Mastering Private Money Lending in Real Estate: Strategies, Risks, and Best Practices with Jenny Tsa

I just came back from a private money lending conference. There are so many people out there or company that does private money lending and they're just looking for people to borrow the money. So there's definitely lots of money out there, but I think sometimes when people says, I can't find a PML to fund this, maybe you should look at it. Is it your deal? Or that means it's not a good deal. If it's a good deal, people will lend.

Okay.

Is it because of you as a person or you have something that, that people wasn't able to trust you or, or you're inexperienced? And so I think there's oftentimes, I think as a borrower, you always have to ask for feedback. Sometimes people will ask me, hey, I know you pass on it. Do you mind telling me why? I'm pretty honest. I will tell them exactly why. I would say the ARV just doesn't make sense and you don't have a lot of cushion in this deal. And so that's why I'm not lending.

Welcome to the She's Got Assets Real Estate Investing Podcast. I'm the host, Shona Leffis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience. From how to find off-market deals to creative financing to long-term and midterm rentals, we aim to educate and inspire others to gain financial freedom and generational wealth through real estate. And as always, please subscribe so you never miss an episode. We really appreciate reviews. It helps others find us and just helps us get found.

I was a corporate tax executive, so I've been doing corporate tax for over 25 years. And somehow I got laid off last year. And after that, I'm like, okay, what should I do? I really don't want to go back to that stressful. I'm sure you guys know when you down to your April 15th, right? Trying to file your tax return. It's always stressful, but that's only for individuals, but for corporate, pretty much have deadlines almost every single month, every single quarter. So that was a very stressful job. And so I said, you know what, maybe I don't want to continue in this career. Let me take a break first. Of course. I happened to join a real estate mentorship program and I learned about private money lending. I'm like, wait, really eye-opening. Like you can make that. There's people actually borrow that much money and pay that much interest. And I'm like, who would do that? And then so I started exploring. So I actually made my first loan in April of 2023. And that's how I got started. This whole journey.

That's, yeah, it's, I think it's always been there. It's like an age-old thing that we haven't been exposed to a lot of times, and it just, it's mind-blowing when you first realize, wow, we don't have to use a bank or a pri— it just opens up a whole world of, um, possibility. Yeah. I was like, how do I find one? It's like a unicorn.

There you go. Right now, you know where to find it. Yeah.

Thank you. The other thing is, I think in this industry, we oftentimes come into this from a corporate course or something and there's a lot of terms thrown around, none of your own money and all of these things. And I, that's possible and we can, I'm gonna talk about our case study, but I also think you have to do the work and you have to make the business case. Like no one's gonna just throw the money at you. You're not just here's some money, like without vetting it. So I'd love to hear you, how, how to talk to, I guess like really like basically if you have, say we're in real estate, generally it's fix and flips. It's you're looking for money to like for funding or rehab. If I didn't wanna be approached for a loan, what was, what's, because you're very thorough and I love how you vet people and Because my process is pretty simple.

I only have one thing in mind. The first thing is I assume everyone's going to default on their loan. What am I going to do in this property? Do I have an exit strategy? Am I okay in holding this property as an investment property? So that's my number one, you know, rule of thumb is to think that going into every single deal, Looking at it, keeping that in mind. And then like, okay, there's two parts really you need to really underwrite. What I call underwrite is you underwrite the actual property, the deal, and you also need to underwrite the person because you can't do one without the other and you got to do both, right? Because if you have a great asset, a great deal, but that person cannot complete the projects. Cannot exit, then you're stuck with this property. What are you going to do? Or on the other hand, you have a really great person who's really responsible, but the deal didn't really pan out. What is that person going to do? Are they going to try their best efforts to complete the project or pay you back? So I think, you know, you, I really need to evaluate both sides and you just need to also look at a a lot of the details, like not just the deal itself, the person itself, but the legality, like getting a great attorney to draft good documents to protect you as the investor or the lender. I think that's also very important because I just know that sometimes I see some of these documents, it's like, it's not written so well. And then as a lender, then you lost that protection. So I think there's things that you really need to be careful and also look at it from not just underwriting a deal, but also looking at it from the total, the total package and also the macro environment. So I think there's a lot of things that needs to go through, but I like to go through all these details. I'm a very detailed person. Shona, you should know that, right?

Very much. I got your loan out, your loan intake form, and I usually, it's just like a pretty informal conversation. And I was like, wow, this is very very thorough. Hey there, savvy investor. Quick question. Are you ready to jump into midterm rentals but not sure where to start? I've got you covered. At She's Got Assets, we help real estate investors set up and fully book their first midterm rental with quality guests so you can double or even triple your cash flow. And here's the kicker. We dive deep into marketing strategies, including how to tap into the lucrative niche of getting insurance leads for displaced families or long-term stays that can really boost your bottom line without all the hassle and regulations of short-term rentals. Sound interesting? Head over to she's got assets.com/ntr and get all the details. And if you're new to real estate investing, we've got something just for you. Check out our REI Playbook course where we teach you how to snag your first investment property by finding off-market deals without cold calling or door knocking. We'll even walk you through creative deal structures like owner financing and how to leverage what you've already got. You can find all that goodness at she's got assets.com/rei. Oh, and one more thing, don't miss out on joining our free She's Got Assets community. We've got a ton of resources plus weekly live streams where you can dive deep into strategies to help you succeed. You don't want to miss it. Trust me, hop into the community at she'sgotassets.com/network and let's get you crushing those real estate goals. All right, back to the show. But I really want to unpack what you're saying, right? Because it's the person and it's the deal and they both have to make sense and you have to make the business case for why it's a good deal and your experience, like, so how do you want someone to present that to you? And, you know, is it a presentation in DACR? What are you looking for in that scenario?

Well, first of all, when a person told me, oh, here's the deal, here's the address, here's the amount I'm asking, I go, do you have a pitch deck? Right? Because yeah, you could put it in a text and email, but if you have, if you spend the effort putting it together in a very organized fashion, then I know you as an organized person. I know you put it together and you did a very nice pitch deck. And actually I have another one that I've came across, I think a very organized pitch deck, and she actually have link to all the supporting. She will put the deals, the purchase price, the rehabs, and then with the rehab, she has a link that links to that, to a G Drive, Google Drive that links to contractor's bids, right? The comps, she actually put the links of each comps. and I can go back to Elaine Cecillo or Resin. Then I can really, just from looking at that, I know, okay, this person has really thought through the analysis herself or themselves. So they know that what they're really doing. And for me, it already gives me like some level of comfort. I know this person will look at the details, will think through the different strategies or exit. Exit plans in case Plan A doesn't work, there's a Plan B. And so then I think that's very important to present to a lender, potential lender, to walk through, have it all laid out very organized fashion. I think that's, that's my number one sign of poor.

You don't want a back of a napkin presentation.

Oh, and then I've heard someone says, I'm not good at doing Canva, the pitch deck, the pretty slide deck, and it's just taking too much time. I'm like, nowadays, AI can help you put together the pitch deck. There's always AI, or Canva has some really simple template. All you have to do is upload some pictures and then put in the bullet point, whatever you text me or in the email, and it's just there. And I think also my intake form or the applications, Also ask a lot of like your experience, your credit scores, or how many projects have you done or currently. I think that also gives me more information about you as a person and also what's your experience in terms of real estate investing or fix and flip.

Yeah, for sure. So I heard, I saw Amy commented, totally agree, a pitch deck makes it worth desirable to PMLs. Yes. If anyone, I'd love to hear if anyone, like maybe type a 1 in the chat if done a PML deal or maybe 2 if you're new to this, but the way I see it, Jenny, I don't know if you agree. I feel like it's a mini business case, right? Because it's like, it's its own kind of, and you have to make that case just because it's a 65% deal. Okay. But how are you going to execute that? What's your strategy?

