I’ve successfully been a private money lender for 10 years. The after repair value is key, but also is the time it takes to get the repairs done. You MUST take time to get to know the flipper, his/her plan, how experienced they are, the refi exit strategy, and even what renos are necessary vs. nice to have. The longer you work together the more willing you can be to relax on LTV on the “front-end” of the flip (before it’s in selling conditions). Visit every potential property in person before the handshake. Get a lawyer that works on YOUR behalf, not the borrower. And avoid brokers. Go to local REI gatherings and talk personally with flippers. Have a loan term sheet ready to hand out.
Hi Dave, what about the tax man. In BP's example in this video he made 10k on his 100k in the first year. Doesn't 10%-37% of that disappear to the IRS as capital gains?
@@ffliberty There are a few ways to lower the tax burden, but yes. The government always wants its pound of flesh REGARDLESS of how you invest! Note: many people do this with tax deferred funds in their IRAs. 😉
The title of this video is misleading. This video talks about HOW Private Money Lending works. It does not really explain the details of how one would BECOME a Private Money Lender. Who creates the documents, how do you vet the borrower, what the fees are, resources for getting started, etc is what I was hoping to see.
Documents should be created by lawyers, then adjusted to the situation, usually there is a fee at origination 1-4% followed by monthly payments of 8-14 although 10-12% is most common, closing costs and title search fees are covered by the borrower, there are plenty of lectures / seminars / courses if you’d like to get class like information but overall it is a very basic concept to grasp and it is better to reduce your margins slightly and leave the technicalities to the professional (lawyers, accountants, ext). You choose a borrower depending on the type of loan you chose to make, if it is some sort of flip, look at their track record & skin in the property, if it is a cash equity line of some sort make sure that the property is owned outright and loan out 50-60% of the collateral property’s fair value since if they default you will have to fire sale the property below market price. Finding customers is the hard part, use your network and leverage the internet. Lastly, being a real estate agent working with higher end investors helps Pool funds for bigger deals. Hope that helps!
Something I wish other videos would address, and maybe I always miss it, is at what point should one feel ready to start using their own capital to get started, or how might one get started by using another party's capital?
I’ve even used a HELOC to create my OWN line of credit to borrowers with my rate charged to them TIED TO PRIME! That way it’s structured to provide me a consistent rate regardless of what the Fed does. 😉
Good video Brandon but I don't know where you got these rates from...I have NEVER heard of borrowers for private lending paying any less than 12%. I'm a private lender for a number of developers in Boston, MA and Providence, RI. I charge 2 points at closing and 14% interest only fixed rate on a 1 year note. The lowest I've ever gotten from a developer is 12%. Double digit rates are standard in private lending for real estate
It seems like everybody who puts a TH-cam video out explaining how lending works, says 10%. I think it's for simplicity's sake when showing people how to do the numbers for interest only
Im a private lender.typically in my country. There should be a collateral example give your atm or issue check to me. Or land title whatever.payment mode is monthly.total amount + the interest devided by like 6mos or 12mos depends on what has been agreed..
Taking over my Dads private loan portfolio. He has been lending his own money out for 35+ years. He manages all of it manually a.k.a. manila folder style. I am looking for some software to help manage all his loans. He has about 30 private loans active. He also has 12 rental properties he also manages the same way. Any recommendations would be helpful.
hi dave, thanks for sharing all your knowledge here, that's awesome! can you tell us a little bit more how to taking money out of self directed ira would work for private money lending? currently i have a 401k and if i want to take money out of it they charge me a fee plus i have to pay it back (to my own 401k) with 5% interest. are the conditions for pulling money our of IRA similar?
