All Forum Posts by: Jennie Berger

Quote from @Chris Seveney:

Quote from @Jennie Berger:

Hello BP!

I have a growing community of friends / colleagues / et al who are interested in putting their money to work passively by private lending. I've been in the private lending space for about 1 year, and have lent on 3 projects to date. I have connected with many borrowers who are asking me to lend on their deals, and while many of these deals sound very attractive, I'm limited in my own source of funds, hence the reason for this post.

Background: I've been a designer and developer for the last 5.5 years, specializing in large gut renovations and ground up construction of single family homes and small multi unit buildings in the city of Chicago. I own and operate a few rentals, both mid term furnished and long term unfurnished, in 3 different states. I am an Illinois licensed real estate agent (mainly used for my own developments).

My Role in these private lending partnerships: Source and vet the borrowers, underwrite deals, originate, manage and service the loan, be a fiduciary. 

Context: Currently I lend in both my own LLC (just me, sole owner), and in a separate LLC (JV between one of my capital partners and me). This works well, but seeing as new people want to come on board, I don't believe creating a new LLC for each new capital partner makes sense, nor is it scalable.

To clarify: I am NOT looking to pool funds or syndicate at this time. Merely to lend more borrowers money on more of their rehab / flip deals, as well as offer transactional funding for same day double closes.  In essence - each new capital partner would lend only on one deal with me. I will NOT be mingling funds from multiple partners on the same deal.

Locations: Over the last year, I have lent only in Chicago IL, where I'm presently based. I'd like to start lending in other states - Texas, Florida, and maybe some others as well as Chicago.

Goal: Before presenting these lending opportunities to new capital partners, I'm hoping to glean more insight into the wisest, most efficient way to structure these partnerships to protect everyone involved. I've read/learned a little bit about: Partnership lending, table / wholesale funding, fractional notes, lending trusts, note on note. 

> Is one of these the best option? 

> What other options are there that are streamlined and will protect everyone involved?

> Which type of attorney I'd need to hire to draw up a legal document(s) for this type of partnership?

Thanks so much in advance for your wisdom and advice!

 Here is what I would do:

Take the existing LLC and do a participation agreement with them on that specific deal. So your entity would still be the lender, but you have a participation agreement on the loan.

This will not be syndicating and should keep you out of hot water with SEC etc (note not an attorney but do participation agreements all the time). 

Note that the partners agreement is not recorded but they receive a partial assignment and allonge from you. 

Hey Chris:

This seems to be the easiest way to do things. Assuming my capital partners trust me with their money, I don't see another more efficient way. Should I have an attorney in MY home state draw up this participation agreement? Or, would it be better to have an attorney in the state where we're lending funds to draw it up? (In this case, I'm considering a new loan in TX)

Thank you for your input!

Quote from @Jeff Wills:

I would say that you certainly need an attorney who specializes in lending law in your state to draft you lending docs. You should always be first position, and only lend on the borrowers LLC to avoid homestead/owner occupied foreclosure proceedings which are always less favorable to you.

Personally I do not go over 70% LTV AS IS, but terms are at your discression and comfort level.

Right now, I charge 12% interest to borrowers, and return 9% to my investors Annually. I then charge a 6% origination fee to the borrower, but no other fees apply. 

I think you just set up on LLC/Company, and then all loans should be "originated" from there. If you plan to coinvest, or invest personal funds as well, use a seperate LLC so that you become a client of your parent company, further insulating your liability.

If you have any questions please do not hesistate to reach out, sounds like you have a great foundation already. 

Thank you for your recommendations!

To clarify - are you saying that opening up a new 'joint' LLC under my main LLC (so in essence I would create a series LLC and then open up smaller LLCs underneath it?) with each new capital partner is the best way to scale my lending operations?

I feel I've got the rest down pretty well and am following your SOPs in my practice already. I have 2 LLCs - 1 that I am sole owner of, and another that I have a partner on. I lend in both of these LLCs currently.

Thanks @Mike Grudzien, appreciate the kind words!

Quote from @Amanda Rechsteiner:

Quote from @Lily Levi:

Hi Amanda, I DM'd you. My family and I are private lenders with experience lending in Michigan. I'd love to learn more about both opportunities you listed. I hope to speak soon!

 Responded! Thanks for reaching out.

Are you only lending in MI currently? 