Yeah, it's also very important. Yeah. I think also. You have a great contractor team, and that's also important. If you said you haven't done a flip before, you haven't even talked to any contractors and just goes like this and say, "X me have funds." I'm like, "Did you get a contractor in there to look at it?" Did you get— I think from my experience, what I've seen, a lot of fix and flip, it's the breaking point is if you have a good contractor team or not. Shauna, you should know, you flipped many properties. And it can break or make your deals profitable or not. Because if you don't have reliable contractors or if you have bad contractors, then it can turn your deal from profit to losing money. Because, you know, first, if they do the wrong thing, you got to redo it, or it's the time rate, they drag on forever because that's just normal for contractors. They like to take on, start off You know, very fast, the first few days or first week, they will get everything really. They have 7 people at your property and then afterwards, okay, they only show up every other day and only with 2 people. You're like, oh, that's not a good sign.

100%. And that goes back. Yeah. It's your team and vetting them. And I think GCs are notoriously, they have good intentions, but yeah, that's a whole nother conversation, but I think it's super important. Going back to, so it's a business case, like what are your, I think the things we hear about a lot are like ARV. And so what are you looking for? Are you looking for exit strategies? What are your, like, if you were to say this is the perfect pitch deck, like what you want to see? And I love that you're vetting the person too. And I don't think we talk about that enough. Like it might be a good deal, but if you don't, to your point, don't have the team or don't have the skills or don't have the persistence, but there's going to be bumps in the road, right? I can't wait to share our dog story, Jenny.

You have to share that one with us. Why? On a pitch deck, of course, ARV, but I always never take whatever the borrower presents to me, the ARV, because there's people that will hyperinflate the ARV or they pick the wrong comps. I like to be more conservative on ARVs. So I will do my own comps and ARVs, right? You give me the address, I will, I will not use exactly the comps. That the borrower sent me, but I will use it as a kind of a guideline, a reference point. And then I would find my own comps and see if they are really good comps or not. And then I would also take some discounts off the ARV once I get the average, because you never know in this market, right? And I think also when you look at the macro economy, we don't know what this kind of right now how the economy's going to turn, right? Especially with the elections. And also, you know, they're cutting interest rate, hopefully. And that means the economy is not doing so well. That's why the Fed cuts the interest rate. And, but then it's like right now I hear both sides. Some people will say real estate is going to do great once they cut interest rate. Another 50% say no, that means the economy is going bad. Then that means the housing market will be impacted as well. So to me right now, I would take a very conservative approach on ARV. And I take the discount of that ARVs and then making sure you really have a, at least a 7 cents deal. Sometimes 80 cents is just, and also I will look at, okay, I actually do the calculation for the flipper. Okay. If I was like, literally, I'm like, okay, you told me the ARV is this. And your purchase price is this, and then your rehab is this, and then you pay me as a PMO all these interest and points, and then the closing costs and everything. And now I'm like, you're only left with $10,000. I'm not sure, even though that could be like 5% or 10%, some are lower value homes, but in this market, $10,000, it's not going to give you a non-fiscial. So I said, these are the deals that I'll pass. I wouldn't even look at it. So that's what I looked at. Land, everything. Like today I was looking at a deal and I even looked at, okay, so you're telling me you got a great deal. Okay. So I'm doing my underwriting, look at the properties. And, but I'm like, it looks like the neighborhood surrounding you, your, this property is much bigger than the majority of the properties there. Like that, this one is like 3,000 square foot, but everybody's every, all the other properties around, it's only 1,500, 1,600 square foot. So you really, then it makes it really more challenging for you to sell this property when it comes down to when you're done flipping, because with that big square footage, your price point's going to be higher, right? And if it's price point then higher, is it really people looking at that price point going to look in that neighborhood? Because most of the price point of that neighborhood is going to be in the lower range because it's only 50 and 60 1,600 square foot. And so then I look at how many days on the market, the average days on the market for even the 1,500, 1,600 square foot versus this 3,000 square foot home. And it's okay. It looks like right now it's going to be 70 days, 60 to 90 days. And okay, I add in back the points and the interest for addition, the holding cost. Then I'm okay, does it still have profits in there? So I look at it from all 360. I'm not sure if any, I'm just I'm looking at it like I am investing in this deal myself. Like I'm the flipper. Does it make sense for me to go into this deal? So I think as a PML, I think a lot of people don't realize, they just say, oh, what is the ARV? What is the purchase price? Is this everything? Okay. All right. I'm going to lend. But I think the key is you got to make sure that the flipper or the borrower can exit. The key reason is you want your money back, right?

You don't want those house keys. You want the money.

Most important thing is I want the flipper, the borrower to be successful so they can exit and complete the transaction or whatever, either refinance or flipping or selling. That's what I—

And you want them to be successful because you're saying, hey, your payment's due. And they're like at the end of their budget and it's sitting on the market. That you don't want to be in that position either. That's it. Yeah. So many things. But yeah, I think just, I'm just thinking about like when I first heard about PMLs and I was like really nervous and I, what I realized was if you have a good deal, if there's meat on the bone and you have a good business case, there's definitely money out there. And, but I think if you have a thin margin deal, it doesn't make sense. Again, to your point, if the ARV's wonky, that it's like a dock and a whatever it is, then it's gonna be hard to find PML. But if all the things line up, I'm sure you're happy to loan if, if you, if it's a good business case.

Exactly. Like I said, I didn't realize there's actually lots of money out there. Yeah, I'm serious. I just came back from a private money lending conference. There are so many people out there or company that does private money lending and they're just looking for people to borrow the money. So there's definitely lots of money out there. But I think sometimes when people says, I can't find a PML to fund this. Maybe you should look at it. Is it your deal? Or that means it's not a good deal. If it's a good deal, people will lend. Okay. Is it because of you as a person or you have something that, that people wasn't able to trust you or, or you're inexperienced? And so I think there's oftentimes, I think as a borrower, you always have to ask for feedback. Sometimes people ask me, Hey, I know you passed on it. Do you mind telling me why? I'm pretty honest. I will tell them exactly why. I would say the ARB just doesn't make sense and you don't have a lot of cushion in this deal. And so that's why I'm not lending. And there's one time I actually, I feel so, I'm not a stalker, but once the person give me the name, I will start Googling them or ask ChatGPT. I said, hey, can you give me, pull me everything of this person and start looking at the social media, checking them out and see if what they tell you over the phone or the video. I usually do video calls. I don't do just phone and see if it matches up what they tell. Because sometimes I can tell you like the recent example, I was just on a deal on a Zoom call with someone who's trying to get to a deal. And I, after a call, I just went online and Google, and that person actually has some lawsuits against them. And it's, and there you go. I clicked on it and I started looking at it and I'm like, you can say a benefit of doubt could be the same different person with the same name, but it matches the location that he says that he used to live. And, and it's okay. It says this person, the court sent him stuff and then he didn't attend, or it's just keep on repeating, sending him stuff and he didn't show up and stuff like show up to court. And so that's already told the person. And then of course they gave me an explanation. Oh, it's just, you know, something that is just an oversight or there's some issues. And I go, if you can't really manage your own finances, take care, be responsible of your own finances, how can I trust you to take my money, run away.

Yeah.

You have to be responsible to, as a lender, to me as a lender, because I lent you my hard-earned money and you got to make sure you treat it the way that, that's more important than your own money. And if you don't care about your own money, or that's the attitude that you do to your own finances, then how do you expect me to trust? To be a partner with you.

Yeah, no, that makes total sense. And the way that really reflects in how you're going to treat the next project or yeah. So just, it's basically what I, Jenny, when I was working with you, I'm like, oh, you're like a bank. Like you were underwriting me.

I have to ask for, I didn't ask for your tax return. I didn't ask for your full job. Okay.

