Private lending is relationship-based. To have a successful deal with your borrower, active communication is necessary to outline and agree upon expectations. Joining Lisa Hylton to elaborate on this is Alex Breshears, the co-owner of Infinite Road Investments, who has had years of experience with private lending for residential real estate. Alex discusses why it’s essential to have a good background check with your borrower. She also shares her process and criteria for choosing which projects to lend money on. If you’re someone who’s new to real estate and planning to get access to private money, you are going to want to learn more about this. Tune in and soak up all the knowledge you need about private lending!
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The Different Flavors Of Passive Investing – Breaking Down Private Lending With Alex Breshears
I’m excited to have on my show a special guest. Her name is Alex Breshears. We are going to be getting into everything about private lending. If you have no idea what that is all about, you definitely want to read this episode. Alex is amazing. She is a private money lender. She’s also a Regulation A fund Investor Relations Manager, multifamily underwriter, educator, a limited partner in multifamily syndications, a community builder who partners with active and passive real estate investors, syndicators, and military spouses to grow their financial independence, knowledge, and professional network.
She started her private lending company, Infinite Road Investments, in April of 2020, funding her 1st and 2nd lien positions for residential properties in the Hampton Roads, Virginia area. This other item here is super important that I want to share. She also started an educational Facebook called Private Lending Lessons. That is how I personally met Alex. She offers weekly educational lessons, daily posts for discussion, and opportunities to network with other investors about private lending and various projects that might need funding.
I am super excited to have you on, Alex. Welcome to the show.
Thank you so much, Lisa. It’s always fun when someone else reads your bio because you’re like, “I’m busy.”
Where I want to get started with you is I want to talk a little bit about your background. Talking about busy, can you share with my readers where you live?
I am in Hampton Roads, Virginia, where the Chesapeake Bay meets the Atlantic Ocean near the North Carolina, Virginia border.
We talked a little bit about some of your business–entrepreneurial stuff in your bio, but what do you do for work?
I’ve been transitioning my “normal W–2 job.” I’m a Chemistry professor and my classes got all moved online, thanks to COVID, and they are still online. For the foreseeable future, I will be teaching online and it’s been great. A lot of people had to make that transition during COVID. For some people, it had hurt them and for some, it helped. I happened to be one of those people that helped.
I know you are a military spouse for many years. Can you talk a little bit about that experience of being married to someone who’s been in the military and on active duty for many years?There is a canyon of difference between knowing and understanding something. Click To Tweet
It is chaos. Imagine this third person in your marriage that gets to dictate where you live, how long you live there, and when you get to see your spouse. That’s what being married to the military as a wife. My family is not military. I had no idea what I was getting into. He was in the military when we met. I’m having a down moment before, and people are like, “You knew he was in the military when you married him.” I’m like, “That’s not helpful.” There is a canyon of difference between knowing and understanding something. We got into serious moving. We have stationed places for a couple of months. The longest I’ve lived anywhere is 22 months.
Our orders pulled when we had the moving truck in our driveway. We’re going to place A and ended up having to go to place B while they’re loading the stuff on our truck. They give you this list and say, “Here are your five choices. You rank the five choices,” then you end up going to a sixth-place that wasn’t even on the list. It creates this level of chaos. After many years, you can roll with it. Early on as a military spouse, I had plans. I was going to go to this grad school, go to this professional program, and move along this career path.
The Navy is like, “We’re not doing any of that.” For a lot of years, I was very resentful of the military. It was always something I could blame. All the military moved us to this part of the country so I didn’t get to finish the grad school program or do the professional program I wanted to do. I was the victim in my own life. In the last few years, my mindset has shifted. As you mature as a woman, as an individual, as a married person, it’s not much that the military moved me there. It’s I chose to keep my family together. That became more of a higher priority than me going to a specific grad school or professional program. I took pride in that that I chose my family first.
Can you touch a little bit about how you’re able to get into this business that you’re doing now? Does your lifestyle compliment this business that you’re in private lending?
It’s a product 100% of our lifestyle because when they think about real estate investing, there are only two things that come to mind. They’re going to be a landlord or put farmhouse sinks into ugly houses as they do on HGTV. Both of those things were great ways to invest but it generally don’t speak to a large population, especially women, because we’re dealing with our own lives, our families, our households, our own jobs. The last thing we need is to add another tornado to the storm. For anybody who’s ever had a rental property or anyone who’s ever had to deal with a fix and flip and contractors, that is a massive tornado most of the time. A lot of women will discount investing in real estate because that’s the only two things they know.
