All Forum Posts by: Taylor Hughs

This morning I was thinking since you are in DFW area that you should attend one of the Quest IRS mixers...as there should be people in the group with IRAs looking for private placement.  and BAM if they're not having a private money LIVE seminar soon.  Really for people with money looking to lend, but that's where you go to find them.

How to Score Big with Private Money Lending
Tomorrow, January 13th, 12pm CT

Actually looks like it is not a mixer but a zoom call.   You can lookup the contact info for quest and subscribe to that call.  Maybe good intro to how it works, what costs you can expect, and some of the players.   I would also suggest you go to some of their live events if you can.

@Taylor Hughs, I appreciate your enthusiasm.  I will provide another point of view, but it aligns with the others.  You said "I have gotten into real estate the last month or less..." 

To mirror Bruce's message: If I told you: "I really got into football the last month or less.  I read all the play books.  Now I want to go to Baylor/A&M on a full scholarship for football."  If you were the Baylor/A&M coach, would you give up one of your scholarships and positions on me?

I understand you are only looking for advice at the moment, and don't want to discount your new passion for real estate, but anything new is always the best thing ever.  The challenge is: if you buy a piece of real estate, whether it be with your money or someone else's, during this honeymoon phase, you will likely be stuck with it when the honeymoon phase wears off.

Now to your direct point: private lending is great to scale your portfolio, if used correctly.  The biggest reason I see to use it is because no other capital is available to you.  Ultimately, private lending is just an expensive mortgage.  As Chris noted, you are going to be paying points up front and likely a 10%+ interest rate, versus a commercial lender that will take a little longer to close, but closing costs will be much lower and interest rate will be lower.

So why do people use private lenders: some will lend more than a bank will, so you don't need as much money down.  And they can typically move a lot faster, so if you offered a seller a 10 day close, no traditional lender would be able to hit that timeline.  

As for stacking loans, most lenders (traditional or private) are not open to that.  It would cause one of them to be in a second position, which neither wants.  You can do pref equity, which may function similarly to a loan, or bring in equity investors to fund the shortfall between project cost and mortgage, but generally, the lower down the capital stack (the order of priority for all the dollars in the deal) the more it will cost you, since each layer is taking more risk.

@Taylor Hughs

As mentioned private money is available but at what price. We are lending at 12-14% + points right now and will not go above 70% ltv

Can it be cheaper yes, but realize it is very expensive $ and you have to have experience and skin in the game.

If people are telling you there is 100% financing it’s right behind the tree where Bigfoot sleeps and across the river from Santa Claus house

@Taylor Hughs

Yeah, i think its a "viable" strategy.  But, like any "successful" strategy, you've got to be an "amazing" "business" person.  Yes, of course, somebody is trying to sell you on this strategy.

if I understand the strategy you are thinking of, yes you need to find an "angel investor" who is willing to take a chance on you. Then, out of the gate you need to DELIVER, and probably hit it out of the ballpark.  That investor will want to see big returns, otherweise what was the point.  Then, doing again, and again, and again..

The strategy is not much different than say, "marrying a rich widow..."  Or, how the likes of Munger or some of those other guys that say you have to make your first $1mil or was it $100k.  Basically, once you have that seed money, you can use it to make more money, AND even afford to have a bad deal --- not that you want one, but in reality it DOES happen.

So, basically this angel investor is that first $1mil.  You didn't earn/make it, you just got somebody to back you...

As mentioned above, no... don't go betting your grandma's retirement, etc.  

Yeah, it can be a really good strategy.. but its HIGH risk, high reward.

Whether it's your first, tenth, or thirtieth investment, keep an open mind about the types of properties you consider. There's a world of possibilities out there, and each one offers unique benefits.

You might find that single-family homes are readily available and could be easier to manage or sell if the need arises. It's about balancing your portfolio and not putting all your eggs in one basket. 

Being young will present challenges in a field where experience is highly valued not just with lenders. You will need a team of people to work with, including contractors. How will you know when one is trying to rip you off, is lying to you, or what to do if a squatter moves in? 

It's wise to be cautious and aware. Many players will not have your best interests at heart. This isn't to discourage you but to prepare you for the journey ahead. Consider teaming up with a mentor or a partner who has the experience and is willing to guide you. This collaboration could be a powerful learning experience and a stepping stone to success.