Want to earn 10%, 20%, or 30% on your savings?
Real estate investing is the answer. Real estate investing takes many forms, but what I'm talking about in this blog post is how you can be what's called a private lender and generate rates of return on your savings that far exceed anything you can get from the bank. With private lending, you can actually see your money grow over the span of a few months. $10K can turn into $11K or more in a year or less.
How is this possible?
The reason you're able to get such high returns is because real estate investors who purchase and rehab properties have short-term, low-dollar amount cash needs that require fast turnarounds. That might be $30K - $50K for a down payment on a property. Or it might be $15K to initiate the rehab on a property since rehab funds are released by lenders on a reimbursement basis...you have to pay for the first stage of work, then get reimbursed, then pay for the next stage, then get reimbursed, etc. Or it might be $1K to $2K to put down as an earnest money deposit to put a property under contract.
There are lots of scenarios like those where a relatively small amount of cash is needed quickly to close a deal or keep a project moving. Traditional lenders can't be used in these scenarios because their minimum loan amount is $50K and they require a ton of paperwork that will take two months to process before you even find out whether you were approved or not. Real estate deals move far too quickly for that. The difference between getting a deal and not getting it routinely comes down to contacting a seller this evening and reaching an agreement instead of waiting until tomorrow morning. And the only way an investor can move with the speed necessary to close the best deals is to have fast access to capital.
Being a private lender makes you that resource for fast access to capital. And for that fast access, you can get a return on your money that far exceeds anything you can get from any bank product, including CDs.
So how do I become a private lender?
There are basically two paths. There's the long, hard, high-risk path that I'm on, which is where you start learning the real estate business from the ground up. You take a lot of knocks learning how to acquire and rehab properties and you eventually generate enough cash and knowledge of the business that you can lend money on projects because you know how to analyze them to ensure that you're making a good investment. This is a well-worn path that many have taken.
The short, easy, low-risk path to becoming a private lender is to choose a person on the long, hard path who you trust and lend them small amounts of money for their projects. If you've been doing the right things financially and you have strong cash reserves in a savings account, then put that money to use. Actively invest it in real estate. $5000 can turn into $5500 in six months or less with almost no risk. Yes, there is risk. There's no risk in leaving your money in a savings account earning 0.0024 percent, but there's no reward in it, either. You're actually losing money because inflation is outpacing any interest you earn on a savings account. Investing is the only way to protect your money and grow it. Some people do the stock market. I tried and couldn't figure it out, so I committed to learning real estate.
If you're someone who isn't a graduate of the Warren Buffett school of investing and you don't have a million dollars or a few hundred thousand or even a tens of thousands of dollars in the bank or other investment vehicles, then you really should run some numbers through a retirement calculator like this one and see how much money it's going to take to maintain the lifestyle you want to maintain after you retire and how far you are away from being on pace to have that amount. It's sobering. And that's why I'm out here taking large risks so I can reap large rewards and get myself on track to retire comfortably.
If you're in the "need to get my life right" group with me, then I encourage you to start doing some private lending with me. You can learn the business of real estate and learn how to generate unearned income that's taxed at the capital gains tax rate (15%). Real estate investing is not complicated, but there is so much to learn. It's nowhere near as simple as they make it look on TV in 42 minutes plus commercials, but it isn't rocket science, either. Private lending is a great way to learn the business of real estate at low risk AND get paid for it. The images that follow illustrate what I'm talking about.
I went to FAMU for undergrad and Bowie State for grad school. This is the University of Marianne Drive where I got the Ph.D. I never intended to get. This house has been an education!
This is the before picture of the living room.
This is after opening the wall up and turning what was a bedroom into a dining room.
This is me uninstalling the hardwood floor after I fired the contractor I started the project with. That's a long story for another blog post. I had to remove the floor because they did such a poor job of installing it. This was the least of their shabby work that had to be redone.
Rather than install a proper underlayment, thievery and incompetence led to the initial contractor using wall board and pieces of the new hardwood as an underlayment. There was such a pronounced change in elevation in this part of the floor, it felt like you walked onto a pitcher's mound.