I had the opportunity very early on. I worked for a hard money loan broker. I met him at an REIA event while I was in undergrad. He’s like, “You’re a science major. You must be good with numbers.” I’m like, “Not too bad.” He mentioned what a hard money loan broker does and what the process is. He said the magic words every college student likes to hear. It’s flexible hours. I was like, “Done, let’s do this.” This was many years ago. Back then, you were physically driving to the properties to get a scope of work and to have a paper application filled out by a borrower. I got a Crash Course education in what the fix and flip model look like, what we now call the BRRRR method. The one thing I always noticed was no matter what happened, the mortgage had to get paid. If the contractor was three weeks behind, you still had to pay the mortgage. If the tenants moved in and then didn’t pay rent for the next two months, you still had to pay the mortgage.
I was doing some of the bookkeeping for this hard money lender. I was seeing the dollars coming in and out of his business at his flowing. He’s investing in real estate. He’s on the other side of the table. It made more sense to me that if you’re only living somewhere for 3, 6, 9 months at a time, real estate tends to be a very slow–moving illiquid asset. You don’t have that time to find something, analyze the market, negotiate the deal, do the fix and flip, and then you’re gone in three months. COVID has pushed the idea of remote real estate investing further than it’s ever been before. Many years ago, that was unheard of. When we got back into the idea of investing in real estate, we had to have something that could deal with our mobile geographical lifestyle and lending fit that. As long as I have electricity and internet access, I can do that from anywhere my husband is stationed. If you get stationed somewhere that doesn’t have those two things, I’m not going anyway.
That brings me right into the meat of this episode, which is we’re going to get into private lending. You touched a little bit about how you discovered private lending. Was that how you discovered private lending, which is in college when you had met that hard money lender?
Yes. I got to get a Crash Course in that side of the business before I learned anything about fix and flip and buy and hold. That was my education in real estate. It was one of the first REIA meetings I had ever gone to. I struck up a conversation with this particular individual and I was hooked.
That was in college and then you started your business here in 2020. Is it that you revisited that investment strategy later on? What prompted or triggered it coming back as something that you’d want to do?
We always knew we would come back to real estate. We had done a couple of fix and flips in places that we lived a little bit longer. We had done some informal private lending. We knew other active duty service members that were doing fix and flips and they needed some funds for renovation or whatever it was. It was always a side hustle, but when you’re moving every 3, 6, 9 months, life gets in the way. You’re trying to find a place to live, figure out where the grocery store is, and all these other things. When we got stationed here in Hampton Roads, my spouse is a Navy service member and this is the hub of the Navy on the East Coast this 2021 in the Hampton Roads area. Our thought process was that we would be able to stay here for a couple of tours. We’d be able to put down roots and buy a house. When that whole thing gelled together, we’re like, “It’s time to start building something for our future.” He’s been in the service for many years. It’s time for that next transition into our life, whatever we want life to look like when we don’t have the military dictating where we’re going.
Moving from there to the investment strategy of private lending, can you talk about what your criteriais? When you go to make a private loan to someone, how do you determine which projects to lend money on?
The business aspect of it started during COVID that it impacted a whole lot of people. One of the things that impacted an investor was these hard money loan companies. A lot of them shut their doors at the very beginning of COVID. They said, “We’re going to take a beat. We’re not going to fund anything. Have a nice day. We’ll revisit when we have a better idea of what’s going on with the economy in this particular disease.” I happened to know another active duty service member here in the area when Zoom was the new shiny thing. Everybody was doing breakout rooms. We happen to get put into a breakout room together. He was mentioning that he had a problem. He was going to lose this deal because he was a week away from closing and the hard money lender completely shut their doors so he had no funding.
I was like, “Tell me more about the deal.” He was in my backyard and it turned out that it was the exact type of property we’d want to lend on. He was the exact type of borrower we’d want to work with. I was like, “If you give me two weeks to get all the legal stuff put together, get a bank account, and get seed money going, I’ll fund this deal.” That’s how we circled back to private lending and investing in real estate. This opportunity presented itself and we moved forward. Our criteria are we need to have someone who has experience doing this. We are not going to be a first–time flipper or BRRRR method kind of person.
Everybody wants a quantitative value. I don’t have a quantitative value 4 to 6 project. It’s something where you were actively involved, not just the capital partner. I want to make sure that you can effectively manage this process. It’s only for fix and flips so we are not doing anything long–term. My borrowers are in and out of a deal in 3 to 4 months. It’s going to be like, you need funds for renovation and closing, whatever it happens to be. You get your contractor team in there on day one. They’re doing whatever they need to do. The property is put on MLS 3 to 4, 5 weeks later. It’s off to a retail buyer because there’s such a low inventory here in Hampton Roads like many other places in the United States. Stuff hits the market and then it’s gone and done. We are only funding fix and flips from that regard. We have some criteria for the property. It has to be a single–family home. It has to be a fix and flip, minor–moderate rehab and it has to be in good school districts for both elementary, middle, and high schools.