So I'm not exactly like a big bank, but it was very thorough and it was just level of professionalism that I was like, it was just like, and you were very just easy to communicate with. And so I just felt hope. Because I also, on the flip side, right? You hear of stories where PMLs, they commit to lending and something happens. I felt very confident that it was going to work out and there was really good communication. You were even traveling at the time and it just was like, I think, can we—

Yes, I was traveling all the time.

But yeah, so, okay, there's so many things. So I think we're really emphasizing like you're on both ways, right? And you want to understand the PML, have, do they have a good track record? I think it's also the reverse is true. Make sure you maybe talk to some of their references, right? Make sure that they're going to come through because you don't want to be at the escrow in a day and they just find another deal or they're not able to fund you. That's not a good place to be. Yeah.

Yeah, definitely. I think it goes both ways. You have to trust, the lender has to trust the borrower. The borrower has to trust the lender. I've heard it can go sideways on both sides, right? There's lenders who pulled out last minute, leaving the borrower hanging and couldn't close. And why is that? I think that's why I think you got to make sure that you are comfortable with the deal. Once I said yes on funding, I'm committing to fund, close the deals. Don't just say, yes, I'll lend to you, but before you really thoroughly underwrite it and felt comfortable that you want to lend on this deal. Because once you said you're committed, you're committed because the borrower's relying on you to fund the transactions, right? I, for me, my process is I don't really tell people until I'm thoroughly done my underwriting, check references, Google them, stalk them on social media, and just making sure everything and got my legal documents ready. And then that's, I think that's when you're like, okay, now I got underwrites, now I'm committed. So that's why I really don't do any like requests that say, hey, I need to close in 2 days. That doesn't give the lender a lot of time to underwrite. And I like, I literally right now, I said, I don't do any deals unless it's at least 2 weeks ahead of time. I think that is the minimum, bare minimum. If I have never known you, like if Shawna, you come to me, I don't know you before, I have to start from my underwriting from the beginning. I would need at least 2 weeks and also get all my legal team to get all the documents ready and prepared to go and all my funding, all my funds, you know, ready to go. Because if it's shorter than 2 weeks, you're just giving yourself as a lender pressure, right? To either, oh my God, I got to underwrite this really quick. Then you just got, you get stressed and pressured and you will miss a lot of things when you're under, when you're under time constraints. So I think that just to me, I always tell people if it's too rushed, don't do it. There's plenty of deals out there. You don't feel like fear of missing out.

Shit up. Yes.

It's the next opportunity. It's for me right now. I'm just looking for my next opportunity. Yeah, I know my money's not working for me right now, but it's okay. Don't feel like, oh my God, I got to push out the money. You know, as soon, as fast as I can, but I'd rather get my money back and have a good return than rush into it and not get any return.

Totally. Or a risky deal. Yeah. If this is resonating with anyone, let us know in the comments. It's really good to hear feedback. I want to go back to a couple of things. I think we often have this, it comes down to mindset and finding a PML. And I think it's out there, but how do you network with PMLs? I think there's a lot to that. And again, we talked about there's money out there, the deal has to be good. So what are ways that you find your deals? Or if someone's like saying, I, I've never heard of this, like how do I find a PML? It's a little bit daunting in the beginning, right? If you haven't networked and have a good relationship, do you have any tips on that? Because they're out there, right?

You mean like for lender to find borrowers or borrowers finding lenders?

So I think for like a flipper to find a PML, like how do you network with, or both ways, what are your tips? Because I think we think they're hard to find or it's just, who would loan me that much money? Right? When you first hear about this, if you haven't done a lot of deals, it's really a lot to process.

I think important is what I find is this industry, real estate, it's all about network. It's who you know. It's not how smart you are. It's not how much money you have or The skill set that you have is who you know, I think. So networking is very important. Like join a lot of these Facebook groups. If you have, you know, mentorship programs, you know, join those mentorship programs. There's definitely lots of people in there that are real estate investors. And even that group doesn't have PML, the other, your, you know, colleagues, I can call it, your fellow flippers. They need to borrow money, right? They will give you references, like your referrals. Oh, I have used this PMO. I've used this hard money lender. I think there is always, people will know somebody or someone that you can connect and find your lenders or your borrowers. So it's all about connecting and networking.

It's so true. Yeah. That's a good segue into how we started working together.

We actually have something in common. PMO and fix and flipping.

Yeah, no, I think we connected over mid-term rentals and I happened to say like, I'm going, I was under contract or something. Is that how it went? And then I went to the property the first time, went to the property by myself and I was like, do you want to do a tour? And this is the dog house. If anyone's heard of it, there were dogs, ferocious dogs. You met the dogs. Ferocious, like gonna eat you dogs in kennels. And so Jenny was like on the FaceTime with me as we toured the house with dogs growling on us.

Oh yeah. And yes, that was a bit scary. First scary encounter virtually and then, then, of course, after that in real person.

Yes. Yeah.

Yeah. That's what I'm saying. You never know. We originally connected is not talking about PML requests. It was just talking about, oh, I'm interested in probably learning more about midterm rental, maybe start a midterm rental and then I can reach out to Shona and they'll Of course, Shauna's very nice and said nothing in the chat. So we were chatting about midterm rental and she just casually says something, "Oh yeah, I'm under contract with this property." And I'm like, "Oh, my money just came back. I need to find a deal to fund it." And that just start— that's how it started. And then of course, Shauna said, "Hey, I'm going to go check on this property. You want to get on FaceTime?" I go, "Yes, of course." So we were FaceTiming, looking at property. She almost got eaten by dogs. We talked about that.

Oh my God.

And of course, at that, during that time, I actually was only 3, 2 hours away from the property. And I said, hey, can I just come down and look at it in real person? So I actually hopped onto the car with, I think that afternoon, we talked in the morning and I think we hopped.

Yeah, I was, you were like on it.

My husband and I like, okay, let's go. So we hopped on like in the afternoon, like in, I don't know, a couple hours and we were down there meeting Shona in Rio Verde by the house.

And the dog.

And the dog. That's right. And the dog. Yes, that's right.

I still remember there was like a counter and there was a pit bull in a cage and I had to, you were on FaceTime, I put the phone down, I hopped over the counter to avoid the dog that was in a cage. Um, that's Oh man. Yeah. But it's a good story now, but real estate is definitely, yeah. And I guess what I sort of like, I really want to emphasize, let people know what you do and when you're doing projects, because that builds your credit. I don't know what you think, Jenny, but builds credibility. Don't just, if you're just asking for money and you haven't built up that credibility or rapport, I would think that it's, you're less likely to get. It's important to have that out there.

Yeah, I totally agree. Like I said, I look at people's social media posts, what they've been posting or their comments. And if they have not posted anything and their Facebook page is just a background, no person, no head, I'm like, okay, then I will be a little bit cautious about that. I know some people like to be private. I'm a very private person. I'm an introvert as well. I don't like to blast on social media because it's, I think it's part of being my culture and you being Asians and also my faith, Christian, okay, you gotta be humble and you can't brag about your achievement or accomplishment, right? And I know in life, you gotta do some kind of, some level of marketing about yourself. You don't have to be go overboard about it, but if you just, if you have something that you think you should share with other people. Then just share it. Don't, but don't go overboard. Okay, you're slamming emails every 5 minutes. Or just, we call it washing the Facebook news feed, the feed, the Instagram or the Facebook feed. But I think sometimes you just need to do a little self-promotion, just a little bit. You don't have to do a lot so that people know what you're up to. And I have to say, I'm pretty bad at that. And I've usually been very quiet on some of these real estate Facebook groups, but I think I got the encouragement from a lot of other friends and sisters and said, hey, you should start doing sharing. You know, just don't think of it as promoting yourself, but just think of it as sharing. So I think—

100%. And I think it's, there's so much value. And I think we're actually helping so many people when we're, it's like private money, there's the sellers, and we're improving the community. So we can frame it in our heads as, hey, we're giving back and we're keeping money local, right? There's a lot of things that have, you know, it's just, I think that's important. It's how you frame it. Because yeah, I used to be very private. Now I'm not, but I'm very like—

No, well, let me tell you, let me ask, let me interview you. Now you're not being private. Now you are more out there. So doesn't mean now you got more deals coming, right? You got owner's finance, okay? So people would check you. Okay, yeah, she's serious. She is. She's not a scammer. She houses and you've got that credibility, right? Is that right? Am I correct?

