The 3 Types of Private Money Lenders

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Hey, how are you paying off your private lenders? Do you plan on paying 10% forever? Or do you need a deal to cashflow well enough for you to do that? Or are you waiting to refinance? Because I know I know, some private lenders want six months, does that mean you’re trading them out every six months? Until when? That’s that’s such a great, this is a whole conversation? And it’s not a question. It’s not a quick question. It’s a great conversation, and it’s all of the above.

Okay, so when you’re first starting out, a lot of everything in real estate has something to do with where you’re currently at what resources you have access to. And resources would be what type of lenders right? So I’ll get lenders that will come in, I have a lender right now I paid him off nine grand today, okay? Because he wanted nine grand typically, it’s like the lenders that are $25,000 and under are like, I need my money back in six months or less, right. So then when you start running into other lenders that have 100, grand 200, grand $300,000, very rarely do they want their money back within a year, because that’s a larger chunk of money, that usually means they have a larger chunk of money over here.

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So I have such a surplus in my wholesale in my fix and flip business that I never really worry about paying off my private lenders with my own capital if I need to, right. So like this month, I think I’m paying off 90 grand or so of like, other lenders that were like, Hey, I just like to be paid off by sometime middle of set like 2022. And I’m like, You know what they are I already know they want to be paid off next year, I’ve got the excess capital.

And the way I’m structuring is kind of a weird thing, I actually bring the money in, I donate that money to my charity, my charity then pays off those lenders. And now my charity has the note against that property. Okay, yeah. So I get a tax deduction for that donation, then my chair is, it’s a little bit complicated, you understand it, but some people might go over their head. So what I what I what we do now is typically we tell our lenders, long term lenders, I put them in, I put lenders into three buckets, okay?

And when I talk to my lenders, I tell them this, I go look, you’re either category a Category B, or category C, Category A is you and I are probably going to speak once every couple of years, and you’re just going to put your money in there, you’re going to get a check for the next five years, you don’t really care, you’re good at eight to 10 percent…