Going to the experience level of the person who’s executing the work, how do you guys get comfortable? As someone who’s reading is thinking, “I like the idea of private lending, but how do I determine the person that’s coming to me?” Do you see their other projects or get references or anything of that nature?
There are a couple of things that readers could do to evaluate history and experience for a borrower. The first thing I usually advocate for active investors to do is to put together something I call a Real Estate Resume. That could be a PDF file, a PowerPoint, or your Facebook page, whatever you want it. That’ll outline the various projects that they have done in the past. A lot of people have closed or a picture of them at the signing table when they buy a piece of real estate, then they’ll generally have that same photo sold. You can track what they’ve been doing. You can go and search public records for that municipality and see when they took title to the property or sold it, if they took a loan out on it, when that loan would satisfy. You can see the timeline to make sure that the timeline they’re claiming lines up.It's time to start building something for your future. Click To Tweet
The other thing I do is I ask the borrowers for three professional references. I want to talk to three people that have done some real estate business with you in the past. I’ll reach out to those people in conversation, relationship–building, how was the experience, and how was it. I will ask those people for one other person that they know has done business with my potential borrower so you’d get that second–tier ring. That’s where you get some interesting stories. I’m talking to six people about that potential borrower after we’ve made sure the metrics of the deal pan out the timelines. At that point, we’re doing due diligence on the borrower.
Do you get into any of the small multifamily residential like duplexes, triplexes, or even fourplexes? Do you play in that space or you specifically like a single–family?
Since we have such a strong military base, they have families and they’re generally not going to want to live in a duplex, triplex, or a quadplex with families. It’s going to be specifically single–family homes, but that could change in the future as opportunities present themselves when the market changes.
I touched a little bit on the fact that you did your 1st and 2nd lien position in your bio. To get started on your experience, can you talk a little bit about how many private lending loans you’ve done?
Through the business so far, I’ve done six. Over the years, I have informally done them as an individual to other people that I knew. The thing about private lending is relationship-based. It’s not going to be something where people are going to message a private lender and go, “What are your rates?” I get that daily. It’s not a transaction relationship. We have to get to know you, what your personality is and what your risk tolerance is. From that perspective, it’s not going to be a high–volume operation.
There are private lenders that are lending out their own capital or they have direct control over. There are going to be some limitations. It’s not like we’re backed by hedge funds in New York where we have $300 million at our disposal to loan out. From that perspective, it’s not going to be a high–volume business, but that’s great for the passive investor that wants basic mailbox money. If they have one 1st lien position of $200,000, it’s out at 12% interest–only payments for a year, you’re getting $2,000 a month for having that money out, deployed and working for you. They might not be interested in scaling up.
I wanted to understand what the numbers look like connected to this. I’m assuming at this point you’ve had deals that have fully repaid.
Yes, we got a couple of full cycles.
Have you had a situation where you have not been paid like something happened and they are unable to make payment?
I have not had that situation. I’ve had it where the loan has gone longer than we anticipated. It was through no fault of the borrower, COVID, supply chain problems. He was waiting on windows for 2.5 months. He ordered windows the day he closed for this property and it took forever for the windows to come in. He did put it on the market on MLS with a note that “new windows will be installed by closing.” We kept waiting for the new windows and waiting for that. It was under contract pretty much the entire time. We’re waiting for windows. In those situations, someone’s going back to vetting the borrower, I would advocate being very upfront with your expectation for communication.
If you want weekly updates about the renovation of the property, if you’re lending on fix and flips, you need to let the borrower know that, “This is my expectation. I want a video walkthrough once a week.” You build that rapport. It’s also very relationship–based. That particular borrower was very upfront and saying, “I ordered the windows in a timely fashion. Here’s the receipt. We’re having supply chain issues due to the pandemic.” I’m like, “I got it. Don’t worry about it. Don’t stress. We’ll make it work.” It wasn’t like bury his head in the sand and ignore the problem. He let me know early on that this loan was not going to come back in the timeline we had previously agreed upon because of this issue.
That brings me to something else that I saw on your community on Facebook, someone who did have a situation where the borrower was unable to pay. They ended up having to foreclose them. They had to go through the foreclosure process. Granted, you’ve not experienced that yourself but have you had relationships with people who have experienced that and some of the key things that they had to consider when going through that process?