It totally is. Yeah. And I think it's just, yeah, it's really important. I think people are like, to your point, they're going to Google you. And if you're not, and you don't have to be like prolific, but if you're not talking about what you're doing and it's a little bit like, are they legit? I've had sellers tell me they listen to my podcast. That was like, oh my gosh. Oh, wow.

That's amazing.

But I also think it's not bragging, your point. It's just letting people know what you're up to. And it can be like a simple update and don't overthink it. I think we tend to get in our heads a lot and I think just, it comes down to communicating what you're up to. I don't think that's bragging. I think if, you know, you don't have to put just the fun stuff. I think we all curate these like beautiful, like Facebook worlds that we have in real life. So you can post, so like I post fun, like when garbage cans, which everyone is like, but it's the reality.

I mean, I think sometimes people resonate if you actually share mistakes or failures, right? Or things you have learned. Not always going to be the rosy and, you know, gloomy success stories, right? Sometimes you just have to show them the real hard work behind it, right? Because I think sometimes people get— I don't want to say misled, but there's a lot of influencer YouTubers out there just telling you, oh, this is great. You're going to make tons of money. Now you're going to make this amount. Okay. It's easy. You just need to put in 4 hours of work every week. And I'm like, I'm sure that is true. And it's funny because a lot of people think private money is very passive. It is in a way it is, but it's not. I have to say, if you really want to do a good job or find a great good deal with the right person, it takes a lot of time to filter through a lot of deals and underwrite it. And once it's underwrite, that doesn't mean that's the end of your job. There's a lot of things from underwriting all the way to closing or funding. And even after funding, you think No, you're not. After funding, you got to service the loan unless you outsource the servicing to a third party. But if servicing yourself, then you got another phase that you got to work on it. And then once it's done, you got the payoff stage, right? And hopefully in between, you don't have to deal with late payments or defaults or foreclosures, right? If they're it's, you got to work it through. So yeah, if you compare, people say mailbox money. Yes, it is mailbox money to a certain extent. If you really want to do this well and successful and really mitigate your risk, there's a lot of work that you need to do, I think, and process, right? Process and procedures. Now I got my process, still refining every deal. I refine my process. Making sure you got all the documentations, chasing people down, like chasing title company. Yeah. I just have one horror story, but we can go on a different discussion to talk about. It was like crazy. Every title company or even escrow title officers are so different. Some are really on the, really on the dot and really responsible. Others is like you chase them. It's, hey, I think the closing is in 2 days. Send me anything. I've run into one that's closing in 2 days and I said, you haven't sent me wire instructions. Okay. And are we still closing in 2 days? And of course I sent that, actually I sent her an email like 4 days beforehand. She didn't respond. And then 2 days beforehand, I sent another follow-up. I say, hello, can you please confirm receipt of this email that you got my email? I'm trying to fund this shit. Okay, you have to send me wiring instructions and all these other things so that I can make sure that I send in the money on time. Yeah, so there's a lot of work. Don't get fooled by people say, oh, it's mailbox money.

No, I think we throw around the term passive a lot in real estate and that's, there's levels of passive. I don't, yeah, even if you're, you've got long-term rentals, there's no passive in that. You still, yeah, I love that you emphasize that because I think, yeah, it's a great model, but it's also, it's work and to do it well, right? And to have good deals. I love that you brought up title because I do, what I also love about this model is, right? Like it, the loan is really secured to a real asset. That's what I love about real estate. And I don't know if people understand exactly, go into the weeds, but I think that's the really thing just to, what I'd love, I feel like yes, you're trusting me, but you're also, there's a piece of property involved. So if something goes wrong, you have an asset. The stock market, not so much, right? So I'd love to hear you, if you don't mind, just, and then maybe it's basic, like deed of trust and promissory note. It's just like saying I owe you money, but it's a very formal structure. right? And for anyone that hasn't done it, it's really important to like understand.

Yeah. Okay. I always say the key documents is of course the promissory notes, which is the borrower have to sign and says, this is how much I owe Jenny or your lender. You know, this is the terms and everything. That's your promissory notes. Now, of course, there's the deed of trust and deed of trust means that you have collateral. That's mean that property, you have a lien against it in case borrower doesn't pay you, you can take, you can foreclose on the property, right? So these two are actually the most important document that you must have. Okay. Now, of course, there's also other document, which I think now after I've been doing this for so many times, actually, it's also very important, which people doesn't realize. So sometimes I ask for personal guarantee, right? In case that they run away or they have no skin in the game or something happens, I still have a chance to go after their personal assets or whatever. Yeah, but there's a personal guarantee. There's also other documents now. This is going to be more complicated, but you need to certify that this is a business loan, an investment. Is not a primary residence, or this borrower will not intend to move in as a primary resident or live in there. Because for lenders, if you start lending to people on their own primary residence, you actually fall under the mortgage law. There's different sets of laws, regulations that fall in when you lend to people as primary residence versus it's a business So that's why you got to be careful. So you need the borrower to certify that, hey, this is truly a business loan for investment purposes. I have no intention to live in there. And so making sure that if they eventually move in there, you have this document that, hey, you told me this is— you're not going to live in there. And now I got probably some regulations or laws that says, oh, I'm now lending as a mortgage broker or mortgage license. That I need to get. So that's very important, I think, for people to understand. And also sometimes in certain states, you actually need a license to be a private money lender. And I think a lot of people didn't realize that either.

Yeah, that's all really important, very detailed. Like I just did a DSCR loan and you always have to sign a statement saying I will not occupy the property because it's income too. So the business loan, how do you— is that like a document or how do you certify that? That's a really good point, I think.

Well, my attorney actually draft a document that just says, of course, the borrower has to certify. And actually, they actually have a section that they have to handwrite that they certify this is a business loan and it's not intent for to live in their primary residence. So now they cannot say, oh, I didn't know, but you actually handwrite it yourself.

Yeah, that's the one we can't— yeah, that's very thorough.

My love just said it's already on the document and you write it yourself with your own handwriting, then you have no way to say you didn't know what that is.

That makes me think, Jenny, you're definitely a pro. And if you haven't done, you haven't been in PML and this all sounds great. Like you get this great return, right? You get points, but get guidance. Don't just go out on your own if you don't understand it, because you could, and I've often hear of like unsecured loans that makes my skin crawl because you have zero protection, right? Like. You want to talk about that? That does happen and it really is like not cool.

I have heard a lot of horror stories. It just happened last week in one of the Facebook group chats. This lady was asking, oh, can someone refer me to a real estate attorney because this borrower hasn't paid me in a year? And I said, okay, real estate attorney. I go, if they haven't paid you in a year, what state you're in, I think you can start the foreclosure process. I say, do you have a lien or deed of trust? And she goes, no, I just have a promissory note. I'm like, so is that it? That's all you have? She goes, yeah, I didn't know any better. It's my first deal, so I don't have any deed of trust or any lien. I said, okay, then I guess it's just a personal note. That's the best I have. Well, no security or no collateral. I think you could probably just go to a small claim court.

I don't know.

I'm not sure if a real estate attorney can help you, can help you much because there's really no property or lien against these promissory notes. And so I don't know what else they can do other than you go to personal small claim courts or go after them. Personally. Yeah.

And I think that there might be times where that's intentional, but if someone doesn't know, like, just do your homework, get help, ask the questions on both sides, right? Because that's so critical. And you hear of these stories and it just heartbreaking all the time.

