Private Lending

AB Capital Holdings LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Unlocking the Potential of Private Lending: A Game-Changer in Personal Finance

Introduction

In the ever-evolving landscape of personal finance, an often-overlooked avenue stands out for its unique blend of opportunity and flexibility: Private Lending. Far removed from the rigidity of traditional banking institutions, private lending emerges as a dynamic and accessible financial tool, offering both lenders and borrowers an alternative path to fulfill their financial aspirations. Imagine a world where your investment directly shapes someone's dream project, or where your entrepreneurial venture receives the backing it needs, not from an impersonal entity, but from an individual who believes in your vision. This blog highlights the key topics of private lending, benefits, and the impact it can have on individuals and communities alike. Whether you're a seasoned investor seeking diversification, a borrower desiring more personalized loan terms, or simply curious about this lesser-known facet of finance, join us on a journey to explore how private lending is redefining the boundaries of lending and borrowing, one personal connection at a time.

What is Private Lending?

Private lending is lending from any non-bank entity. This can be either a private individual or non-bank company offering lending.

Who can be a private lender?

Anyone who has funding to offer can be a private lender. There are SEC rules for combining or pooling funding from multiple sources. It is also prohibited to lend for an individual’s private residence without appropriate licensing. But fundamentally, anyone can be a private lender.

Why be a private lender for Real Estate?

• Diversification: If you ask some investment experts how to diversify a portfolio, the answer will be percentage splits between stocks and bonds. Private lending can provide diversification beyond the traditional stock and bond investments.

• Local & Personal Impact: Create a smaller financial ecosystem based upon trust and relationships. Private lending creates a mutually beneficial value with less friction (process costs) than traditional bank lending. As a rental real estate investor, I would much prefer to put an extra 5% into the quality of the tenant experience than into loan origination fees.

• Flexibility & Control: The Private Lending relationship allows the borrower and lender to dialog and negotiate terms (interest rates, repayment schedules, amortization). As a private lender you are in control of choosing the properties and projects you are willing to fund.

• Collateral: Secured loans (real estate) have the benefit of reduced risk through collateral. Appraisals, title searches, and market research can be part of the process to ensure risk levels are acceptable. The loan note and mortgage (ties the note to the property) should be recorded to ensure the best options for legal recourse should problems arise.

• Income & Returns: Every financial portfolio should have a strong base of income producing assets. Mortgage notes can provide consistent cash flow.

• A $100,000 note at 6% interest and amortized over 30 years will generate monthly income of $599.55. For the 30-year life of this loan the total payback is $215,838.

• Building a trusting relationship between borrower and lender can open up possibilities for negotiation of multiple types of note terms structures (interest only, short-term, long-term, etc.).

• Introduction to Real Estate Investing: For those new to investing in real estate, Private Lending can provide a way to engage and learn without jumping into tenants, rehabs, and property ownership.

Source of Funds

Providing funding is not limited to personal checking and savings funds. Retirement Funds can be utilized for Private Lending. Refer to the Blog "Self Directed Retirement Account Investing".

Conclusion

Private Lending is providing steady income for my retirement account. If you are interested in learning more please email [email protected] to schedule a time to further discuss the topic.