I do know someone that has three that are in foreclosure. The nice thing about private lending is you can be involved or not involved as you choose to be. This particular lender chose to have her money brokered out through a private money lender or a hard money lender, however you want to look at it. She didn’t do any of the due diligence on the borrower or the properties. The properties are in 2 or 3 different states and those are states that she lives in. As remote investing, she’s one person removed from the borrower. Two of the properties are owned by the same borrower. I don’t know who owns the third one, but the borrower defaulted on about 200 of his properties.
He washed his hands. It was a huge debacle. He stopped paying and said, “Have a nice day.” She’s been working with the broker servicer for a couple of years. This has been going on to try and figure out, “Do we take the title and renovate and sell? What are our options?” For your readers, anybody that’s worried about the aspect, it’s a legitimate worry. You are lending money that’s secured by an asset. You want to be able to figure out how you can get control of that asset back so you can get your capital back. It’s by looking and talking to an attorney that’s familiar with lending in that state.
I say lending because a lot of people will reach out to their local real estate attorney like, “I closed with Brown and Brown. I should call them.” A lot of those real estate attorneys, if you think about your closing, all they’re doing is taking the documents that the lender provides to them and say, “Here’s where you sign.” They’re not the ones drafting the documents, looking into the laws. They’re just going, “Here you go.” A lot of those documents are written for owner–occupied property, which we do not lend on the owner–occupied property. Most private lenders that I know of do not lend on the owner–occupied property because that’s a whole separate ball of wax that a lot of Dodd-Frank Act and everything else we don’t want to mess with.
Get tuned in with someone who knows about lending in that state. The easiest thing to do is to lend in a community that you know well, whether it’s somewhere that you grew up, you live, you have family boots on the ground, but get familiar with the lending laws in that state and reach out to an attorney that’s familiar with lending. Once we’re on the foreclosure train, there are two broad categories that foreclosures fall into. There is judicial and nonjudicial. Nonjudicial foreclosure does not have to go through the court process, whereas judicial foreclosure tends to be the one that you hear the horror stories. The foreclosure process took 2, 3, 4, 5 years can be judicial. If you choose to lend in a state that’s a nonjudicial foreclosure state, that can help. It’s still not going to be an overnight boom that you got the property back and if you have that collaborative approach with you.
It’s state laws that determine whether there will be a judicial or nonjudicial foreclosure.
That’s your last–ditch effort. Going back to private lending, being more of a relationship collaborative effort, if you have a good relationship with your borrower and being an adult and proactive, if they come to you and say, “I lost my job, I have this problem and financial hardship.” You can say, “Thank you for being upfront with me, deed the property over to me, I’ll take title to it, and I’ll handle whatever I need to do in order to get my capital back out of the property.” It goes back to being that borrower’s due diligence, what they’re going to do when there’s money on the line. When they’re under stress, under pressure, are they going to put their head in the sand or be proactive, collaborative, and upfront with the struggles?
This moves me nicely into the process. Can we break it down for someone what the private lending process is?
What I tell people on a very high level is private lending is you are the bank. You get to dictate the terms, within the limits of the law, for how long the money is deployed, the interest rate, the fees that you’re willing to charge. When you’re going to be collecting that interest in fees, is it at the very beginning, end of the loan, throughout the life of the loan, or what are you going to be lending on? All of those decisions are entirely up to you. Passive investing gets a bad connotation that it’s like, “You’re sitting back doing nothing. There’s a lot to do.”
Private lending tends to be what I call front–end heavy. That’s when you’re doing the due diligence on the borrower, getting all the paperwork straightened out, and doing the underwriting on the property. You’ll meet a borrower or a borrower will meet you. It’s through what I call the real estate underground, your network of people. You go through the process of underwriting and feeling them out as an individual. You walk the property if you’re interested in doing that, seeing the scope of work, you sign off that, or you’re okay funding this. You hammer out the broad strokes of the deal, interest rate, payment terms, communication, and expectations.
You will wire the money to the closing company. You do never, ever send money to the borrower directly. It always goes to the closing company, whether it’s an attorney or a title company, it will then disperse the funds according to what needs to happen. The seller is going to get their money that they are due for the purchase price. If there’s anything above and beyond that, say you’re lending on renovation, lending additional money for renovations, the way I do it’s held in escrow with the title company. As the borrower goes and puts on a new roof for $5,000, they can submit a receipt to me, prove that the roof has been put on, and then get reimbursed that $5,000 from that escrow account. They can go and move forward with the project.
In that case there, they would give you that receipt. You would see it. In the case for you, you’re living in the same places where these projects are taking place. You can choose to see the project to verify that this stuff has taken place. Do you authorize the title company to release?
