"Skin in the Game"

As a fairly new investor, I have encountered a number of lenders who seem obsessed with borrowers having "Skin in the Game." For those of you who are not sure what that means, it means that you, the borrower, need to have some of thier own money in the deal to make it seem more "painful" if you lose or do not perform.

I would like to take a moment and explain how "skin" is an illusion and is much like the TSA, it provides and "illusion of security" rather than the actuality of it.

Most investors never have any real "skin in the game"... think about it they can open a second with another lender for between 6-8% over 15 years, the other lender (private or other) become the bank and get not only all their money back, but regular interest payments as well... or they visit their banker and take out a personal loan and pay them the interest and principal... Signature loans are a great example of these. Secondly, most investors would not hold the property in my name either it would be in an LLC, well again an LLC owned by their LLC... skin is an illusion once you start investing... and they probably wouldn't use a personal loan either... since many have business level financing available... business credit cards, etc...

So when investors do wind up buying a property, the question, to private lenders and owners with carryback arrangements, is was more of a "where would you like us to pay the interest? You or the bank?" ... Don't complain about risk, after all, the greater the risk, the greater the rewards... Right?