And also I think people don't realize also lean positions. There's first lean, second lean, no lean, which we just talked about.

Zero lean.

I think what the level of like risk Yeah, first lien, second lien, and then zero lien.

And so that's a good thing. And really the only time that comes to pass is if there's a default, right? The first position is the most secure, right? So do you loan on second? I might love to hear your perspective on the positions and where you're willing to go. Yeah.

So for me now, all of my loans have been first so far, but of course it doesn't mean I don't lend on second now. Why I say that? Because even with first lien, you can still have risk in losing money. So why I'm telling you that? Because, so you look at really the total combined loan value. Because if, say for example, your, that property as is, it's say $200,000, okay? And you lend that person the full $200,000. Okay. He's lending 100%. Okay. Say, because they say the ARV, once they add the rehab could be $400,000. Okay. That's a great deal, 50% or 70% deal. And to be honest, if they start demoing it and they walk away during middle of demolition, do you think that property is still worth $200,000? No. It does not. So even as a first lien, I'm just saying even first lien, You can still lose money, right? Because if you take that property and sell it to a wholesaler to finish it, you might only sell it for $160K or whatever, right? And you still lose $40,000 because you lend $200K. Now vice versa, let's say you have a property, another deal that's $200K. You only lend that person $100,000 as first lien. And then they went to ask Yoshona and asked for a second lien for $20,000. Even though it's a second lien, but the total loan values, $100,000 plus the $20,000 is only $120,000 out of that $200,000. So in case anything happens, I think that second lien position still has better security than our first example of that first lien position. Right. I think it's important that you look at the total loan value versus, oh, first lien, second lien. Yeah. You can have third, fourth, fifth lien if that total loan value is 50%, right? So in that case, if that property goes into auction or foreclosure, all these lien positions will probably get paid if there's value in it, if there's equity in it.

Yeah. And that, it's really what it comes down to, because if there's enough equity, there could be a third and there could be more. I'm not, that's not common, but that's really the risk factor. Yeah. So I had a coach tell me, like, I think first lien is coveted because it feels more secure, even though it may not, to your point, excellent point, may not be true. But I think that's always like the juiciest position, right? If you're going to get a PML, you get a first lien times the equity, just like a good, that's just a solid, right? If you're like, yeah, second, and you're squeaking in, it might be tricky.

So I would say in general, that's how it works. But of course you got exceptions.

So, so you're not, I think, and if you're very analytical, you're looking at the whole thing and you're not like, I'm only going in first. You're seeing what's there, what the loan, the value is. Yeah. That makes a lot of sense. We get hung up on these terms and we don't necessarily unpack what that really means. They really only will come to pass again if something defaults, right? So.

Correct. Yeah. So don't get hung up on the terms, but I think look at the details. So ask questions.

Yes. Yeah. That's, I love that you said that. And also I just, there's so much to unpack here, but I want to talk about where I feel like we're partners. If you loan me money, I'm your partner. And I'm really big on like communication. I'm like, what do you like from a partner when you're lending money? What's the ideal? Like how much communication? What cadence, I think we don't think about that enough sometimes. And when we get into the deal, we're heads down, right?

Yeah. Yeah. I think the more communication, the better. From a landlord perspective, like I want my buyers to just keep me updated. I think, Sean, you did a great job. Every single, I would say even that short duration, you keep me updated almost like every week or something. You let me know what's going on. We have completed XYZ, and now we're still, we're working on ABC. I think that at least gives the lender comfort, at least know what's going on. And if you have a handle over that project, right? If that person is scrambling, disorganized, doesn't know what's going on, having issues with contractors, then I don't think they want to share those news with lenders. And, but I think even that you should still share because me, like you said, it's a partner. Maybe I can help you think, okay, what are the alternatives? What are the alternatives? Maybe when people like just stress and they might just think this way, but if you start talking to people, they probably see a different perspective that you don't see, right? So maybe they will help you figure out an alternative way to solve your issue. So sometimes it's actually better to share even challenges with your lenders and say, hey, I just want to give you a heads up. I don't want to be a surprise. Here's what happened. I'm working on it. Or at least just tell them you're working on it. You're trying to find a solution. You're on it. So don't worry about it. Or So at least the lender said, okay, at least I know she's trying to figure out a solution to the problem. Or I can say, hey, do you need me to offer you some help? Or do you need support? Because like I said, like you said, we are a team. We're partners, right? Because I want you to be successful. I want you to complete the project so I can get my money back. That's the most important. It's to my best interest to also help you. Right, to finish his projects. And so I think that is very key. I think just be on top of it and just communicate with your lender. I think that's really important. Even though I try to give them like, hey, at least I need a monthly update if it's going to be a long project, at least some videos or pictures and what's going on. I have one borrower, she actually has a social media account. Of her flipping business and she constantly posts out there, right? And so I can actually go to that social media, like you, you, Shona, you will post on your social media, say, here's the, you know, I'm working on this project. Here's the status. Then actually I already know I could just go to your social media page. I said, oh yeah, I know Shona working on this and now they got all this done. Just need the last touches. So I think that really helps and gives comfort to the lender.

Yeah, no, I think we don't, and especially with smartphones, there's like really no excuse. Like you can document, you can do a video walkthrough and that would, I would imagine just, it's simple. You're not even writing anything. Yeah.

With smartphone technology, it's just so easy to just take a few pictures or do videos. The best is real time, but taking videos and pictures send a glimpse, I think that helps a lot already.

Yeah. And you made me think of something I don't think we touched on too. It's like thinking through all the scenarios of do you build in, hey, if you like, obviously we don't want to extend, we build in a budget and we need to be realistic. But if we need an extension, do you build that into your, you know, promissory note? You have the option to extend or how do you manage that? Just because things happen.

Yeah. So I usually will allow extensions. I usually put that it's already in the promissory notes, you know, and you can limit to how many or how long. For example, most of my deals is I, my, my term is usually 6 months. And then I will say, okay, I will allow one extension for 3 months. You know, some, it depends on the deals. You have some, it's not like a set in stone, but some will be longer. Some will be shorter. So I usually put in that another one-time extension. That's what I do. Now, of course, there's fees you got to pay to extend, but I think that gives the borrower flexibility. For example, I have one borrower. She was— this was a BRRRR property, which means she's borrowed the money to flip— I mean, not flipping it, but to rehab it and then put a renter in afterwards, right? And then she's going to keep it, refinance it, and pay me back. Now she started her refinancing like at month 5, 4, 4 and a half or 5. And she started early already. Now, unfortunately, she couldn't get the appraised value high enough, right? So now she got to go to a second lender using a second appraisal. And then that's why she extended it because she needs more time. And it turns out she needs to go to the third one before it gets to the value that she needs in order to refinance the amount to pay me back. So I think sometimes the extensions, it doesn't mean a bad thing and doesn't mean that borrower's not good. It's just things that they can't control. Like especially, you know, this is a refinance project now. Well, fix-and-flip, like we said earlier, contractor, they always have an issue. It's not going to be done in 2 months or a month. Okay. Double that timeframe. If they say 1 month, assume 2 months. If they say 2 months, 3 months, you know, they say 9 months, we say 12 months. Build in that cushion, build in that extra time. I think as long as you are on top of it, you're doing your job and you let your lenders know that you're trying everything, you're trying to pay them back, but it's just things that, that just beyond your control. You're working hard on it. I think most lender will extend.

Yeah, I think that's really, it's communication. I remember when I was working with you, we're under contract and it fell out and I hated texting you that and I felt really bad. I was like, but I don't wanna, I wanna just be up. And then it got back in contract, but it was uncomfortable, but I communicated it even though it was not the funnest update to make.

