Is anyone here lending? Or has borrowed hard money and knows the scoop? We might be interested in lending some IRA money but don't know how to begin.

Jeffrey, every conference I attend talks about finding money to borrow - never about lending money. Is there a speaker out there who can address those of us with IRA money we can't use ourselves (yet) but would like a better return on that what we are presently getting?

Talk to a mortgage broker. They have many sources of money to lend and you can become one of those sources.

Always have a lawyer on your side to review documents. Spread your money over several projects, not all in one deal. Understand that not all deals require one lender, sometimes several lenders will go together on a project.

Understand that hard money deals are riskier by far. Easy deals can be and are done by banks.

I am getting tireder as I age, so I decided to down size two years ago and I was going to try to be a hard money lender with the cash influx. for several reasons, I didn't get very far in the research and I decided to buy some more properties.

one of my issues is that I am a control freak and I don't trust others ... so to pass my cash out would have been difficult.

I think the key would be o find experienced flippers ... and most of them either have the cash themselves or the ability to obtain it ... and there is no way I'd lend my money to a pie in the sky flipper dreamer as so many seem to be.

Good money around here if you can do it.

Since I don't like borrowing and lending is the other side of that equation, I can't recommend doing either. But while I wouldn't do it myself, here are some worthwhile considerations for those who want to try it.

Hard-money lenders in my area are experts at evaluating the ARV of properties. That is their collateral for when the deal goes bad. They're also experts in quickly and emotionless when demanding payment like clock work. Zero tolerance to the nth degree.

Hard-money is expensive for a reason. Usually the borrowers have exhausted all other sources--even credit cards--by the time they come asking for money at 8% with 5 points up front. Think about it...why else would anyone want money at such high rates when credit cards will do it so much cheaper and just as fast if not faster and without requiring any collateral at all? Yes, there are some "creative" terms involved, but those are all priced into the cost of the money.

I think you want an excellent collection agency on your side. Be ready to pounce on the non-payers. Again, Zero T.

If you aren't funding the whole deal, who else is? Most hard money lenders I know refuse to be in anything other than first position on a note.

When you lend money to "Investors" or "Flippers", they turn around and make a promise to repay you. Like with any deal, you bank on the idea they will make good and follow through. But the moment a borrower hits a snag such as an unseen issue with the property, zoning, permits ,etc -- it is cheaper for the borrower to walk away then to find more money to complete the property they now will yield them little to no profit! THIS IS a TERRIBLE IDEA to lend money to people who have little to loose!

I tried the "lend money idea". But instead of using the "Subject Property" as collateral, I got a "note" secured by the borrower's PERSONAL RESIDENCE. With the borrowing now Homesteading their home, I could only get a lien placed on the property and now have to wait until they die or move out...Like 40 years to get paid back.

On the deals were I lent money and held a lien on the subject property, when I had to foreclose, the house was torn apart with nothing even being improved.....

We've done this multiple times with good results. You can structure it any way that you both agree on.

Our criteria are:

--the person we lend to is as important as the deal. How long have they been in RE? What's their track record? Are they involved in the local RE association? What's their financial situation?

--the deal has to make sense. We had someone come to us wanting a loan for a $220,000 duplex that pulled in $2000/mo in rent in an area with minimal appreciation. We said no.

--we have to make enough money for it to be worthwhile.

--we have to be first position on the note.

--ARV has to be a MAX of 75%, and we prefer 65%.

We've found people to lend to by networking, mostly through our local REIA group. It's a great way to use IRA money, and if you're willing to do smaller loans it can be a huge win-win for investors who want to borrow on cheap properties. Pretty hard to get a loan on the 35K properties we've been buying lately. Maybe this could be your new niche!

To me no matter how careful, you have to rely a little on luck.

Check out PatchofLand

I have not used it. Just interesting.

Fundrise.com

W,

Lending out is a good business. I lend on short term projects like flips or gap funding (they need the money for a short time while pulling a deal together)

Personally I recommend this for IRA investing over buying RE. It's just pushing paper, no roofs to blow off, mold, or inspectors sniffing around. All backed by insurance and a lien on the RE.

Check into a ROTH 401K. Tax free ba-by!

Brad, we are not eligible to contribute to IRAs anymore. No earned income. All we have are the ones we contributed to during our working days, so only a small amount in a Roth, the rest is in "regular" IRAs.

And yeah, we don't want any more RE held in an IRA.

WMH,

Do you manage rental properties? If so create a small LLC and become an employee of the LLC. Boom you have earned income. I bet you could talk your "boss" into providing you some company perks too.

Then don't do the IRA approach, create a solo 401K. That way you can take the money out and lend it to yourself at a low interest rate and then lend it out as hard money.