Isn’t the title company going to release on their own?
No. You have to call and authorize and say, “Please cut a check for $5,000 to so-and-so borrower.” They don’t even need to know what it’s for. You can say, “It’s from this escrow account, go ahead and authorize this.”Be very upfront with your expectation for communication. Click To Tweet
What is a typical interest rate that you are charging or that you see in the marketplace now?
The marketplace is going to be a little bit different depending on where you are in the country. Some markets are 8% for a first lien position and other markets are 14%. If you’re in the second lien position, on the low side, it’s 12% on up to 25%. In the second lien position, you’re in a little bit more of a riskier position if something does go wrong.
Can we get into the lien positions, what are they and what is important to understand about them?
For your readers, a first lien position is going to be a first mortgage on the property. Oftentimes, that’s going to be the mortgage that they use to purchase the property. It can sometimes be a refinance if they bought the property for cash, and then they refinanced out to get their capital back. Most of the time, that’s going to be the mortgage that they use to purchase the property, take title to the property. A second lien is a mortgage that’s coming in behind, whether it’s in time or priority the first lien position. For example, if a borrower buys a property or they fix and flip, they have a first mortgage out on it. Maybe it’s a friend of theirs and says, “I’ll give you $100,000.” They need money for renovation. They have $100,000 to purchase it, but they need another $30,000 or $40,000 to renovate it.
You could come in as a private lender and say, “I’ll do a second lien position for $30,000.” You’re always running it through a title company. You’re going to have the title polled or all the checks in the boxes. The money gets wired from you to the title company. That process starts they do the work and get reimbursed, or you want to handle that. I don’t advocate giving them $30,000 and say, “Use it wisely.” If you’re comfortable doing that, do that. That’s the first lien. You can either be in a first lien position if you have enough capital or you can do a first lien position in a market where the first lien isn’t $100,000. There are still places in the United States where you could buy a house for $30,000, $50,000 and have that be your first lien position.
Is there a way in which a private lender can check to see if there are other liens on a property that they’re being asked to lend their money on?
Yes. That’s why I advocate running everything through a title company. When the borrower is closing, they are required to get something that’s called Lender’s Title Insurance. The Lender’s Title Insurance covers me as a lender. There’s another policy that they can subsequently get or at the same time get is called an owner’s title. During that real estate transaction chain, if something is fraudulent or somebody didn’t sign off on the right documentation, or someone comes forward to make a claim to that property, lender’s title insurance will protect me as the lender. A third cousin comes back and says, “I never signed off on selling grandma’s house, but the investor bought grandma’s house.” It turns out that those documents were forged. If the owner doesn’t have an owner’s title policy, they’re out of the money. If they have the lender’s title insurance, the title company will pay the lender the capital back that they’ve lent because of that bad chain of custody for the property.
Correct me if I’m wrong, the title company can check whether there are other liens on that property.
They’ll give you a whole title report. It’ll talk about if there are any encroachments from other property maybe the next–door neighbor has a shed that’s partially on your property. It’ll talk about encroachments or if there are any easements.
Would it be wise to get that check done before you sign the agreement to lend money? If you sign that you’re going to lend, you’re locked in, right?
They are signing at the closing table for the funds. The deal will not close unless there’s a clear title. If we don’t have a clear title, the deal isn’t closing, which means they are not signing on the dotted line for any funds.
We’ve talked about the title company and you talked about having an attorney specifically that understands the laws of lending in that particular state that you’re planning on doing business. Any other vendors or service providers that are very key to this business?
A lot of it is going to be on the borrower side, but having that referral for that borrower can be instrumental in getting the deal done properly. For example, having an insurance agent, somebody that understands that you need a builder’s risk policy versus a straight homeowners policy. You have a policy that covers theft, for example. Everybody knows how expensive cabinets are. They bought kitchen cabinets and they’re on the property. They have not been installed, but then they’re stolen. That’s considered theft. That’s not something to be claiming on the homeowner’s policy.
Having an insurance agent where you could talk to the borrower and say, “I need to see your insurance documentation, but if you needed an insurance broker, here’s who I’ve used in the past.” They understand what’s needed and covered. A broker that could help pull what’s called CMAs, a Comparative Market Analysis, or a BPO, which is Broker’s Price Opinion, to give you a solid idea of what you think the property will sell for. You want to make sure you’re not going to be over–leveraged in the property. I’ll traditionally only go up to about 65%, 70% of what’s the properties after repair value. What that BPO or CMA is going to say, “I don’t necessarily need to dial in. Is it going to be $260,000 or $262,000?” As long as I’m in the area, I’m pretty confident this property is going to sell for about $260,000. I can back it up and go 70% of $260,000 is this number. That’s the maximum I’m going to lend on.
