BiggerPockets Real Estate Podcast

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642: Private Money: What the Experts Warn Against Before You Lend (Or Borrow!) w/Beth Johnson and Alex Breshears

Jul 31, 2022

Beth Johnson and Alex Breshears, co-authors of "Lend to Live," are seasoned private money lenders who share their journey into the world of real estate financing. They explore how anyone can start lending with minimal investment and the advantages of passive income. The duo discusses crucial distinctions between private and hard money lending, effective borrower evaluation, and the importance of strong relationships. Their insights include risk management strategies, the necessity of insurance, and challenges faced by lenders, making private money lending an accessible opportunity for many.

01:01:39

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ANECDOTE

Alex's Entry to Private Lending

Alex Breshears entered private lending when a friend's hard money lender backed out during COVID.
This highlights the increasing demand for private lending as traditional sources become unreliable.

insights

INSIGHT

Private vs. Hard Money

Private money is capital controlled directly by an individual, offering more flexibility.
Hard money lenders, even when rebranded as 'private,' have external capital constraints.

question_answer

ANECDOTE

Beth's Introduction to Private Lending

Beth Johnson learned about private lending on a date and was intrigued by passive income potential.
Her husband's prior experience and her background led to her involvement.

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Laughter and Lending: Real Estate Insights

01:40 • 4min

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Understanding Private Money Lending

05:51 • 12min

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Exploring Private Money Lending

17:50 • 12min

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Understanding Risks Beyond Borrower Default in Real Estate Lending

29:38 • 4min

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Managing Defaults in Property Loans: Communication and Precautions

34:04 • 2min

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Navigating Private Money Lending

36:13 • 14min

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Mindset and Mastery in Real Estate

50:25 • 7min

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Exploring New Horizons in Real Estate Investment

Published in 1960, 'Psycho-Cybernetics' is a classic in the self-help genre. Maxwell Maltz, a plastic surgeon, developed this book based on his observations of patients whose inner attitudes and feelings remained unchanged despite successful surgery. He introduced the concept of 'self-image' and its profound impact on achieving personal goals. The book combines cognitive behavioral techniques with cybernetic principles to help individuals regulate their self-concept and achieve positive outcomes. Maltz's methods, including visualization, mental rehearsal, and relaxation, have been widely adopted by motivational gurus, sports psychologists, and self-help practitioners. The book emphasizes the importance of a positive self-image and the use of mental imagery to achieve success and happiness.

Extreme ownership

How U.S. Navy SEALs Lead and Win

Leif Babin

Jocko Willink

This book by Jocko Willink and Leif Babin focuses on the principle of 'Extreme Ownership,' where leaders take full responsibility for their actions and decisions. The authors use their experiences in the U.S. Navy SEALs to illustrate how this mindset can lead to success in any organization. The book covers various principles such as believing in the mission, checking ego, and leading by example. It emphasizes that leaders must own all failures, develop plans to overcome them, and ensure their teams are well-conditioned and aligned with the mission. The authors also stress the importance of humility, discipline, and effective communication in leadership.

The cashflow quadrant

Robert T. Kiyosaki

In 'Rich Dad's Cashflow Quadrant,' Robert T. Kiyosaki explains the four types of people when it comes to money: Employees (E), Self-employed (S), Business owners (B), and Investors (I). The book emphasizes that financial freedom is more likely achieved by moving from the left side of the quadrant (E and S) to the right side (B and I), where money works for you rather than the other way around. Kiyosaki argues that traditional education often fails to teach financial literacy, leading many to work hard for money instead of making money work for them. The book provides insights into the skills and mindsets required to succeed in the B and I quadrants, which are key to achieving true financial freedom.

Lend to Live

Beth Pinkley Johnson

Alexandria Brashears

Is private money lending the next best way to invest? To the everyday landlord, home flipper, or once-in-a-while investor, private lending seems completely foreign. Why would you lend money when you can put it into your deals? And even if you wanted to, wouldn’t it take millions, or at least a few hundred thousand dollars to get started? Surprisingly, private money lending is available to more people than you think, and it could be your next way to make truly passive income.

Alex Breshears and Beth Johnson were neither millionaires nor active investors when they started lending private money. Over time, they realized that they had grown relationships with active real estate investors, many of which always needed funding for the next deal. While swinging hammers and painting baseboards may sound fun to active BRRRRers or flippers, to Alex and Beth, the passive income that came in from private money lending was even better.

They’re now so ingrained in the world of private money lending that they’ve written the newest BiggerPockets book, Lend to Live, where they talk about how to build “hassle-free passive income” by lending private money. In this episode, they go over how a new investor can start lending, what to look out for in a lender when you need money for deals, and how even with a few thousand dollars, you too can start building truly passive income streams.

In This Episode We Cover:

How any investor can start lending money for a substantial profit

Why private lending has become more popular as investment funding becomes limited

Hard money vs. private money and why you should never confuse the two

What to look for in a private money lender and how to vet them before you invest

Protecting your money as a private lender and what you need to do to secure a return

Where private money lenders can find investors who are looking to invest

And So Much More!

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