All Forum Posts by: Corey Dutton

Thanks @Ian Ippolito. Oh no, I would never, ever considering doing something that the sacred 'The Virgin Group' failed at in the U.S.! LOL. It may work in other economies but obviously it doesn't have enough demand in the U.S. market. I agree with you that lending money to family members is certainly risky business. In fact, we get frequent hard money loan requests for the purpose of buying out family members (and friends!) out of real estate investment partnerships. Actually this is a very common use of hard money, to buy out family and/or friends in real estate deals. Because do you think a bank is going to give you a loan because your cousin has hired all of his family members to run your apartment complex and now its losing money so you need to buy the cousin out? No way. This is only the kind of loan a hard money lender or bridge lender would do and it's expensive. But it can be much cheaper than what a family member is costing you in an investment. So, back on point here, yes you are correct to say that doing business with family members is a risky proposition!!!

But it's already an agreed upon deal before you go to the platform, so the platform offering is nothing more than an organized, legal way to set it all up. This is why I like it. Versus crowdfunding where one takes a deal to the platform and the "crowd" or "peers" fund it. 

This platform based approach to family lending would make it less litigious or problematic, I would think. Maybe there was just not the demand out there that would produce the numbers they needed to keep going? That's my guess. Any other thoughts about why this lending model failed? Please share.

Several companies have tried and failed to create a successful ‘family lending’ platform, whereby family members can lend one another money. Similar to a peer-to-peer lending platform, also called crowdfunding, a family lending platform enables relatives to lend one another money while the “platform” intelligently handles the contractual details and the loan servicing, e.g. payments. (Conversely, peer-to-peer lending platforms are loans from complete strangers). This seems like a great idea, the family lending model via an organized digital platform similar to Prosper.com. This would give family members more comfort when lending to other family members, since the platform takes care of all of the details. Not to mention family members who are lending can take advantage of rates of return that they would otherwise not be able to get in the current environment.

Many have tried and failed at the Family Lending Platform. CircleLending, a startup out of Massachusetts, launch its Family Lending Platform in 2000. This later became, “Virgin Money USA,” a Virgin Group Company. The Virgin Group started Virgin Money USA in 2007, which was a stab at the Family Lending Platform business model, but finally withdrew from the U.S. market in 2010. The Family Lending Platform seems like an idea that could have been translated into a viable business model.

So why did it fail? Please share your comments below regarding family lending via a platform such as Prosper.com and why you think it failed. I am curious to see what others have to say about this topic of family lending via an organized, digital platform.

@Tim Macy do you know any gap lenders in your area or any investors wanted to JV on rehab deals? We have a deal about to fall apart because our guy's partner backed out on a rehab deal last minute because he doesn't have the funds to close. Maybe you know a rehabber that would like to JV on the deal if not a gap lender? How about you @Michael Gutierrez? Do you know anyone who would be interested?

Thanks for your help!

For real estate investors seeking ‘buy and hold’ investment opportunities, financing is always a conundrum. So how does an investor find loans for rental property? Because there are so many avenues and options, an investor in rentals must make 3 important considerations when seeking financing:

1. What type of financing can you qualify for? Is your income and credit up to par to qualify for a bank loan? Or do you need to seek out other alternatives for financing such private money, hard money loans. Take time to find out what you can qualify for before you go too far down any road. Try to discover every, possible option for financing and put every option on the table.
2. Is a private money or hard money loan an option for you? If your credit is not up to par, or you have self-employment income, you may not qualify for bank financing. This may make you a candidate for hard money financing, since most hard money lenders typically don’t worry about credit or income, but more about the property itself that is being used as collateral for the loan.
3. Are you seeking a short-term solution or permanent financing? If you are just looking for a short-term, bridge loan to purchase a rental property, this is very different from a long-term, permanent type of loan for a rental property. Research the various options once you know what your goal is for the financing.

Whether you’re seeking a bank loan, a hard money loan, or some other form of loans for your rental property, start with the 3 considerations above. What else would you add to this discussion? Please share.

A hard money loan is a type of non-bank loan that comes from a private money source. Hard money loans are known for their speed of funding, low hassle loan approvals, and higher interest rates. So why would anyone pay the higher interest rates associated with a hard money loan?

1. Speed of Funding: Because good real estate opportunities don’t wait for bank loans, a hard money loan may be your only option for financing a real estate transaction. When it comes to fleeting real estate opportunities, it’s either buy with all cash, or buy with a hard money loan in place of all cash.
2. Rehab Properties: Often the best values in real estate can be found in the purchase of properties that need work such as repairs, past due maintenance, and cosmetic rehab. Most banks won’t lend on these types of properties for many reasons.
3. Bad Credit or No Credit: Banks won’t lend to borrowers with bad credit or no credit, but hard money lenders are usually not concerned with credit but rather with the property being used as collateral for the loan. For example, a borrower with a bankruptcy or foreclosure is not a problem for most hard money lenders.

A hard money loan may be your best option when the situation calls for it, so make sure that you have a few hard money lenders on your contact list. You never know when you may need one!