Georg Weber Hi Georg! A 401k is STACKED AGAINST using your retirement funds for anything other than traditional instruments, like stocks, bonds, mutual funds, money markets, etc. It’s frustrating that to invest in anything else, they make you either borrow from your 401k or take an early withdrawal with PENALTIES and TAXES. Ugh! The blessing I had was a CHANGE IN JOBS which afforded me the opportunity to move all of my 401k funds into a self-directed IRA. I researched several and decided on Equity Trust Company. They are a very good IRA custodian and offer convenient control of funds. They charge an annual fee based on the total value of my account. Then came finding the right property rehab expert. I did, and closed 15 rehab deals with him over many years. Then I met another even better borrower who worked with me and my lawyer to structure a LoC with his property investment and management company. And the rest is history.
That’s a payday loan, not the same, borrowing for productive uses is considered debt leverage and thus potentially an asset, borrowing for consumer spending (especially at high rates) is pure financial illiteracy
I’ve successfully been a private money lender for 10 years. The after repair value is key, but also is the time it takes to get the repairs done. You MUST take time to get to know the flipper, his/her plan, how experienced they are, the refi exit strategy, and even what renos are necessary vs. nice to have. The longer you work together the more willing you can be to relax on LTV on the “front-end” of the flip (before it’s in selling conditions). Visit every potential property in person before the handshake. Get a lawyer that works on YOUR behalf, not the borrower. And avoid brokers. Go to local REI gatherings and talk personally with flippers. Have a loan term sheet ready to hand out.
why avoid brokers?
Mark Manley Why avoid the “middleman”? $$$!
Loan term paper? Where can I find this?
Hi Dave, what about the tax man. In BP's example in this video he made 10k on his 100k in the first year. Doesn't 10%-37% of that disappear to the IRS as capital gains?
@@ffliberty There are a few ways to lower the tax burden, but yes. The government always wants its pound of flesh REGARDLESS of how you invest! Note: many people do this with tax deferred funds in their IRAs. 😉
The title of this video is misleading. This video talks about HOW Private Money Lending works. It does not really explain the details of how one would BECOME a Private Money Lender. Who creates the documents, how do you vet the borrower, what the fees are, resources for getting started, etc is what I was hoping to see.
Documents should be created by lawyers, then adjusted to the situation, usually there is a fee at origination 1-4% followed by monthly payments of 8-14 although 10-12% is most common, closing costs and title search fees are covered by the borrower, there are plenty of lectures / seminars / courses if you’d like to get class like information but overall it is a very basic concept to grasp and it is better to reduce your margins slightly and leave the technicalities to the professional (lawyers, accountants, ext). You choose a borrower depending on the type of loan you chose to make, if it is some sort of flip, look at their track record & skin in the property, if it is a cash equity line of some sort make sure that the property is owned outright and loan out 50-60% of the collateral property’s fair value since if they default you will have to fire sale the property below market price. Finding customers is the hard part, use your network and leverage the internet. Lastly, being a real estate agent working with higher end investors helps Pool funds for bigger deals. Hope that helps!
@@jank3441any way I can reach out to you for more info?
Something I wish other videos would address, and maybe I always miss it, is at what point should one feel ready to start using their own capital to get started, or how might one get started by using another party's capital?
I’ve even used a HELOC to create my OWN line of credit to borrowers with my rate charged to them TIED TO PRIME! That way it’s structured to provide me a consistent rate regardless of what the Fed does. 😉
How those an investor set him self as a separate Entity (LLC) trust or any For tax purposes or Liability ?
Good video Brandon but I don't know where you got these rates from...I have NEVER heard of borrowers for private lending paying any less than 12%. I'm a private lender for a number of developers in Boston, MA and Providence, RI. I charge 2 points at closing and 14% interest only fixed rate on a 1 year note. The lowest I've ever gotten from a developer is 12%. Double digit rates are standard in private lending for real estate
from what i've heard so far, 10% is typical here in the seattle area: 10 - 12%
Do you do private lending for personal loans. If so my contact me at mhumphr5@emich.edu
It seems like everybody who puts a TH-cam video out explaining how lending works, says 10%. I think it's for simplicity's sake when showing people how to do the numbers for interest only
@@nightterror007 I feel like 12% would be an easier number so 1% a month lol
Hi JPS! what the rates you have now when there is historical low rates in the country.
