Want to raise children with responsibility and teach them how to become contributors? Looking for ways to make your capital work harder? Today, we’re talking with Gary Boomershine, CEO of RealEstateInvestor.com about creating a family economy and private lending for real estate.

https://www.youtube.com/watch?v=MOm6ZYP_4xg

If you’re an investor or business owner who wants to create the life you envision… tune in now!

Table of contentsWhat is Private Lending?Real Estate Professionals Need CapitalThe Basics of Private LendingThe One Requirement for Private Lending for Real EstateThe Importance of the Down PaymentHow Do You Get Into Private Lending for Real Estate?Rule 1: Think Like a BankerRule 2: Have Your Own CriteriaRule 3: Leave the Paperwork to the ProfessionalsPrivate Lending and the Family EconomyLeveraging You Family’s Skills Connect with GaryAbout Gary BoomershineBook A Strategy Call

What is Private Lending?

[2:31] “If we look at...the biggest buildings on every street corner in the world, they’re not rehabbers or real estate companies. Okay, you’ve got a few of them. But you’re not going to see a flipper or a rehabber. The biggest buildings on every street corner, in every part of the world, are banks. Why? Because their business model works.”

Gary points out that many people see a bank, and only really view it as a natural part of their money cycle. They don’t fully understand the concept of banking, and how it is one of the most profitable business models. He points out that the population has been trained to be a cog in the banking system, without questioning it. 

Yet, he also says this:

[3:25] “It’s really easy to vilify the banks. But...you know what? The business model works. How can we look at things and act like a banker?”

This is the foundation of private lending.

Real Estate Professionals Need Capital

No matter which way you slice it, capital is necessary for real estate investors. They can come up with the cash themselves, or they can leverage other people’s money to make the sale. Typically, this is when investors visit the banker for a loan. 

[5:50] “Who writes the rules for finance? Is it the hard-working real estate investor? No, it’s always the lender.”

If the bank is the lender, they want to see your credit and tie up all your assets in collateral. They also likely want a down payment. Then, once the investor secures the property, who gets paid first? The bank. Banks almost view investors as employees—they’re doing all the heavy lifting and bringing business deals straight to the bank. 

And there is tremendous opportunity in becoming like a bank and loaning your capital to other investors if you have the right vehicle to do so. In other words, you also want to leverage other people’s money, like that of a life insurance company. 

The Basics of Private Lending

Gary’s first lesson of private lending is that he doesn’t go directly to borrowers. Instead, he goes to a hard money broker or private money broker. That way they can bring him the deal flows. The brokers talk to borrowers and handle the paperwork, as well as vetting properties. These are licensed brokers. Then, all Gary needs to do is wire the money and he gets a deed of trust (rather than a deed). 

[8:25] “Private money lenders typically don’t use their own money. They’re using people like us. So if you have an infinite banking system, or if you have cash sitting in a bank account, [you] can go put that to work.”

In such deals, Gary prefers to be lending in the first position (as opposed to the second position), because there is less risk. This way, the loan is secured by a piece of real estate, and he gets a fixed interest rate. 

[9:05] “I’m usually getting anywhere between eight and a half percent, and sometimes as high as ten percent. Some people can get higher than that.”

He also requests a 30% down payment, which mitigates much of the risk in the event that the housing mark...