Identify Your Goals
The first thing I’d advise you to do is identify exactly what you’re trying to accomplish.
I know you want to make money, but how much? My when?
Are you trying to build on your kid’s college fund, or are you trying to bulk-up your retirement account?
Figuring out the answers to questions like these will help you tremendously.
What if You Don’t Have A Lot of Money in the Bank to Lend?
One of the biggest concerns people have with this type of investment, is they think they don’t have the money to lend.
You don’t have to necessarily have the total amount necessary to buy and rehab a house sitting liquid in your bank account.
You can pool your money with other people, and you can even use the funds in your IRA to fund the deal.
Be Relationship-Focused
Private lending is built on trust and personal relationships, unlike traditional bank lending.
As the lender, you personally know the borrower.
You’re going to be communicating with the borrower on a regular basis over the duration of the loan, so avoid people that rub you the wrong way.
Do They Have a System?
I’m a proud nerd when it comes to systems when it comes to business.
I need order in everything I do.
Granted, part of why I’m that way is due to my personality.
But it’s also because I know that systems improve your chances of having continuous success in business.
Systems also help me identify the specific parts of our business processes that need to be tweaked when we’re not getting the results we want and expect.
As a lender, it’s absolutely vital that the borrower has some type of system in place.
You don’t want somebody just “winging-it” with your hard-earned cash.
They don’t necessarily need to be a business system “geek” like myself.
But they do need to have some type of definitive process that they follow from point A where they identify and analyze properties, all the way to point Z, where the property is sold to an end buyer.
Related: See How Easy it is to Work with Detroit General Contractors
When done right, private lending can be an extremely lucrative passive investment.
How did you personally become initially interested in lending money? Leave a comment below, let’s talk about it!