10 Reasons Why I’ll Never Flip Another House

As an experienced real estate investor, I’ve done wholesaling, fix-and-flips, and buy-and-hold. I can tell you from firsthand experience that while each strategy has its merits, serving as the private lender on other investors’ deals is by far the best role on the investment team and here are my favorite ten reasons why:

1. Return on Time: Evaluating the time invested versus the returns gained makes private lending a game-changer. On average, I might spend around 20 hours making and servicing a loan that often yields $10k to $20k in fees and interest payments. That’s $500 to $1,000 per hour! Conversely, an investor flipper (my borrower) will likely spend hundreds of hours buying, fixing, and flipping the property, and when you calculate their return on time, it doesn’t come close to what I can achieve.
2. Above-Market Returns: In addition to the return-on-time, as a private lender, I can generate financial returns well above conventional investment avenues such as the stock market, making it an attractive proposition for savvy investors. It’s common to generate returns ranging from 15% to 20% consistently.
3. Repeatability: The beauty of private lending lies in its consistency and repeatability. For a house-flipper, each property and project will carry its own challenges that must be overcome. As the lender, my process remains remarkably uniform. Over time, this consistency allows for even more efficiency and easier delegation, which in turn will enable me to scale or gain even more of my time back.
4. Universally Applicable: Real estate investing demands capital regardless of where you are. Every city, county, and state in the U.S. needs private lenders to address market gaps not being addressed by institutional or hard-money lenders. If something happened and I had to move my business to another location, I could get going in a matter of weeks because, after all, I am offering something everyone wants…money.
5. Recession-Proof: Because there is always a market for money private lending transcends economic downturns. When markets are hot investors need private lenders to provide fast cash to close deals. On the other hand, when markets slow down, and institutional lenders tighten up, private lenders are there to meet that market demand.
6. Capital-Light Model: Private lending doesn't necessitate hefty personal investments, unlike many other investment avenues. Instead, strategic partnerships and innovative financing structures enable savvy and well-networked private lenders to thrive without substantial outlays of their own capital.
7. Geographic Independence: Managing a diverse lending portfolio requires only an Internet connection, so there are no geographic constraints. I like to travel, so I can take phone calls or review emails and documents from anywhere in the world.
8. Highly Scalable: Private lending can be scaled up (or down) by diversifying across residential or commercial sectors, catering to local or national markets, by loan sizes, and by the number of loans being made. Conversely, most investor flippers can barely manage one to three projects simultaneously and often spend 40+ hours per week managing the projects. As a lender, I can simultaneously manage dozens of loans because I only process documents, read emails, and make phone calls.
9. Ageless Opportunity: Private lenders aren’t bound by career stage, age, or physical limitations. The lending process is straightforward and accessible to anyone at any phase of life, offering a reliable means to bolster retirement savings or supplement income streams well into retirement.
10. Market Knowledge: Like banks, private lenders get an insider’s view of the real estate market. They see what investors are paying for a property, the costs of their repairs and renovations, and how well the market responds to those renovations. As an active investor, I find this information invaluable in my decision-making.

By embracing private lending, investors can unlock a wealth of opportunities, harnessing its versatility, resilience, and profitability to navigate the dynamic landscape of real estate investment with confidence.

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