You know, things happen and it's like, it's not your fault that it fell out of contract. It's the buyer just backed out or got cold feet. And I think it's better you tell the lenders that, hey, it fell out, so now we need more time to put it back up to the market and we're going to start the process again. So at least I, I, sometimes I go, oh, then I can better plan when my money's coming back, because then I can say, okay, when do I look for the next deal? Or I will commit to a next deal until later. I think that also gives me a heads up, like, when am I going to get my money back? So I can—

Yeah, no, that makes a lot of sense. Yeah, because you're, you want your money to work when it's sitting there. It's not earning money. So yeah, you're really, it's a business and you, this is a business. It's not just a hobby, it's not a hobby, right?

No, you have to treat it as a business. I think if you just treat it like, oh, a side hustle. Yeah, you can do it as a side hustle. They always call it side hustle. You have to really treat this as a business so that you will run it like a business and you would take it more seriously and not just, oh, okay, all right, I'm going to lend you this money. Here you go. And just forget about it. And, and I think the other thing was that I always see people do it. They don't require monthly payments. And that's really, I want to stress about that. I know some people said, oh, we will make payments at the back end, but that adds another level of risk to you as a lender. Because what if that person never completes the project? You didn't even get those monthly payments that you're supposed to get. And I think also the monthly payments also is a way for me to validate that person. Like to how that person, are they on time? Are they on time on payment? Do I have to chase them? Hey, your money's due or you're late. I've been very fortunate, you know, lucky that most of my borrowers, like they either pay me on time or pay me early, or sometimes I just need to send them a quick reminder. Like I usually, I'll try, I'm not too good about it, but I'll be better. But usually I will try to send them like a reminder. Hey, your payment is due. 2 days or 3 days and they're, oh, okay, you totally forgot it's due, it's due on that day. And they will start sending money in. So I think that's very important. Also is a way of checking to make sure that person is accountable and responsible for what they bond the loan. So I think that's very important.

I will just say, I think it circles back the fact that you've had, and I'll say luck in quotes, is because you vet really well. You treat it as a business. You're not doing risky loans that you haven't thoroughly underwritten. So I think that's probably a big part of it, right? Because you're very intentional about who you're lending to.

Yeah. And I think sometimes it's even you did the best underwriting, it doesn't mean things will not happen. Yeah. And to me, it's so far, I have to knock on wood again. So far it's been, it's been okay. Nothing went wrong, but I was told, just assume one day. It's not if it's going to happen or not, it's when it's going to happen that you're going to have a foreclosure or foreclose a property. Just hopefully you can delay that timing as far out as you can, but eventually one day it will come. And so—

It's true.

Just have to prepare for it, like mentally and making sure that finance-wise, you are okay in case that they cut.

And we don't ever talk about that on either end, right? It's put, it's always put out there. It's such a great passive thing, but there is risk, right? And I think we should go into it eyes wide open, understand that's why banks are so serious with underwriting because they're assessing the risk, right? That's just, yeah.

I think in life, all kinds of investment, doesn't matter what kind of investment, that there is zero risk. Even you put your money in the bank, you can lose it too, right? There's banks that close down and you could get your money back, or of course if they're not FDIC insured, or you put in more than the FDIC insured amount, then of course you lose that excess amount. But like I said, there is no risk-free investment. If someone tells you there's risk-free free investment. That's a lie. Even I said, even you invest in US Treasury bond, it can still, this still can have risk, but that risk price very tiny because the US government can go bankrupt.

Yeah, it's true, right? We forget that it's all risk. And I think there's a lot of reward too though, right? But you have to be comfortable. I was going to say to you, don't loan your 401k or IRA or self-directed. If that, if that, if you lose that, I feel like you I don't know how you feel about this, but I think we hear a lot of these, oh, just tap your equity and loan it out. But you have to be comfortable with, you know, that. I think that's important to where your comfort level is maybe as a PML. I don't know. I've never been a PML, so.

I think like I was just answering a question today on someone says, oh, should I take out HELOC to do PML? And I clearly tell them that's going to be very risky. Because if that person doesn't pay you back or is late in making payment, or you relying that payment to pay your HELOC monthly payment, and if that person gives it to you late, then you're going to be late on this end. You got to make sure you have your own funds to pay in case the borrowers make late payments or default, because that HELOC It's against your own home or your property. It's against your own credit, right? You got to make sure you can fund that and you have enough reserve to continue to make payment if that borrower doesn't pay you back. So I think that's very important. Yeah, it's very, I would say, very lucrative because you're using other people's money to lend it to at a higher rate, borrow at a lower rate, lend it out at a higher rate. But You gotta make sure the worst case scenario is if that person doesn't pay you or default, do you have money to continue to pay that TLOC?

Yeah, that's a good point. I think really thinking through it and understanding like what, yeah, weighing that, all that out. Jenny, this has been so fun. I want to get to some Q&As or anything else that we didn't cover that you feel like is often overlooked or not talked about as a PMO, because there's, it was a lot to that. That's right.

Definitely there's a lot in PMO that I didn't realize when I first got in, but I think the most important thing is I think people didn't realize, I think I briefly mentioned it, it's some states require licensing to do PML, but of course, some states, even though there's licensing requirement, there are usually exceptions to the requirements. Like the main reason why these license, these laws is meant to target people who's like consistently doing it like a true business, not us individual who makes a few loans a year. Make sure you check with an attorney if there's license required or not. Is there exemptions? Exemptions, because I know, for example, Idaho, I lend in Idaho, but there is a licensing requirement, but they said if you do 5 or less within a year, you don't need license. So making sure that you are aware of that because in case anything happens, because we always say, If the deal went, everybody's happy, nobody's suing anybody. If anything goes wrong, then people will start suing people. And if you don't have the right legal documents or you don't know that you need a license and that note could be invalid, right? You never know what's happened. And the other thing is the user manual. I think a lot of people didn't talk about what's user usury laws. Each state has put a cap of how much interest rate that a person can charge to another person in terms of some state, which is personal loans, some state business, even including business. For example, California, the cap at 10%, which means if you charge anything in excess of 10%, that's including points. So not only APR, but points. Points and APR, total 10%. If you charge exceeding that 10%, you could be, you know, under criminal or anything in excess, you have to pay back the borrower, plus you can be subject to penalties like the government can find you, right? So that's why I think it's very important because I see a lot of those second lien or you know, equity partnership that says, oh, 20% or 30% flat for 6 months. I'm like, oh, okay. Have you checked the usury laws? Now, if so, are your legal documents helping? Sure, there's ways that you can go around it. Of course, check with your attorneys, but if you structure the deals correctly, you can, I wouldn't say go around, but there's ways to mitigate that risk. So making sure that you are aware about that before starting your, your PML journeys. Always find a good attorney, a real estate attorney, or actually the best, at least a minimum, a real estate attorney within that state of the property that you're lending. Or the best is find an attorney who specializes in private money lending.

Yeah, because getting your documents right, you can't ever go back. That's So critical if something ever comes to pass. Yeah.

Yeah, exactly.

Awesome. Oh my gosh. There's been a lot of questions I've been ignoring.

Oh, really?

Yeah.

I've had seen it. Let me see if I just—

I will, uh, if anyone has questions that's still listening, we still have a few folks on. First of all, let us know if this was valuable, takeaways, because I don't know, it's good for us to hear, but I'm going to go through this and see. I'm going to start asking you a couple of questions. Eunice is asking, or do you have time, Jennifer? Sorry. Is that okay? Do you have time? Do you get financial statements to make sure they have sufficient funds to pay the interest payments?

Now, I actually don't ask for it, but it should be a good practice to ask for it. But because I always say sometimes I know that people can— yeah, I ask for finance. When you say financial statement, is it bank statements or financial statements, right? Financial statements, I don't want to say anything, but anybody can just put together a spreadsheet.

A pen and paper. Yeah.