You wouldn’t want to lend on a property that you’re not going to be able to recoup investment when it sells. Can we touch on finding deals and a little bit on assessing deals? You noted networking. You touched on that a bit. If you are a private lender, you want to get into that private lending space, what are the key things that that person needs to do in order to be getting deal flow to determine deals to private lend?
The first thing to do is drill down on what you’re willing to lend on. You want to lend in this market on this type of property in these areas, have these metrics, or whatever. If you go, “I have funds to lend, I got pitched an elephant sanctuary in Texas.” I’m like, “No. I do fix and flips in Hampton Roads. Thank you very much.” As soon as you put it out there that you have funds available, that you want to place, you’re going to get everything. If you’re very specific and say, “I only fund fix and flips in Hampton roads that are within 10% of the square footage of the neighborhood or average home price for that zip code.” They have 6 out of 10 for all their school districts elementary, middle, and high.
That becomes very narrow. A lot of people are like, “You’re never going to find a deal like that.” I’m like, “I have more deals that I can fund.” You have to tap into exactly what you’re willing to lend on. Once you put that out there, whether it’s a Facebook group, a local community saying you’re looking to find investors doing these types of deals or properties, those borrowers will find you. It’s a matter of screening the borrower. Is this someone they’re wanting to work with? Facebook stalk them, Google them, whatever you want to do. “Is this someone that I want to work with?” You’re going to have far more borrowers than you are capital to deploy. That’s not a problem in private lending.
Moving from that into reflections. In this section, it’s almost like a flash round. The first, which you touched on a few before, what are the top things that you don’t do when you’re private lending?
You do not give cash to the borrower and ask for any money to come to you as a lender outside of closing. If they’re going to pay 2% origination points, that’s going to get paid out of closing. I highly advocate both for active and passive investors that they know that because the number one scam in private lending is these private lenders will promise the moon and back. They’ll say, “All you’ve got to do is send me $5,000.” People don’t know any better. They send the $5,000 off to “private lender.” They disappear, Google stops getting an email back, the Gmail stops working, whatever it is. The number one thing is no money exchanges hands outside of the closing. That is key.
The other thing is making sure that you have some recorded deed of trust or mortgage, whatever it is in your state. The other thing that people come across is thinking they’re doing private lending. They’re like, “My cousin’s best friend decided he wanted to be a fix and flipper. I gave him $30,000 to do this renovation.” I’m like, “All you did was give him $30,000.” If you don’t have anything recorded anywhere, you gave him a loan to his business. That’s not the type of private lending that I’m talking about. You want to make sure you always have a recorded, secured interest in the property.
Connected to that, all the loan payments over the period of the loan are those typically paid into the title company–oriented like a bank account. How is that handled?
The interest–only payments are what happens. Those can get paid directly to you as the lender. You can also hire a loan servicing company for a small fee. It’s $20 to $40 a month. They’ll provide an online portal. For example, the borrower can log into and make a mortgage payment like you would on your own home. They send the payment minus the fee over to you. If you want it even more arm‘s length away from you, you can hire a loan servicing company to collect your interest–only payments too.
Is there a benefit to hiring that loan service company?
You might have to provide tax documents to the investor to say this is how much interest you paid at the end of the year. It’s going to be all in their computer system. They’ll be able to provide those documentations that this is the amount of interest you paid over the year and they can email that off or put it in the portal, whatever it happens to be for that servicer.
That brings me to things that you must do when private lending.
You must talk to people. As wonderful as being a passive investor is, it’s not as passive as most people want to lead it to be. There’s going to be some upfront work and it’s going to involve talking to people. Me as an extrovert, that’s no problem. I know some other people are like, “I don’t want to talk to people. I want to deploy my cash and go.” You can do that in private lending. If you want to be the person that’s making all those decisions, you don’t want to place your money with a broker. They put your funds somewhere. If you want to be a little bit more in the driver’s seat, you’re going to have to talk to people. That could be talking to insurance agents in your area.
You have that referral network. Maybe you find a couple of contractors to add to your referral network. More of that human capital you can offer a borrower, more incentive for them to perform. If their contractor quits halfway through the project and they call you and say, “My contractor quit.” “I’m sorry to hear that. Here’s George, here’s his number. He’s done other projects for me, pick it up, and let’s go.” It’s a bonus service you can offer to your borrower. I would say the more connections you can make in your specific market, the better.
What do you love and not love about private lending?