I'm really curious how you structure your partnerships with new capital partners / new PMLs you bring on board. Like you, I'm also looking to scale my private lending business and bring on new capital partners who are looking for passive income. I'm also looking to lend in a few other states - TX and FL to start. Presently, I live and lend in Chicago IL.

I'm trying to figure out the best way to structure these partnerships so everyone involved is protected. Creating a new Joint LLC with each new partner is cumbersome and not scalable.

*Note that I'm not looking to syndicate or pool funds together at this time, rather to work with one new partner on a single deal, and another new partner on a separate deal, and so on and so forth.

Thanks for your input!

Hello BP!

I have a growing community of friends / colleagues / et al who are interested in putting their money to work passively by private lending. I've been in the private lending space for about 1 year, and have lent on 3 projects to date. I have connected with many borrowers who are asking me to lend on their deals, and while many of these deals sound very attractive, I'm limited in my own source of funds, hence the reason for this post.

Background: I've been a designer and developer for the last 5.5 years, specializing in large gut renovations and ground up construction of single family homes and small multi unit buildings in the city of Chicago. I own and operate a few rentals, both mid term furnished and long term unfurnished, in 3 different states. I am an Illinois licensed real estate agent (mainly used for my own developments).

My Role in these private lending partnerships: Source and vet the borrowers, underwrite deals, originate, manage and service the loan, be a fiduciary. 

Context: Currently I lend in both my own LLC (just me, sole owner), and in a separate LLC (JV between one of my capital partners and me). This works well, but seeing as new people want to come on board, I don't believe creating a new LLC for each new capital partner makes sense, nor is it scalable.

To clarify: I am NOT looking to pool funds or syndicate at this time. Merely to lend more borrowers money on more of their rehab / flip deals, as well as offer transactional funding for same day double closes.  In essence - each new capital partner would lend only on one deal with me. I will NOT be mingling funds from multiple partners on the same deal.

Locations: Over the last year, I have lent only in Chicago IL, where I'm presently based. I'd like to start lending in other states - Texas, Florida, and maybe some others as well as Chicago.

Goal: Before presenting these lending opportunities to new capital partners, I'm hoping to glean more insight into the wisest, most efficient way to structure these partnerships to protect everyone involved. I've read/learned a little bit about: Partnership lending, table / wholesale funding, fractional notes, lending trusts, note on note. 

> Is one of these the best option? 

> What other options are there that are streamlined and will protect everyone involved?

> Which type of attorney I'd need to hire to draw up a legal document(s) for this type of partnership?

Thanks so much in advance for your wisdom and advice!

This sounds like an amazing project @Jonathan Klemm!

Super exciting opportunity @Quincy Mingo! I'm sure you'll get some really valuable input on your questions. *If you need a creative helping hand with the design for your renovation, please keep me in mind. :) 

Quote from @Brie Schmidt:

Quote from @Drew Sygit:

Politicians are getting too extreme!

 Yes, the problem in Chicago is we have so many mom and pop investors and no way to reach all of them except word of mouth.  This was passed in October and I would say at least 50% of investors, and agents, have no idea about it and the other 40% don't fully understand it

@Brie Schmidt I had ZERO idea about this, thank you for sharing.What a SHAM. Is there a template you use to contact our Alderman?

Agree with @Ivan Tello. 

A 3-unit in Wicker Park - when rehabbed nicely - can be worth a LOT of money. Have you underwritten the deal from the perspective of: 'If i fully rehab the property, in addition to repairing it structurally of course, how much can I sell it for?' 

Structural repairs are really unknowns, as others have mentioned in this thread. However your potential margins - with a brrrr/refi or a sale - are very large if the property is able to indeed be repaired.

Good luck and keep us posted on your progress!

One of our borrowers who successfully flips on the South Side (Dobson, Park Forest, etc.) is capitalizing on the abundance of discounted rehab properties (on market and off market via wholesalers and the such), which is a key strategy given rising rates. 

He prioritizes deals with substantial margins, mitigating rate increases, and actively manages rehab costs to maximize profitability by being heavily involved in the process and GCing his own projects. He possesses a deep understanding of his target neighborhoods, crucial for accurate valuations, and is adjusting to market shifts through meticulous financial analysis and timeline management. 

Critically, he's filling a gap: turn-key, entry-level homes are scarce in Chicago, creating a strong demand for his rehabbed properties. His disciplined approach demonstrates that opportunities persist for those who understand their market and control costs. This strategy is especially effective given the current lack of entry level homes in Chicago.

Our two cents - thanks for bringing this topic to the forums!