In 2017, I started my wholesaling business with a whopping $20. Seriously, 20 bucks. In 2019, I had the opportunity of a lifetime to purchase my first deal—16 single-family homes. The purchase was a little under 1.5 million dollars. The problem was I didn’t have any money that I could put towards this acquisition. This is when I was introduced to Private Lending. Two investors came to the table with the full $1.5 million. My life was changed forever!

Since that first transaction, I have purchased over 100 homes and have built a multimillion-dollar company all through private lending. During that time, I have observed two facts:

  1. Millions of dollars are made every year through Private Lending.
    Both the lender and the borrower have the opportunity to build wealth.
  1. Millions of dollars are lost due to investors not taking advantage of this investment strategy.

Whether you are not familiar with this option or you have chosen not to go the private

lending route, you are stunting your growth and your financial future.

The Lender Perspective

Most of the private lenders I have worked with are not in the real estate business. They are doctors, engineers, lawyers, tech professionals, or other business owners. They are looking for ways to deploy capital that will work to build wealth for them. They are passive investors not looking to be involved in the day-to-day operations. If you have capital and you are considering investing in real estate, lending is a good possibility for these reasons:

  1. Less Work, Fewer Headaches
    If you lend money to a real estate investor instead of purchasing a home for yourself, you lower the responsibility and risk that you take on. If you don’t own the property, you don’t have to deal with the contractors, the realtors, the property managers, the tenants and best of all you’re not trying to solve every little problem that the owner may face. I’m not saying lending is perfect. You will have issues at times like anything in life, but by lending you lower the amount of interaction that it may normally take to complete a real estate investment.

  1. Safe and Secure
    Every investor has a level of risk they are willing to take. For some it is very low while others are open to shooting for the moon every chance they can. There are certain elements of risk in lending like any other investment, but with lending you can negate a sizable amount of that risk. There are several ways to structure your loans, but most are SECURED LOANS meaning the capital you lend is secured by the property that is being purchased. A promissory note is the agreement between you and the borrower. The mortgage or deed is what secures your loan. Those documents are registered with the county and if the borrower does not pay the loan, you can repossess the property. Most loans are anywhere from 50-70 percent of the actual value of the property, which protects you and your capital.

  1. Great ROI
    Loans can be short term or long term, they can have high interest rates or low interest rates, and they can be made in your personal name or an LLC you have created, or through your IRA. Lending gives you the ability to get mailbox money every month with limited experience. It is similar to stocks and bonds. You don’t have to be a millionaire to invest. You don’t have to worry about having a great credit score and being approved to buy the house. You can be young with a minimal amount of capital and begin lending to build wealth for the future. Maybe you are older and have an IRA with capital sitting there going to waste, you could invest and start receiving returns on that capital. Lending can give you the opportunity to make anywhere from 6% to 20% on your investment.

  1. Education
    Many investors have come before you and have made millions in lending. Because of that there are educational courses created to teach you how to be your own bank. The “do’s and dont’s” are available for you to learn and help you set yourself up for success.

The Borrower Perspective

If you are like I was and have limited capital, not a perfect credit score, or little track record, working with a private lender is about the only option you have. You are not getting a loan with a bank that will require capital with a great credit score, and you are most likely not going to get a loan through hard money lenders that require capital and experience.

It can be deflating watching others reap the success of real estate and not having all the tools to help you get started. Private lending can come to your rescue and start you on the path to success and financial freedom. Here are a few ways private lending changed my life and can change yours too.

    1. Relationships.
      There are many investors looking for great opportunities to deploy their funds. They are out there looking for people like you. Sure, it may be more difficult at first to raise the capital you are needing to do your first deal but over time it does become a lot easier. The key is getting your first deal and following through with your commitment. If you do what you say you’re going to do and if you show your lender a positive experience, they will do it again. In fact, they might even deploy more capital with you and even refer you to their friends.
      Building relationships are key. Let’s face it, you will make mistakes, but if you work hard to always take responsibility and do the right thing, your lenders will appreciate that.

    1. Speed and Process.
      Sometimes the key to being successful in real estate negotiating is how quickly you can purchase a deal. Working with banks and other lenders can often take a while to close. The normal time frame is 30-45 days. I have seen sellers get multiple offers on their property and go with the investor that can close the quickest. Having a private lender available can give you the flexibility to move quicker on the deal than your competition. After you do a deal or two with a private lender and you have built that relationship, you can skip through a lot of the red tape that you will face going through a traditional lending company.

    1. Structure
      There are more ways to skin that cat. I’m sure you have heard this saying before. This too applies in dealing with private lenders. You can structure each deal differently or that best suits you and your lender. At first you may have to do a 50/50 split with your lender or maybe pay a higher interest rate. Don’t be afraid to pay a little bit more for the capital. Don’t lose a deal because of greed. A bird in the hand is worth more than two in the bush. I’m full of wise sayings under this point. Remember you are being given an opportunity to make money with little to no skin in the game. If the lender requires more from you at first that is ok. You are paying for your education. As you grow you can restructure your loan to better suit you. Get the deal done.

Many people have played a major role in my success including the private lenders who believed in me and took a chance on me. I will be forever grateful to everyone who lent me funds because without them giving me the opportunity, I would not be where I am today.

Categories | Article | Funding
Tags | Capital
  • Jason Engelman

    Jason has over a decade of executive management experience. For the past 5 years, his focus has been managing investment portfolios within the real estate and energy industries. Jason is married to Country Music Artist Tori Martin and together they live in Nashville,TN and Fort Worth, TX.

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