Put any numbers in there. Yeah. If you ask for bank statements, yeah, it would be good to ask for bank statements, but sometimes I try to stay away because I don't want to like get into the privacy issue, right? But I think it's a good practice to ask for it. And, but sometimes people can just borrow money and put it in theirs temporarily and taken out. So to me, I look for not only they have interest reserve or the reserve funds, the funds reserve, but what do they do? If people that has W-2 jobs, do they have a stable income or does their spouse have stable income? And look at it from that perspective, because I know, and one of my borrowers, she's an attorney. And I know that, okay, I don't think I'm be scared that she's making money as an attorney, right? That's her business. And also I don't think she will do anything wrong because she's an attorney and can't ruin her reputation if she doesn't give new flow. Like, okay, that gives me a little bit of more comfort in that. So yeah.

That makes sense. Okay. That's a, I, yeah, that makes a lot of sense. Okay. Another question. If it's out of, if it's an out-of-state PML, is the percent based on the state the deal is in being lent or is it based on the lender state?

Well, I think that was talking about the user rates. It's actually the property, where the property is.

Okay. That makes sense. Okay.

So even when you're looking for licensing, right? You, it's where the property is. Because, or the borrower, I think most of the time the borrower's probably within the same state as the property, but it should be the property. That's my understanding. Now don't quote me. I'm not an attorney.

Not the one, right?

But you know what, we advise no accounting advice and this is just for educational purposes. So yeah, I think I look at it from where the property stays.

That kind of makes sense. Okay. Yeah. Great question. And I hadn't ever, I don't think I've thought about that, so I'm really glad you brought that up. Okay. Another question. What do you charge for extensions? Like when you're in the promissory note, how do you work that?

I think it's just That's the beauty of private money lending is you— it's so flexible. You set your own terms, right? You can charge 10 points if you want, if the borrowers want, instead of 8, that's fine, right? But I usually charge, for example, it depends on my initial points, right? If I say I charge 2 or 3 points for 6 months, then okay. If I need to lend another 3 months, then I probably take 50% of whatever I originally charged. Because think about it, I need to make my return. If I, if you don't pay me back, I need to, if I pay, if you pay me back, I would just use that money and lend it out again. But now I'm lending you again. So I think in order for me to have a good, fair return, I usually just calculate that way. Like I said, it's just negotiation between you and the borrower. I know some people don't charge for extensions. I think it just depends, but I think the other things that I also forgot, one thing that I should tell a lot of first-timers is don't— make sure that you actually charge all the fees back to the borrowers. Pass the fees to the borrower. It's not for you to absorb it or my cost of doing business. Because I know a lot of newbies and I've been bad at that one too. When I first started, I didn't know any better. I said, okay, I'll pay 50%. 50%, you pay 50%. But it turns out you should charge out all your fees, like your wire fees, your, of course, the document fee, the attorney's document fee, that's paid by the borrowers. I tell people, just think about it. When you buy your own home, you take out a mortgage from Bank of America or Chase or whatever, you take out your HUD or final settlement payment, the statement. Did they charge you every single penny? Just look at that. Okay. The financing, what do they charge you? They would charge you everything. So you're no different from Bank of America or Chase. You just now, you are the mortgage company. Just the same thing. It's just a little different format, but you're still the same. So basically then you should pass all the costs to the borrower. It's their cost.

Yeah. And don't feel bad about it. Yeah, I know. I'm the same way with like rentals. I didn't, I felt bad charging a lease breaking fee and now I'm like, nah, Yeah, that's, I'm not eating that. Sorry.

No. Okay.

Awesome. I'm scrolling this. Lots of comments. Amy says, love the discussion. Thank you so much. Sandy says, it's so good.

Awesome.

I, we really appreciate the feedback. It's fun. Okay. I'm just looking for, and if anyone has questions that didn't get answered, feel free to pop them in here.

Can you recommend a few states to start with? Yeah. Did you see that one?

Can you recommend?

Yeah. Is that?

Like states, like I'm not sure what the— yeah, I didn't— yeah, feel free to answer it if you know what they're asking about. Go ahead.

I think they're asking like to start in lending. I think, cause I said some states, you know, have licensing requirements. There are states that doesn't require licensing. I don't— cause for me, I really didn't focus on what states should you start in. Of course, I would say, always say start in your home state if possible, because you can literally go check out that property if possible, right? Like I said, I don't check, like physically see all my properties, the land and dock, except yours, Shauna, and then a few other ones because I was just close by. So I, if it's close by and I can travel there, I would do it because it makes a huge difference if you're there to see the property. With your own eyes versus virtually. Still virtually still good, better than nothing, but going and seeing with your own eyes and checking out the neighborhood, neighborhood, I think that's very important. And the real condition of the house. But I think just starting in your own backyard, that's good if you can travel to. If it's not, then start lending. If you don't want to deal with licensing, kind of start in states that doesn't require licensing to begin with. I think Texas is one of them. I'm not, I don't exactly sure. I think there's some states that doesn't require licensing. So like I said, I'm not an attorney.

That's okay. I'm not your attorney.

But yeah, so I would do that.

I like that you said your own backyard because you're also going to have an intuitive feel. If someone's giving you an ARV that makes zero sense in your market, it's going to be like automatic alarm bells, right? Or you say, know what, or if it's a great deal, it's like, oh, that's a great deal, right? Yes. I, that's—

[Speaker:ASHLEY_KEHR] Yeah. [Speaker:ASHLEY_KEHR] Shona, you're in the areas, you live there, you pass by those neighborhoods all day long, so you know what's there or not, right? So you think, I think it's easier for, I will have more trust in the borrower who knows the area very well. They have lived in that neighborhood for a long time. Those that are like doing virtual flipping. That's, that's another level of risks, right? Because they are relying on somebody else virtually, right? How well do you, do they know the market? How well do they know the contractors? Did they vet them? Or are they going to fly there to check on the properties all the time? If you're lending to someone who's going to do virtual flipping, that's something, that's an additional level of risk.

So. That's very true, right? Yeah, that's just another layer to consider. Yeah. Sorry, I was just, I didn't realize you could pin the questions over there. I don't see any other ones. I know we've been on for a while and I'm just going to do a quick like browse, but thanks for, you guys hung on. It was really, it's a really good turnout tonight. So thanks everyone for joining and hanging out. It's been a fun conversation.

I thought this is fun. People doesn't like talking about numbers and I don't know.

I, I could, but I feel like that's right. Yeah. Okay. Maybe we should have, that's the next one, Jenny. We'll do a deal deep dive or something.

Before we get into a deal.

Yeah. Rates are flexible. We're in a weird time and I think that's something, and that is the beauty. Like you said, everything is negotiable, right? You could offer a crazy good rate. You could be like, it's all negotiable. And I don't know if we emphasize that enough. That is the, it needs to be a good return, but it's negotiable, right? Yeah. That's a beautiful thing. You don't negotiate.

Correct. You negotiate. And also I think it's, you know, sometimes if the borrower said, hey, this is what I propose, you can counter. It's negotiable, right? Yeah. And I always say lenders, I don't want to say that, but it is who has the money, who has more stick. But no, it's all like you say, it's all negotiable and even the lender, borrower say, hey, I'm going to pay you 1.10%. You're like, no way, I'm not going to do 1.10%. You can counter back, right? And you say, hey, this is how much I got to do, 2.12% or whatever. And that's what I think I want my return to be. But also don't overcharge it in that market. For example, if the going rates is like 2.10%, you're charging 5.15%. Course, for the same lien positions. Now let's talk about same lien position. Then people is going to go, I don't need to borrow from you. I can go to them and get the money at the same low, much cheaper rate. Now, of course, it depends on the lien positions and how much loan-to-value you're lending, right? Because I know some private money lender or hard money lender only lends up to 80%, 85%, 90%. So you still have to put in some amount into the deal. But if you're trying to borrow full 100%, you got to make sure you're paying more in interest at points because that's a lot more risk for the lenders. And if they don't have the better returns, they're not going to lend. So.

