm. 100K minimums! A friend runs a brokerage here, assets are bonded to a hundred million, you just can't break that down to 10K!

I really think his best bet would be to wait for someone who needs some cash and buy part of a performing note, with recourse and a repurchase agreement. A good note like that could be a much safer bet than making a smaller loan, especially in a rehab. IMO :)

Roy N. · Answer

Bill Gulley:

Here, north of the 49th we have mortgage brokers who pool funds from folks like Byron Broadnax into what are essentially "private" REITs.  I have never explored this option {these day's I'm the guy looking to borrow, not lend}, so do not know if one needs to be an "Accredited Investor" to participate.

Is there an avenue similar to this which might be an option for Byron?

Bill Gulley · Answer

Thanks Tom!

No, I wasn't suggesting a dasiey chain, Jeff made a good point, you need to know them and the property and it will be better to partner not act so much as a lender.

Small amounts are tough to lend, you could make a purchase money second, fully amortized might make a decent loan, but it won't earn what you could do with it in other areas.

If there is a deal and a buyer is a little shy, transactional deals are good, just know the next deal is closing.

You might find a small note to purchase, or buy payments of a larger note.

Rehabs are construction deals, as SFD lending goes one of the risky types to make, I just suggest you not.

Don't get in a hurry as Ann said, use your funds and build up the war chest....plenty of time. :)

Tom Goans · Answer

Byron, have you reviewed Bill Gulley's profile? This person can give you tremendous guidance and a wealth of information based upon a long history in the lending and real estate industries.

While some of us share our thoughts, he provides facts and experience.

Jeff S. · Answer

Your options are very limited here, Byron Broadnax.  Depending upon state law, you probably cannot advertise at all since you are not a licensed lender. Thankfully, this includes anyplace on the web, which is full of scammers.

We follow two simple rules that have served us well:
1)	Never loan to someone you don’t know, even it that means getting to know them a couple of times over lunch.
2)	Never loan on a property you haven’t seen.

This pretty much forces you to loan locally and to those you’ve met in advance.  REI clubs are clearly your best bet here.  You’ll avoid legal issues with advertising and get to check out your borrower and the property.

Unfortunately, with only 10k, you’ll likely end up in a second or maybe third position low value rehab loan.  These can be extremely dangerous and I’m not sure I’d recommend that for your only dollars.  Are you sure you want to loan to someone who needs that kind of money?  That is, you might wait until you have some more cash.

Also, don’t rely on getting paid back quickly.  A rehab and sale can take well in excess of 4 to 6 months.

Lastly, lawyers and professional organizations can be expensive and eat well into your capital.  This is more reason to save a bit more before you take the plunge.
 
Jeff

Byron Broadnax · Answer

So basically, find someone to daisy-chain my money with, until I have enough money outright to do loans with, right?

Where to post if I'm a private lender?

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