Guided Real Estate Investing Podcast #26: Be the Bank - Be a Private Lender Investor

Guided Real Estate Investing Podcast #26: Be the Bank – Be a Private Lender Investor

Announcer: You’re listening to Real Estate Investing Talks, a SimplyDoIt podcast. Your journey to success in real estate investment starts right here, right now. Here’s Dani Beit-Or.

Dani Beit-Or: Good morning. Good afternoon. Good evening. We have people joining us, obviously, from different parts of the world, so it’s always a neat feature or a neat tool to use.

I’m Dani Bei-Or. I’m currently in southern California, sunny southern California. The weather is a bit chilly but not too bad. I want to wish everyone that’s joining us and listening to us now or audio recording, Happy New Year.

We are finally back from a little bit of a break that we took for the past month from the live sessions due to travelling and holidays. We are resuming. We are doing a weekly session about investing in real estate, obviously. The session, it takes place on Friday.

Now, I’m not sure. Is it set up for noon or PST or 11:00 a.m. PST? I’ll check it up. But every week, the main point of the session is actually to have you bring your questions so we can actually respond to them. I usually try to bring a topic to talk about for 10-15 minutes, but, ideally, I would love to have your questions and respond to them. That’s the main purpose of this session.

My name is Dani Bei-Or. I am a real estate investor. I help others invest in real estate. We primarily focus on rentals and flips in different parts of the country, residential rentals and flips in different parts of the country. We’ve been doing this, investing in US real estate, for 16 years or so. We’ve been helping others to do it for about 14 years or so. That’s been my experience. I’m not informed or experienced in every aspect of real estate but in many of them.

Feel free to drop questions as I speak related to the topic or not related to the topic. I’ll try to respond, of course. What I wanted to talk about today is actually on the little concept called being a private lender.

The reason I wanted to talk, to take a little shift from the traditional rentals and flips that we talk about and talk about something a little bit different which is private lending is because I have found, over the years, that, every once in awhile, I meet with an investor and, either they tell me or I can tell, there’s a lot of hesitation.

There’s a lot of concern. There’s a lot of uncertainty. They’re not feeling comfortable with buying a piece of real estate and renting it out because they are very much concerned about vacancies and repairs and dealing with property managers, etc. All those things. I guess they heard a lot of horror stories, and that concerns them, or they don’t want to deal with flipping houses themselves or altogether investing in flipping houses with us.

You don’t need to do much when you work with us. We do all the heavy lifting, but it’s still something that concerns them, or they’re just not a good fit for their personality. But they still want to invest.

What I think is a really good, passive way to invest in real estate for someone who doesn’t want to take more of a hands-on or a more direct approach of owning real estate directly one way or another is actually becoming a private lender.

A private lender is someone that behaves like a bank. You invest as a bank in, let’s say, some real estate investment. It could be a rental. it can be that someone else is buying. It can be a flip that someone else is flipping, and you’re taking a position as if you are the bank. That means you lend money out. You collect interest payments or mortgage payments on a monthly basis.

There are different ways how to go about it. You secure yourself by recording: by signing a mortgage agreement, by recording a note to the property, by adding your name to the insurance policy. You don’t own the property. You are just a bank, same as if you’re buying real estate with a mortgage from one of the big banks. They don’t own the property. They are just the lender.

You become a passive investor in which you care less if the property is performing well or underperforming, or, if we’re doing a flip and it takes a little bit longer to renovate, that’s none of your concern. You can say, “Listen, if you need three more months of renovation, fine. Pay me the interest.”

You don’t have say. You don’t own the property, so you don’t have say regarding the decisions that are being made on the property or on the project or on the flip or whatever that is, but as long as the borrower is honoring the mortgage agreement, the loan agreement that you provided, then you are just sitting there, don’t care if the property is vacant, if it needs repairs, if it’s occupied, cash flowing.

None of this is a concern to you. The only thing that you want to make sure is that you are lending on a good LTV (Loan To Value). That means if something goes bad, then you still have some equity, that the owner has some skin in the game.

What I love about private landing is that pretty much everything is negotiable. We can negotiate the Loan To Value, the rates, the points if we are using points, the schedule of payment. We could do monthly payment. We could do quarterly payment. We could do one payment at the end. Everything that we are considering will affect the rate and the terms.

That means, for example, if I go with someone who says, “I’m willing to negotiate, and I’m willing to accept loan payments only at the end when I sell the flip property,” then that probably means I would pay a higher interest rate because this lender is not collecting anything on a regular basis.

On the other end, if I’m dealing with someone who is lending me 50 percent of what I need, which is a lower LTV, and I pay monthly payments, that probably means that I would probably get a better interest rate.

It’s all negotiable. The experience of the borrower, the amount needed, the Loan To Value, the payment schedule, all of those things are being considered and being decided on the loan terms.

I think that, for anyone who wants to invest in real estate and are a little bit concerned for one reason or another or busy or not really interested in being more involved or actively involved, taking a position of a private lender, which means you lend money and you care less about what the property is doing performance-wise, is a very good way to secure your funds in a relatively high interest rate. 

I usually see anywhere from seven percent annual interest rate all the way to 15 and even more interest rate all depending on the risk factors, of course, that you as the borrower is taking.

I just wanted to cover an option for some of you who don’t want to be actively investing in and owning real estate and dealing with it. You can become a very passive one. It’s called a private lender.

The difference between a private lender and a hard money loan or hard money lender is that you are a private person lending money out to someone else. Hard money are usually a company or organization that just does it professionally. 

If there are any questions, by all means, feel free to post them right now about this topic of private lender. If you want to post questions that are not really related to private lending, by all means, post them as well.

If you are interested in seeing, we have a video that we did about a year ago which is a little bit more structured with visual and with a PowerPoint presentation about private lending and you want to get a link to it, put your name or ask for it, and we’ll just post a link to that video. It’s pretty much everything that I said up until now, just a little bit more structured and detailed. 

With that said, I am done with my topic of considering becoming a private lender for today. Feel free to ask questions if you have. If not, I will let you go for the weekend. I’ll wait another 30 seconds or so or a minute for questions to come in, and if they come in on private lending or something else, I’ll respond. If not, we’ll call it a wrap.

If you are listening to the recording– I get quite a lot of feedback from people who say, “We watched your video, not live, but after the fact.” By all means, feel free to post comments or questions, and I’ll try to respond to them, post-event, of course.

Perfect. In that case, I want to say thank you for taking the 10-15 minutes of your day. Oh, I see something coming in.

The question is, where is the best place to find a private lender? Honestly, I don’t know to tell you that. I usually tap into my own network and resources of people that I have. I don’t have a place that they show up. I think some Facebook groups may have that. I can’t really point to you in a certain direction. I wish I had.

Private lenders are usually a little bit more hidden away. Facebook groups, that would be one way and your own personal network. All the private lenders I have used as a borrower have all surfaced from my own network of people that I work with, investors. 

No problem. I’ll find the link, and I’ll send one to you. No problem.

All right, everyone. That’s it. Thank you very much for your time. I hope to see you in the next one on Friday, a week from today. Have a terrific weekend. Good evening. Good afternoon. Good night. See you soon. Bye-bye.

Announcer: Congratulations. You are one step closer to success in real estate investment. You’ve been listening to Real Estate Investing Talks with Dani Beit-Or. To learn how SimplyDoIt can guide you through the real estate investment process and achieve nationwide success, visit us on the web at Thanks for listening.