That's a great point. It's more risk and there's more reward and yeah, that there's like all those nuances to it. Yeah. No, that I'm really glad you mentioned that. Yeah. That's a great point. Okay. I have another question here. Maddie is asking, what if it's a third party and you're lending to them rather than the actual borrower? Is that recommended?

What do you mean it's a third party and you're lending to them rather than the actual borrower? I don't quite get that.

I don't either. It sounds a little— I don't know. We need more information.

So Maddie, please tell us. Are you saying because there's a broker in between or a connector? That's bringing the deals to you. That's why it's the third party. So you're not really lending to the third party. Maybe that connector or broker brings the borrower to present the borrower to you or the deal to you. And you lend, actually you do lend to the borrower, but not the— it's a flip.

I, yeah, why wouldn't you be lending directly? But Jenny, that is a good point. Maybe it's like a matchmaking thing or something, but yeah, generally I would think you'd want access.

Yeah. So he does. Yeah. I know there's a lot of like connectors or brokers that bring deals and present it to. I would, and if I'm lending for the rehab cost only, even the rehab cost is still lending to the borrower. So to me, I think it doesn't matter. You need to talk to the borrower. So even going through a connector or someone else, You need to make sure or even talk to the borrowers. Um, because the connectors, they need to like, I know some connectors will actually organize like the huge folder that has everything. And if you request, you can talk to the borrowers. If they prevent you from talking to the borrowers, I would not go into that deal because doesn't matter. You need to talk to the borrowers and get a feel of who they are. Some of them, We do a Zoom call and share that report, right? At least you can see that person in real life. I don't want to say, oh yeah, this one is Joe Smith, but there is no Joe Smith out there. It's just an AI. So right now I'm an AI actually. Yeah. You really want to make sure that you talk to the borrower or at least see that borrower's face. Yeah. Pay the contractor instead of the borrower. Oh, I think they're talking about contractors. You sometimes you pay the— are you doing draws? Or you sometimes you pay the contractor instead of the borrowers. But I think Maddie was saying lending, not just payments to them.

Yeah. Yeah. And that sounds like, yeah, I think it just goes back to knowing the deal and yeah, I think if it feels a little uncomfortable or fishy, you're not Don't have all the information. Probably something you need to dig into more.

Yeah, I wouldn't lend to another person that's not doing the deal themselves. I would, I need to lend directly to the actual borrowers who's actually going to be doing that flip. I wouldn't be lending to another person to invest in the deal. Maybe that's the reason why, like Sean, like, want to be a PMO, but you don't have the money. You come to Jenny and ask for money.

And you get what you deserve.

You know, the person didn't know the flip.

Yeah.

I know.

Again, I think you really emphasize, and I think of vetting the person and the deal, right? You can't really separate them or you can, but that's at your own risk, right? It's yeah.

Yeah.

Okay. Jenny, I know you're— how, if someone is, oh my gosh, like, you know, so much, do you offer coaching or how could someone reach out to learn more or maybe get, if you need some handholding or what are you offering?

Basically, I'm just starting all this. So I'm still in the work of coming up with if there's any coaching program or what, but I'm still working on them, but I actually got a website on, so there's a way you can contact me. And so it's JennyTsaw.com. Very simple. So Jenny T-S-A, just like the airport security, dot com. So, yeah, so that website just finished 2 hours ago.

Nothing like a deadline, right?

Yeah, so it's just fresh off the press. Yeah, so excuse me if it's still work in progress. Apologize, but I just want something out so at least people can reach out to me. It's going to be for the refinement, so.

Yeah, no, I think it's great. And I just think, yeah, ask for help. And again, there's no stupid question, right? If you're new to PM, asking questions, and if you're not clear on something, I just clarifying it and understand, getting help, guidance, right? Whatever that is, an attorney, a CPA, or whatever it is that you're protecting yourself, right? Yeah.

I think it's very important. Talk to a CPA, talk to an attorney. I think attorney. Talk to fellow real estate investors. If you belong to a group, start asking questions in that group. I think there's people who will answer, like sometimes I answer. If I see something, it just happens that I will answer. I'd rather Someone go out and ask and get the help instead of, oh shoot, I landed down and they got burned. And that's a very expensive lesson. Then pay someone to help you, guide you. I think sometimes even paying an attorney $500 an hour to ask them a question is still better than losing $100,000 or $200,000. I've heard there's greater amounts that's been lost. So I think sometimes it's better safe than sorry.

100%. And I don't think anyone goes into this expecting for the worst to happen, but you need to understand what, how, what that means and how you're protected. And for the borrower too, right? Like it may be they need to tell you, this is not a good deal. Like, I don't know why you're doing it. And I just think it has to work for everyone and everyone needs to be really buttoned up because you don't want to wait until things have gone south to figure out you didn't structure something correctly.

And I think sometimes the borrowers or the flippers, they sometimes they probably go into a bad deal that they didn't know because there's, okay, I want to get my first deal, especially those first-timers. I want to get my first deal. I will take on, or sometimes some of the realtors just throw them, they think it's deal to them and they say, oh wow, this is a deal. This is deal. I just want to start first one. I want to get in. But if you start asking for PML and you haven't gotten anybody to lend you money, maybe it's time to step back and say, is this really truly a good deal or not? If people are not lending to you or you have a hard time finding the money, then maybe you should rethink, is this really a good deal or not? So actually, I think it also helps. It's like kind of a second set of eyes to help you look at it, look at that deal.

Yeah. I mean, cause a PML, it's their personal funds, an institution, a hard money lender, they're like just going to sell you probably whatever package, like it's not as personal, right? It's not their money that they're lending.

No, no, but you know, sometimes these guys will ask for appraisal. Of course, getting appraisal, it's the best. I would, I would say the best, but I think sometimes people say the ARVs, they couldn't come up with the comps. I think getting a, if you have the time, you should get just pay for that appraisal, right? It's a couple hundred bucks. I think it gives you as a borrower or the lender a peace of mind. And if it comes back saying, oh my God, this is really not what I think it's going to have as-is or the ARV, maybe that $200 that you lost in paying for the appraisal is actually saved you hundreds of thousands or your reputation.

Yeah. So appraisal, do they do as-is and ARV as-is? I don't think I've done one on that, like a Currency.

I've seen appraisal that does ASIS and ERVs. Yeah. So I have seen those before. So they will, yeah.

You can't just, they can't have enough data, right? Yeah. That's a really good point. That's what banks do, right? They're not going to give you money until they get.

Exactly. Like I said, you're a Bank of America, you are the, you know, JP Morgan Chase, you are a mortgage company, you're the bank.

Yeah, it's got the banks that don't mess around, right?

That's right.

All right, Jenny, let's give your info one more time and I'll put it in the show notes too, if anyone wants to reach out and work with you or has questions. Thank you for being so generous too.

Yeah, so it's JennyTsaw.com, very easy. J-E-N-N-Y-T-S-A, just like the Airborne Security, dot com.

Awesome. This has been so much fun. I think we'll have to have you back for a deal deep dive and really dig into some numbers.

We're going to live with your deals. Right.

I hope this wasn't too general. I guess, I don't know. I think that you need a good foundation and then you can get into that. Cause that's so critical to me. Yeah.

Awesome.

We went, this is a very long, I hope you, I hope you, I didn't interrupt your dinner. No, it's okay.

It's 8:43 here where I am, but that's okay. I had a late lunch anyway, so I'm good.

Okay, awesome.

All right.

Thanks again. I will tag you when we're out and yeah, I'm, I will, we'll sign off. Thanks everyone for tuning in. You guys are troopers. You really hung in there and thanks for the great questions and let us know if you got any value. If you're watching the replay, feel free to comment. It's always helpful and I'll leave Jenny's contact info in the show notes so you can reach her.

Okay. Awesome. Thank you everybody.

Bye. Bye. Okay, we're off.