I love the geographical freedom it offers me. My sister had a baby during COVID in Florida. I’m in Virginia. Shortly, as soon as it was safe, I went down to Florida and spent a month with her. I was able to keep doing my business and communicating with my borrowers. I could jump on Zoom calls and talk with them about projects and do due diligence on potential borrowers. It was something like, “I’ve gone to Florida for a month. Let’s go.” I could have downtime when I needed to help take care of the baby or cook meals or whatever it happened to be with my sister. That’s a big reason a lot of people get into real estate. They want not financial independence, but they want time freedom.
If you’re someone that’s an active investor, maybe you have a full-time 40–hour week job, family, kids, or a household, the idea of investing in real estate is like, “That’s one more thing I have to juggle.” It’s very intimidating, especially for women. Doing something private lending–based, it’s something that you can do on your own time. You’re not going to get a phone call from a tenant at 2:00 in the morning if there’s some emergency. If a borrower calls you and you can’t pick up the phone right then, they can leave a message. They will leave a message, trust me, and you can call them back on your schedule and have a relationship with them. It tends to be something that you can fit into your lifestyle no matter where you are when you want to do it.
That’s the thing I love the most. The part that I don’t like is the fact that there’s not a lot of education about private lending, which is a big reason I started the group. A lot of your readers might be familiar with BiggerPockets. It’s a fantastic platform, tons of free education, lots of networking opportunities, but to their credit, they have books on doing fix and flips and how to evaluate scopes of work. You can buy an apartment building in 30 days, but there’s not a book about private lending. Anytime it’s mentioned, it’s like, “Go find a private lender to fund your deals.” That leaves that whole other side of the table like, “That’s great. I’d love to do that, but I don’t know where to start and how to do it.” There are a couple of books out on Amazon, which read a lot more like a textbook than a how–to manual. Just even knowing that this is a way to invest, much less how to do it, is not widespread.
I’m so happy that you’re doing what you’re doing because I’ve learned a lot from joining that group and being in that community. That brings me to one of my second to last questions here, which are lessons learned from your personal private lending experience?
I’ll use it from the framework of my entire real estate experience. I would have done an intentional lifestyle design audit earlier in my life. I had these very clear goals when I got married. I was going to go to this professional school, grad school, to do this, or to do that. I never gave any consideration of, does that fit into the lifestyle for this purpose I married into? The same thing with real estate investing, a lot of people only associate two things with real estate investing, your fix and flip and you’re going to be a landlord. We gave both of those a try. Again, I’m not contemplating or thinking about the lifestyle that we chose to live, being an active duty family and figuring out the hard way that both of those options did not suit our skills or our goals.
When we went into it seriously as a second round now that we’re doing this, we sat down and had a conversation with ourselves and each other. We’re like, “What do we want our ‘retirement years’ to look like?” That’s where we centered on this goal, we want geographical freedom. We’ve lived many years away from our respective families or at least a one–time zone away from our family at any given point. If we want to spend a month in Kansas, Florida, or New York, we want the ability to go and do that because we don’t have children of our own. We’re the fun aunt and uncle of the family.
If we want to spend a month and take them to the Grand Canyon in our RV while they’re on summer break, that’s what makes our life happy and our goal is. I would tell people before they think about getting involved in investing, any type of investing, is to sit and think about what you want your lifestyle to look like. Many times, I get people who are like, “I’m going to get 20 doors or 20 properties or retire to my hut in Tahiti.” I’m like, “Twenty doors isn’t as passive as you’re thinking. You better have a good cell signal in Tahiti.” That’s what I would say, start working backwards. Drill down what the end goal looks like. Where is it? How long are you there? Who’s there with you? How much does it cost to make that dream happen? Start backing up the process and looking for ways to invest that support that end goal.
This brings me to my level–up questions that I ask all my guests. The first one is, what are you grateful for in your life now?
I am super grateful for my family, especially my spouse, because what I’m told is he’s very Midwestern. You start a job, work twenty years of that job, get your pension, retire and then you’re off to something else. The whole idea of investing is outside his comfort zone area, much less investing in things like big apartment complexes and syndication or doing private lending. He’s like, “Whatever, honey.” I try to involve him and he’s like, “Use this. This is no. Tell me where to sign and I’m good.” He’s very supportive in the ways that he can be supportive of his interest level in his time.
What has attributed to your success and continuous growth?
It’s my willingness to take one little step. Everybody thinks that they’re going to change their life with these huge monumental goals. They’re going to close on the apartment complex and then they’re going to be set. When they don’t see behind that photo on Facebook of them at the closing table are the thousands of little decisions they did every day consistently to get to that closing table. I would advocate taking one small step. If you’re interested in doing private lending, then you join a group, it doesn’t have to be my group, talk to other people, read a book, and start dialing attorneys and look for an attorney. It doesn’t have to be something you do all day, every day. It could be your one action for that day is, “I’m going to find one attorney that works in lending in my state and have a schedule or appointment with that attorney.” That’s all it is. It’s that culmination of small, consistent actions that lead to what I call those Instagram moments.
