RenoJay wrote:Back in February I started this thread about private money lending. Now that I have some experience, I thought I'd report back for anyone who's looking for fixed income outside of the bond market.
I've made two loans and about to do a third. Here are the basics:
1. First borrower had credit issues from a short sale of a vacation property. He bought a newer home in my area, put down about 40% cash down payment and borrowed the rest from me at 8.5%. Our letter of intent stated he needed to make automated payments via a processor. Thus far, every single payment has arrived a few days before the first of the month. So far so good.
2. Second borrower also bought a newer home with about 40% down payment. Interest rate to me is 9.5%. Same deal as the first borrower (all payments received) except they pay on the 4th instead of the 1st.
3. Third deal is about to close. The home is older, but still is valued at more than the buyer is paying, and they're putting down 33%. They'll pay 10% interest and 3/4 of a point at closing.
In all cases, the broker and I checked their credit, their employment, their taxes and met with them personally. We also checked the homes, got inspections, etc. In each case, the borrowers were "near bankable" meaning they all had good credit but had done a strategic short sale at some point when their homes went deeply underwater.
Overall, I'm quite happy with this new found investment class. Each home has plenty of equity so should I ever need to foreclose I should be able to get my money back. All the payments have arrived like clock work, and I get the chance to meet each borrower, look them in the eye, and let them know that late payments will lead to them losing their home. Unless home values tumble tremendously from here, then I've definitely become a fan of hard money lending for my fixed income portfolio.
RenoJay: I'm glad this is working out for you. I would still recommend that you get the book "Invest In Debt", by Jimmy Napier and the calculator that I mentioned in an earlier post on this thread. I believe that if you got the book and calculator and learned how to use it from the book, it would make you a lot more money than they cost. It did for me. Good luck.