In this video, I am showing you an example of a house that my students recently purchased where I was the private lender. *Disclaimer* Please note that this is not a solicitation of funds and you are not required to borrow from me or anyone else to be in our real estate coaching program. I am not a private lender for you or anyone else and I do not hold myself out to be one in any way. Please do not solicit me for loans. I am simply showing you this for educational purposes only for you to understand how private money lending works.
I help some of my coaching students in South Florida do their first deal by lending my personal funds and by being the private lender for their deals. I physically inspect each property myself. If I like the house, and it’s in an area where I personally buy properties I MAY be willing to be the private lender.
When you are buying a house to fix and flip, you are buying it at a substantial discount to market value (usually around 60% to 70% of market value). The more repairs the house needs, the lower the purchase price. Deeply discounted properties that need quite a bit of work are called “wholesale deals” (because they are at a wholesale price). Another reason is that “wholesalers” often get these houses under contract and “flip” them to other investors for a profit.
You cannot get a conventional loan on wholesale deals for a number of reasons:
1. The seller wants cash only offers (for example wholesalers will only accept cash)
2. The seller is a bank and only accepts cash offers (for example short sales and REO’s)
3. The seller is a government entity that only accepts cash offers (HUD, Fannie Mae, Freddie Mac)
4. The property does not qualify for a conventional or FHA Mortgage because it needs too many repairs, needs a new roof, or substantial work.
So as an investor, if you are buying a wholesale deal your only option is to pay cash. If you have the cash sitting in your checking account then that is of course an option. But even then, what if you found a second or third deal and you were out of cash? You would need a private lender. Most new investors that I work with don’t have a few hundred thousand dollars sitting in their checking accounts. So they need a private lender, someone like me (or any other private lender) that will lend them the money to purchase the property. Private lenders usually lend around 80% to 90% of the purchase price depending on the property.
The way these deals are financed is by borrowing money from a private lender (an individual) such as myself or anyone that lends private money on properties secured by real estate.
I like to personally help my coaching students do their first deal by helping them find a property, going out to the property to review it with them, and if they need me to, I often am willing to loan them the private money to help them get their first deal done. It’s a win win for both myself and the student. I get a great rate of return on my cash, and they get to do their first fix and flip or rental property (or Airbnb).
If you are in South Florida and you are looking to get started fixing and flipping houses, buying rental properties, or Airbnb vacation rentals, then you should attend my Fixing and Flipping Houses Boot Camp.