What do you know now that you wish you knew at the beginning of your journey?
That’s not told to women enough and it’s sad that we have to be told it’s possible. I’m still here to tell you it’s possible. Once we’re allowed to go to REIA meetings in person, historically, the room is not 50/50. It’s about 70/30 and then of the women in the room, most are not in an active ownership role. There are women in the room, they might be the realtor or the broker, but they’re not the owner. They might be a loan processor, but they’re not the lender. I would like to see that leveled out. Passive investing is a 100% feasible way to get more women involved in real estate and be able to tell them that you can do this even though you’re a “passive investor.”
It’s empowering because you’re still making a lot of decisions, even in the syndication space. You’re choosing which market to invest in, which operators to work with, what your preferences for deals. It’s empowering to be able to go, “I’m a passive investor, but I’m 100% capable of making all these decisions for myself.” I assure you, if you go to an REIA meeting and you tell people you’re a private lender and you have capital deploy, you will become the most popular person in the room quickly. Do not ever have any worries about not being able to find an opportunity. It’s one of those things. If you’re looking for it, you’re going to find it. If you’re thinking about buying this car, suddenly you’re going to see twelve of them on the road, running to the grocery store. You’d never noticed them before because it wasn’t in the forefront of your mind. If you’re looking for an opportunity, you’re going to find an opportunity. If you’re looking for scarcity, you’re going to see scarcity.
I loved having you on. This was such jam–packed. It’s so much good information to the extent that someone’s interested in private lending. It’s good information. If my readers want to learn more about you and Infinite Road Investments, where can they go?
There are a couple of places that they can go. The website is InfiniteRoadInvestments.com. I made a little free eBook, a little 30–page infographic that talks about the process of private lending from a very high level, to give someone a good introduction to what the process is. If they’re thinking about they want to start private lending, there’s also the Facebook Group called Private Lending Lessons. They can request to join the Facebook group and then get in there. All our past events are recorded so they can scroll through all those past events. If there’s something of interest they want to learn more about, it’s right there. We also have virtual networking events monthly so they can always show up and talk to other people that are doing private lending in real–time, in Zoom time.
I’m also on LinkedIn. It’s Invest Passively To Live Actively. That guides my personal mantra. If you see opportunities or are looking for opportunities, that’s going to be presented to you. My way to narrow down those opportunities is having that little personal mantra to myself. I’m on LinkedIn. Feel free to have a connection, share a connection, and send me a message. I’m always in the private lending group and you can also contact me on the website as well.
Alex, thank you so much for coming to the show. Guys, I hope that you got so much value from this. We went through so much in this episode in terms of discovering what private lending is. In Alex’s investment strategy, she talks about the importance of getting clear on your investment strategy as a private lender when going into this space. She talked about her personal track record of doing private lending loans as well as so many great things to think about, the process of it and how it works, finding deals and assessing deals. Lastly, I love the reflection round, which was getting into what are the things that you don’t want to do when you’re private lending and what are the things you must do when you’re private lending. Alex, thank you again for coming to the show. I appreciate it. Guys, keep leveling up.
- Infinite Road Investments
- Private Lending Lessons – Facebook group
- Invest Passively To Live Actively – LinkedIn
About Alex Breshears
Alex Breshears is a private money lender, Regulation A fund Investor Relations manager, multi-family underwriter, educator, limited partner in multi-family syndications, and community builder who partners with active and passive real estate investors, syndicators, and military spouses to grow their financial independence, knowledge, and professional network. Alex started a private lending company, Infinite Road Investments, in April of 2020, funding 1st lien and 2nd lien positions for residential property in the Hampton Roads, Virginia area.
She also started an educational Facebook group called Private Lending Lessons which offers weekly educational lessons, daily posts for discussion, and opportunities to network with other investors about private lending, and various projects that may need funding.
She also works with the team at Mission First Capital, a Regulation A fund that helps active duty and veteran service members invest in real estate to improve their long-term wealth. At Mission First Capital, she works in organizational management, investor relations, and underwriting for property acquisitions for asset purchases.
Alex is also passionate about financial education and independence for female investors She is currently a chemistry professor, teaching for a four-year school online and leading bi-weekly educational series about real estate investing in her Facebook group. She is a limited partner for 16 units in Newport News, VA in addition to owning and cohosting short-term rentals.
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