Private Lending Risk Mitigation
Most Common Private Lending Risks
What are some of the more common risks to becoming a private lender? There are five primary concerns that any new private lender should be aware of when stepping into the private lending space.
I hope you enjoy the video! Below are the primary slides from the presentation, and a brief description of what is discussed in the video. If you have questions, scroll to the bottom of the page and shoot me an email, or discover more about my Turn-Key Private Lending Solution!
Market Risks
What if the property drops in value fast? As a private lender you should always keep low loan to values and ensure the borrower brings money to the table. Keep more of your loans short, less than 12 months maybe even 6 months.
Property Value Risks
Always use w trusted 3rd party evaluator. Stay away from utilizing your borrower’s evaluator. Keep a list of appraisers that you trust on a call list. If unsure or if you see yellow flags, never lend more than you are comfortable with.
Scam Risks
Ask for past references of professionals your borrower has used. Always ensure that the professionals involved in helping you make a loan are licensed and insured. Know the laws of your state for making private loans.
Property Damage Risks
As a private lender, you have the ability to ensure your borrower carries property insurance, and you are listed as the named Mortgagee or Loss Payee. Be sure to discuss your borrower’s insurance coverage with the insurance provider.
Borrower Risks
Ensure your lien is recorded in the public records office of the county your collateral property is located in. Again requiring “skin-in-the-game” from your borrower will prevent someone from walking away from a deal. When inexperienced as a private lender, only lend to experienced investors. As you gain more experience, you can expand your borrower base to inexperienced if you so choose.
Best Solutions
Here is an overview of the best solutions to keep your loans as risk mitigated as possible. This is not a comprehensive list but it can help you build a high-level checklist as you create your private lending checklists.
Turn Key Private Lending
One of the solutions that Blue Bay Capital offers our capital investors is our Turn-Key Private Lending solution. This allows capital investors, seeking passive income investments, the ability to partner with us as we create new loans. Our capital partners are able to leverage our knowledge, experience, and professionals in the industry while participating in a large loan with smaller investment amounts.
Are you disappointed with the performance of the markets? Are you watching your retirement accounts constantly decrease in value or not even keep up with inflation? Have you ever considered investing like the banks do, and lend your money? Consider partnering with Blue Bay Capital in our Turn-Key Private Lending solution.