Do you need a license to lend to real estate investors? Great content.
How Does the private investor set him self As separate entity (LLC )- trust or what ? Best tax season....
What’s the difference between personal moneylender and private moneylender ?
I can only start small with down payments and rehab loans... Not ready for the big league just yet. Any advice from a small approach perspective?
How do you get yourself as a lien holder and contract for the lending?
Im a private lender.typically in my country. There should be a collateral example give your atm or issue check to me. Or land title whatever.payment mode is monthly.total amount + the interest devided by like 6mos or 12mos depends on what has been agreed..
i need a private lender asap
Taking over my Dads private loan portfolio. He has been lending his own money out for 35+ years. He manages all of it manually a.k.a. manila folder style. I am looking for some software to help manage all his loans. He has about 30 private loans active. He also has 12 rental properties he also manages the same way. Any recommendations would be helpful.
What do you want the software to do?
I came here after playing yakuza 4 because it looks like money potential
Be your own banker borrow small loans and make your future
What's the difference between private money lender and hard money lender
Hard money lenders are private companies (or investors) offering asset-based loans that borrowers secure with real property.
What is Individual Money Lender?
To be a Private lender Do i need a NMLS Or a MLO
How can I start this kind of business in California?
Can I be one of many private money lenders for one person? Like if the person needs $30,000 and me and two other people fund them $10,000 each.
that's basically what hard money loan companies do
@@AlexanderMoline I thought hml loan out their own funds rather than teaming up with other lenders to loan out money.
100k you can make 50k a year in the stock market!!! Why 10k
Thank you
@ Stock market has returned 6% in past 100 years? No way, man. I call this BiggerPockets bias 😂
I think it's about 9.7%. Still though I do notice they like throwing lower numbers out there. Last 10 years though has been like 14%
is there a private money lender you would recommend?
Get your paaydaaay loan now => twitter.com/3a000d80820f32e35/status/809350192776347648 How Can I Becoomee a Privаte Money Lender AskBP 065
Justinmedfordlending@gmail.com
+1 760-705-4768
Thank you!
Great info but you go tooo fast
I have to go to youtube settings at the top and change the playback setting to a slower speed
And then there’s my Self-Directed IRA... 😏
hi dave, thanks for sharing all your knowledge here, that's awesome! can you tell us a little bit more how to taking money out of self directed ira would work for private money lending? currently i have a 401k and if i want to take money out of it they charge me a fee plus i have to pay it back (to my own 401k) with 5% interest. are the conditions for pulling money our of IRA similar?
Georg Weber Hi Georg! A 401k is STACKED AGAINST using your retirement funds for anything other than traditional instruments, like stocks, bonds, mutual funds, money markets, etc. It’s frustrating that to invest in anything else, they make you either borrow from your 401k or take an early withdrawal with PENALTIES and TAXES. Ugh! The blessing I had was a CHANGE IN JOBS which afforded me the opportunity to move all of my 401k funds into a self-directed IRA. I researched several and decided on Equity Trust Company. They are a very good IRA custodian and offer convenient control of funds. They charge an annual fee based on the total value of my account. Then came finding the right property rehab expert. I did, and closed 15 rehab deals with him over many years. Then I met another even better borrower who worked with me and my lawyer to structure a LoC with his property investment and management company. And the rest is history.
@SUNDRA SMITH solo 401k you can pull without tax for real estate purchase if I'm not mistaken
Seems kinda scummy to me. Some people in my city target the poor and charge 20% interest for a short term loan
That’s a payday loan, not the same, borrowing for productive uses is considered debt leverage and thus potentially an asset, borrowing for consumer spending (especially at high rates) is pure financial illiteracy
You realize he's describing a loan to a real estate investor, right? Not some poor guy off the street.
Scummy? Banks do this every single day. It’s wise and profitable to be your own bank. Good luck!