This is the first floor now. The hardwood I took up is stacked up in my basement to use on a future project. For this house, carpet will be the floor treatment.
This is the former bedroom, now dining room.
This is the before picture of the second floor.
This is the after photo. My new contractor added recessed lighting, replaced the guard rail, repaired the drywall, and primed/painted. All that's left is installing the carpet.
This is the before picture of the bathroom.
This is after the initial contractor "renovated" it.
How can you be this far off alignment and not see a problem with it?
The tile job was so poor, I had my new contractor remove it all.
After removing the tile, we discovered that the contractor I fired had just thrown tiles on top of rotted wood. I knew this wood was rotted and I paid them to reframe the bathroom, but the thieves did what thieves do. They weren't even smart or competent enough to do a good job with the tiling to hide their thievery. Who are these thieves? Don't worry. There is a blog post forthcoming where I will make sure the world knows who these people are.
This is the bathroom now, after reframing it, re-tiling it, and replacing the tub.
This is the before picture of the kitchen.
This is after the initial contractor "renovated" it. Everything in here was installed so poorly (meaning damaged during installation), I had to replace it.
What you see here is the work of pure idiots. They tiled over the electrical outlet.
Under-cabinet lighting is a great feature, right?
Not if you use screws a quarter-inch too long to install it! How could they be this stupid? I honestly don't know. You might wonder how I could be so stupid as to hire these people? I wasn't stupid, I got fooled. It happens. Meanwhile, I'm much wiser now than I was when I started this project and they still don't know what's wrong with tiling over electrical outlets or using screws that are obviously too long.
This is the kitchen after my new contractor stripped it down.
There's recessed lighting now and cabinets that are actually installed properly. The gas line is moved from the right side of the room near the door to the bottom left corner of this photo to create a better flow in the kitchen. All that's left to install is the countertops and the appliances.
Finally, after much trial and tribulation AND litigation, this house is a couple of weeks away from going on the market. I'm seeking investors for a final round of funding for this project. Paying for essentially everything twice kinda messes up your budget. I'm also looking to identify people who want to invest in future projects. Armed with my new contractor and my Ph.D., my future projects will go a lot faster and smoother.
I've already paid back the investors I started this project with. They each picked up a ten percent return in less than 45 days because I knew I only needed their money for a short period of time to get the roof done before the weather would prohibit it. I'm borrowing at 10% interest for a six month term, this time. I've learned from this project to set a six or twelve month payment term just in case anything goes wrong. There's nothing wrong with paying people back early, but risking having to pay someone back late is a situation I'll never put myself in.
All the major repairs (and the associated level of risk) on this house are complete. I just don't want to be left stretched too thin after I pay for the carpet installation, the appliances, and the countertops (I know a really cheap place to get granite, by the way...you learn a lot getting a Ph.D.).
So if you're interested in earning 10% on your money with the lowest risk you'll ever see, contact me. This is how the rich get rich and get richer. I'm taking all the big risks and learning all the hard lessons so you don't have to and I'm sharing everything I learn along the way.
Oh yeah, I just realized I wrote about everything except how you get 20% or 30% on your money. If you lend ten grand on a six month term at 10% and lend it right back out again (to the same person or someone else), at the end of twelve months you've turned ten grand into twelve. This is how the wealthy grow their money, all day every day. Now how does that compare to the return you're getting on your savings?
If you want your retirement lifestyle to equal or surpass your current lifestyle, you have to create the funds for that lifestyle now. Here's the link to the retirement income calculator again. If doing what you're currently doing with your money is not going to put you where you need to be, then you probably should do something different. Secure retirements don't just happen. You have to create that for yourself. Creating that secure retirement for myself is exactly what I'm doing and I want to help others do the same. If you want to invest in what I'm doing and in your own financial freedom, contact me at Lenzy at Lenzy Ruffin dot com if you're seeing this and you don't already have my contact info. Let's go make some money. This is how the sharks on Shark Tank got started.
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