20% Returns with Private Money Lending: Lee Carney of Mountain Capital
As many of you already know, I just went in on my first private money lending deal. I was inspired to do so in part by a terrific book on the subject called Four Step Guide to Private Lending Profits: Earn 10% to 20% Return on Investment Without Dealing With Tenants, Toilets or Trash. It was written by Lee Carney, and is an outstanding resource on the subject. Lee’s book is broken down into very logical steps:
- Find prospective borrowers (real estate investors, fix-and-flippers, etc.)
- Underwrite the borrower first (due diligence on the person borrowing the money
- Evaluate the property (determine the value of the property before and after investor does her work on the property)
- Loan documentation (establishing a Deed of Trust so that you own the property if something goes wrong)
- Loan payoff and workout (getting your money back and working with problem loans)
[thrive_2step id=’3236′]Click Here to Download Lee’s ebook – FREE![/thrive_2step]
Lee has now made Private Money Lending his full-time business and makes 20-25% on this money.
From our conversation I gleaned some more great insight on the business and how Lee makes incredible returns:
- Finding Deals is Easy. I asked Lee how he finds deals, and his answer made me laugh: “Walk into a room full of real estate investors, and them ‘Who needs money?’” He’s right of course, I know a few real estate investors and they are ALWAYS looking for money to help them flip deals.
- Fix and Flips Are Best. Like most investors, for Lee having cash in the bank is akin to losing money. So he wants to keep churning loans. The more quality deals he makes, the money he makes. So short loan periods work best, and that means short 4-8 month fix and flips make him the most money.
- This Works in Small Towns Too. I asked Lee if investors in smaller markets could do this too. Lee is based in Spokane, Washington, population 200,000. Lee answered that there was more opportunity even in a smaller city like Spokane than he could ever service. He does occasionally do loans in larger markets like Seattle and Portland but prefers to focus on local markets that he knows best.
- Private Money Lending Sure Beats the Alternatives. Like us, Lee is skeptical of the stock market’s long-term prospects as Baby Boomers retire. Plus he says “That game is rigged against us.” And active real estate investing, like owning rentals and flipping houses, is fraught with aggravation and headaches. While he works full time in the lending business, he considers it passive in that he has plenty of time for travel, leisure, and family. He, like us, knows the nightmares of owning real estate outright and feels this is a terrific way to get fantastic returns without having to unclog toilets on Saturday mornings.
In the end, it seems the success of a Private Money Lender comes down to his knowledge of the local real estate market and ability to evaluate which people to invest in.
For instance, with the private lending deal I just did, my partner Chaz Britton had flipped a few condominiums in the same complex. Plus, we are both plugged into the Denver market and know it well. Chaz knows the borrower well enough to know that she is a solid person, with a background in fix and flips.
So if you didn’t have either of those things, how could you get started in this type of lending? Here are a few tips for getting to know your local market.
- Join a local real estate investing group. These are not just for fix-and-flippers and real estate agents. There is a group like this in virtually every market and the information that is passed around is invaluable. This is probably where you’ll meet your future partners.
- Read the newspaper. This may seem obvious but watch for local trends. Is there a sudden decrease in rental listings? How long are houses staying on the market? Is one area poised for growth, but needs to be improved from an aesthetic standpoint? These can represent opportunities.
- Never eat alone. There is probably at least one realtor in town that knows the investing market from front to back. Buy her lunch and talk about what opportunities there are. She’ll probably know deals that need funding right away. Ask her about other private money lenders that you could team up with.
For even more information,[thrive_2step id=’3236′]get Lee’s free ebook[/thrive_2step], his full-length book, and then visit his website. Lee has a program where he’ll provide all of his loan documents and one-on-one coaching as well.
Stay tuned, we’ll have more from Lee as time goes on and we’ll keep you posted on our own loan experience.
Have you ever tried a private money loan? What was your experience?