Posted by Corey Curwick Dutton, Private Money Lender

Taken from a Tedx talk that was published in September of 2014, this inspiring video left me thinking about how principles used in successful hostage negotiation can be applied to leadership. So what do you think the success rate is for hostage negotiations? 50%? 75%? The actual success rate of hostage negotiations is an astounding 95%! If the principles used in successful hostage negotiations have led to such high success rates, how effective are these same principles when applied to leadership?

George Kohlrieser is a psychologist and seasoned hostage negotiator. Most important, Mr. Kohlrieser himself has been held hostage on four occasions. Mr. Kohlrieser believes that the principles used by hostage negotiators are closely tied to leadership, teamwork, and fulfilling potential. The first principle used in hostage negotiations that he ties to leadership is bonding. Bonding, as defined by Mr. Kohlrieser, means that you are able to get into the “space of another human being.” You don’t have to like someone you are bonding with, but by establishing a common goal with the person, you can accomplish great things.

The second principle used in successful hostage negotiations that Mr. Kohlrieser believes is fundamental to effective leadership, is based on trust. As a leader, Mr. Kohlrieser believes that you must become a “secure base” for those you intend to lead. A person who is a secure base offers protection. To develop trust as a leader you must become a secure base. But how do you build trust? Leaders must be able to both dialogue (talk), and listen, in order to build trust. Some leaders don’t talk well, they don’t answer questions, or they simply don’t listen. By learning to both talk and listen, you are able to build trust and thus will begin to establish yourself as a secure base for those you lead.

While watching this video of George Kohlrieser at a Tedx Talk, a couple of intriguing questions emerged: How do you bond with those you’re trying to lead? And, are you a secure base that inspires others, that gives others protection? (e.g. employees, family members, colleagues, partners, etc). These questions are hard questions to answer, and in this video, Mr. Kohlrieser challenges you to answer these questions for yourself. If you are in a position of leadership of any kind, take a few minutes to watch this entertaining and thought-provoking video. It will certainly get your wheels turning!

(Source: https://www.youtube.com/watch?v=k9Z9z_Fd3Bw)

Yes I'd be pretty curious to see what the default rate is on these portfolios as well....

Also, how are these crowdfunding platforms being regulated under Dodd Frank and the CFPB (Consumer Financial Protection Bureau). Consumer lending requires licensing post Dodd Frank. Are you and these other platforms subject to licensing requirements or do you just fly under the radar due to the novelty of these platforms?

Private equity is starting to pay attention to this ever growing trend in private money lending of raising capital via crowdfunding platforms, also called peer-to-peer lending (P2P Lending). For those who still don’t know much about this new form of private money lending, P2P Lending is a loan that comes from individuals instead of a bank. Such lending platforms offer consumer loans for between $1,000 to $30,000, and interest rates are between 6% to 30%, with loan fees of between 1% to 5%. Private equity is definitely starting to see the benefits of securitizing these massive tranches of debt being generated by these P2P lending platforms.

BlackRock purchased approximately $330 MM in consumer loans this year that were made by ‘Prosper,’ which was America’s first P2P lending platforms. BlackRock plans to securitize this debt by slicing and dicing it up and selling it off to investors the “old school” way. In fact, a new US based investment management company called ‘Prime Meridian’ offers two funds that only invest in P2P loans.

For those of us who have always thought that crowdfunding was a trend and nothing more, we may be starting to think otherwise!

Read the entire article here: http://bankinnovation.net/2015/07/from-p2p-lending-to-lending-marketplaces-the-graceful-dance-has-started/

A private money loan is any loan that comes from a non-bank source of financing and includes hard money loans, payday loans, crowd funding, peer-to-peer loans, and bridge loans. Although banks are known for competing amongst themselves to offer the lowest possible interest rate, private money loans are typically at much higher rates of interest. So why would anyone pay the higher interest rates associated with private money loans? Here are 7 examples where a private money loan could be the ideal type of financing for you or your clients this year:

1. 1. Fast Real Estate Transactions: Good real estate deals don’t wait for bank financing. Most of the time it’s either cash only, or, a private money loan.
2. 2. Partner Buyouts: Most banks won’t make you a loan to buy a partner or family member out of a property that is jointly owned, but private money lenders will.
3. 3. Bad Credit: Banks typically steer clear of borrowers with foreclosures or bankruptcies on their credit, but private money lenders aren’t scared off by bad credit.
4. 4. Foreign National Real Estate Purchases: For foreigners looking to buy real estate in the U.S., even with large down payments, it is difficult for them to obtain a bank loan. Many private money lenders will lend to foreign nationals on U.S. real estate purchases with sufficient down payments.
5. 5. Bank Financing too Slow: See number one above. Depending on the circumstances, a loan may be needed very quickly. Banks are not known to move quickly.
6. 6. Uncle Sam knocking on your door? Unexpectedly large tax burdens can really put you in a bind. Private money loans are designed to allow people to borrow against assets they own to cover surprises such as this.
7. 7. Distressed or Vacant Property Purchases: Often the best values in real estate can be found in vacant or distressed property purchases. Typically banks want to see that a property has a certificate of occupancy, or that it is generating income, before they will lend on it.

There are so many more reasons that you or someone else you know may need a private money loan this year. A private money lender can be your best friend when certain circumstances warrant, so it’s never a bad idea to have a few in your list of contacts. What other reasons would you add to this list for why someone may need a hard money loan?

Posted by Corey Curwick Dutton, Private Money Lender