All Forum Posts by: Beth Johnson

@Patrick Hayes

Let me what you think of the book. It's pretty packed with information that might be overwhelming but important nonetheless. My only suggestion is that you make sure you are on the deed /mortgage secured on the project. I'm not a fan of being a silent, unsecured partner nor am I a fan of participation agreements. The only way to get paid back when a property is sold is to be on title as a creditor. Otherwise, there is no guarantee.

@Travis Mullenix

I haven't but wanted to know if you have had experience in private lending before? If not, you will want to be sure to define your own deal preferences and risk tolerance. Some hard money lenders lend at pretty high LTVs, leaving little equity buffer to protect your principal. Other KPIs and considerations you should evaluate when talking to any lender who offered private placement of loans/notes are historic default rate, how quickly they can place your funds (do you get preference over their income funds, for example), average interest rate - borrower note rate and what is passed through to you, are loans serviced by a 3rd party servicer or in house. There's a lot more but I thought I would share a few thoughts, in case you haven't had previous experiences investing with a lender.

@Patrick Hayes

Getting started in private lending is exciting and scary at the same time! When I first started there were little resources on the subject. Nowadays, there's more to help you better navigate the key considerations before you put your money out there. Just know that when people tell you about what to look for regarding the borrower, the property, the project, you need to be able to individually determine your own risk tolerance and deal criteria. Everyone does it differently and so you will want to establish personal goals and guidelines for private money. You're the one risking principal, not the resources that help educate you.

For help uncovering all the risks and retards associated with lending your money out to other active investors, check out the book I co-authored called Lend to Live: Earn Hassle-free Passive Income in Real Estate with Private Money Lending published by BiggerPockets.com/lendtolive last summer. Packed with information and resources. There's even a bonus video on advanced underwriting we did for those who purchase directly from BP rather than Amazon, etc.

Good luck!

@Hunter Kennell

@Jay Hinrichs certainly would be a credible referral as someone who's been in the business for a considerable amount of time!

I haven't invested with him but I do know him through mutual private lending circles and he's been doing this for a while now. I like the fact that he provides affordable housing opportunities for undeserved communities and many of his exits on the loans are said to be lease options for individuals and families who otherwise might not be able to afford or qualify to buy on their own.

The one thing I would suggest is to make sure you feel super confident not just with David but with his teams in market. He's based in the UK so he's not local to the markets he works in so you really need to vet their entire leadership and staff who manage the execution, not just the owner.

@Adam Jones

Check out our book published by BP called Lend to Live: Earn Hassle-free Passive Income in Real Estate with Private Money Lending. It talks about how to find and fund a private loan safely and legally through the point of view of the private lender but it's also great for borrowers seeking to better understand what lenders need to do to secure their loans and protect the principal investment. The more borrowers understand the lenders side, the more credibility they can build with their capital partners by being able to demonstrate concern over their partner's funds and also how to protect it as well.

@Albert Bui - You are correct, most institutional note buyers/aggregators would not pick up an owner-occupied note. If he creates a note for the buyer in 2nd position and then thinks he can sell it to an individual note buyer, he'd likely have to take a discount on the note and would also need to ensure he's not breaking any laws with consumer loan disclosures and usurious interest rates. 

@Caroline Gerardo

Private lending law is much more related in CA than other states as is the foreclosure process much lengthier and supportive of consumer protection at all costs. But with the right virtual team and safe equity buffers in states that are private lender friendly, it can be a relatively smooth process with a positive outcome.

Here's something I wrote this summer for BP blog about one of my client's experience earlier this year:

https://www.biggerpockets.com/blog/loans-gone-wild-turning-a-loan-into-a-flip

Most of the time, these defaults can be worked out prior to foreclosure but you are absolutely correct that when it gets to this "nuclear option" as my co-author calls it, it can be time consuming. Still, if done correctly, it can yield some tremendous returns.

@Kim Hopkins

Yes! It's broken out into six steps known as the CPR Lending System with a pre-step (Calculate and Evaluate) to help you define your own lending criteria and personal/financial goals before diving head first. Step 1 is Connect, meaning how to connect with the right individuals and professionals to start your journey. Where to look for borrower prospects, where not to look, who should be on your private lending virtual team and how they might be of service to you, etc.

Here's a BiggerPockets main blog my co-author wrote that explains it in high level. https://www.biggerpockets.com/blog/find-and-fund-private-money-loans

@Kevin Wong

I would suggest checking out our recently published book https://store.biggerpockets.com/products/lend-to-live that will help guide you through all the basics of how to properly and legally secure a private loan (which is exactly what seller financing is) including what additional provisions to review and order in preparation for close.

Some of these items would include an insurance binder with the seller as a loss payee, title insurance - lender policy, a legally sound promissory note - which I would not leave up to a title company to create, and any CA specific disclosures and usury considerations if it's to be owner occupied. California has a ton of laws around private loans and seller financing.

For local resources to connect with, contact Note Servicing Center based on Chowchilla. It's not who my private lending company uses regularly but I've worked with them in the past and that are reasonable. You can also contact Geraci LLP in Irvine about private money legalities and support. They are a great law firm that specializes in all things private money related.

Good luck!

@Michelet Polection

Have you considered getting a Line of Credit on the property and then lending it out for passive income? I got a HELOC on an investment property last year in 1st position with a variable, interest only rate. This allows me to arbitrage the HELOC into private money loans to other real estate investors where I could make a yield spread on the interest. My short term loans were typically in the 10.5-12% range so my yield is roughly 5-6% depending on prime. (My line is prime + 0.75).

If you aren't sure where to start in learning about becoming the bank, I just published a book with BiggerPockets last summer called Lend to Live: Earn Hassle-free Passive Income in Real Estate with Private Money Lending. You can check it out here:

https://store.biggerpockets.com/products/lend-to-live