Since I began my journey to remain financially independent, I have been exposed to a number of real-estate-investment techniques. In recent years, the need to stabilize our cash flow led us to the business of wholesaling. During the process of implementing it, I finally learned that you really don’t need money to make money. What you do need, instead, is the ability to find, structure, and sell deals to those who want them.
When the wholesaling business is under control, two types of buyers begin to emerge; i.e., cash buyers and non-cash buyers. Initially, I was focusing on cash buyers only because of the simplicity of getting to closing. Then I noticed that, sooner or later, even those cash buyers run out of funds. In other words, unless a good deal happens to be timed just right, I may end up having to look for another cash buyer who can close as quickly as the first one.
At about the time when I was beginning to notice this pattern, an opportunity came my way to become certified as a private-money broker. I was quite intrigued for a couple of reasons.
- It just so happens that, a few years ago, I had taken the time to learn to be a private-money lender. In the end, however, I chose not to implement it at that time. Why?
- First and foremost, the timing of when I was looking into becoming a private-money lender was such that even those foreclosed properties, which were purchased at the “right” prices, were losing equity. Granted, these events were happening in perhaps one of the most challenging real-estate markets in the United States. But still…
- Second, at that time, perhaps because of the first point made, most of the existing local investors – who were in the business of private-money lending – were getting out of it. It seemed audacious of me to think that I could sail through such rough waters of private-money lending on my own.
- Third, I did not know well enough the backgrounds of those potential borrowers who asked if I wanted to lend them money for their real-estate deals. If I happened to get myself into a bad deal with a borrower that either would not or could not perform his/her end of the bargain, there was a possibility that my return on investment might have ended up being in the negative territory. Not a good idea.
- Fourth, with all of the ups and downs (more downs than ups) that I had experienced investing in real estate during the last decade of prolonged recession, I did not yet have sufficient confidence in my own ability to sort through sound deals from not-so-sound ones – although I certainly learned plenty what NOT to do and what CAN be done to avoid many of the pitfalls.
- Lastly, I did not like the idea of tying up my funds in one investment for longer than 12 months. In other words, I am expecting solid returns on my investments quickly and not get stuck with an interest rate that is lower than what I believe my money is worth (as compared to conventional market rates) because of the time and effort that I have been putting into not only learning the trade but implementing it.
- Despite all of the above reasons, I remained convinced that private-money lending was one of the best ways to secure good returns on investments, especially as I advanced in age. Why do I have such strong conviction?
- David and I have been members of local Real Estate Investor Associations (REIAs) for about a decade now. There has been no shortage of investors who come to these meetings looking for money to fund their deals.
- With significant financial setbacks experienced as consequences of the stock-market crashes of 2000 and 2008, I became no longer interested in letting external forces dictate the values of my investments. Already having been of retirement age for the last decade, settling for low money-market rates has not been an option, either.
- Since its inception in 2008, we have been attending investor conferences organized by Equity Trust Company. Equity Trust is a company that acts as a third-party custodian for Self-Directed Individual Retirement Accounts. At its highly-educational annual conferences, all presenters (with possible exceptions for key-note speakers) are Equity Trust clients who have a proven track record of successful investments. Every single one of them relies on his/her own accumulated knowledge to accomplish such success. Many of them are private-money lenders.
There you have it. As they say, opportunities come to those who know what they want and work hard to get it. This is exactly how I felt when the opportunity came my way to become a certified private-money broker. I welcomed it with open arms because I saw it as a stepping stone to becoming an effective private-money lender myself. By a stepping stone, I mean learning to ensure that (A) the interests of the lenders are being protected, first and foremost, and (B) the probability of the borrowers completing the deals profitably for themselves is very high.
As of August 31, 2014, both David and I became certified private-money brokers. Our journey to eventually becoming private-money lenders ourselves has begun. Exciting times are ahead.
Happy Investing!
p.s. If you have a great deal under contract and need money, you can go to our website and get the funding process started.
p.p.s. If you, too, are interested in becoming a private-money lender, backed by thoroughly-vetted hard assets, I’d be happy to answer any questions you may have.
