Happy New Year! You might be thinking about becoming a Private Lender, and asking these kinds of questions: “Is this for me? Is this legit? Is this even legal?” These questions get asked of me all the time. I don’t know if it is for you, per se. Private Lending IS legal, and it IS legitimate. But you need to know what you’re doing. And if you don’t know what you’re doing, find people who do. And if when you meet ANYONE that tells you becoming a Private Lender isn’t legal, or that it’s too risky, tell them thanks……but they clearly don’t know what they’re talking about! The naysayers will hold everyone back that they can. DON’T let them hold you back. I certainly don’t! Here’s all you need to become an OUTSTANDING Private Lender:
Step 1 - Decide to do this and BEGIN! (Plenty of reasons exist on this blog)Step 2 - Decide on your loan criteria. (Residential or Commercial? Short Term vs. Long Term? 65% Loan to Value or higher, like 80%?) Here’s the criteria I show Borrowers… Step 3 - Find borrowers. (They’re EVERYWHERE – this is easy – people ALWAYS want to borrow money – REIA Meetings, Craigslist, classified ads, word of mouth, escrow/title reps, Real estate attorneys, etc.) Step 4 - Find your Team. (You need an attorney, escrow agent, title rep, private mortgage broker, foreclosure company, appraisal, RE Broker – these people should help make informed decisions, and help protect your $!) Step 5 - Fund the deal! (Your team does most of the work. You told them what to do, they made sure it was done legally, and protecting your interests. Of course, they can’t read your mind, so you really need to know how to guide them correctly.) Always remember the reason we’re doing Private Lending: To have our money working in a very safe investment, with as little of our time, and with strong returns, as possible.
Don’t become involved in Private Lending if you want to speculate – go buy a house and rehab it yourself. Don’t become a Private Lender if you don’t understand the risks and how to mitigate those risks. Don’t give anyone money directly: NEVER just ‘write a check to your friend’ and hope that the money gets back to you someday. Not even family members. Be smart. By all means, learn about the process of Private Lending: The risks, the law, protection, etc.
But you might not have time to do everything. I suggest partnering up with someone who has experience, and who is doing this. It’s how my Funding Partners view this: Leverage. Leveraging someone else’s experience (mine) with money (theirs) can result in an excellent source of synergy between one another.
If you’re a busy professional – a doctor, lawyer, teacher, musician – and cannot spend time doing all the due diligence on the property or a borrower, then find someone who does this full-time. We exist! We’re all around you – just ask your friends, “Do you know anyone that does Private Lending?” You’ll be surprised how’s doing this. Or send me an email, I’m always discussing this with other people just like you.
Also, don’t forget that you can use your Self-Directed IRA for Private Lending! See the excellent Guest Post: From the Desk of Self-Directed IRA Expert, Kaaren Hall. This an exceptional way to get started with Private Lending – I have a few Funding Partners using their SDIRA’s, and they LOVE getting better returns than a CD at the bank. Kaaren can really help you figure all this out. Please call her and get yours set up.
So here’s a question: If you have thought about becoming a Private Lender, how can you make it happen in 2013? Yes, that begins today!!