How to Guarantee You Lose Money Lending · Private Real Estate Lending

How to Guarantee You Lose Money Lending

Do not lend without underwriting first! You will see a lot of second position deals when branding yourself as a PML. Whenever you are lending in second position, you have to know what first position owed before you even know if it's a deal worth looking at.

Think of it this way, if you have a cup 75% full of water. You can only fill it 25% more before it overflows.

The borrower might be asking you for that 25%(or a certain amount in second position) but without knowing how full the cup is already, you could be at risk of overflowing the cup. Overflowing the Cup = UPSIDE DOWN MORTGAGE in real estate world. You DO NOT want to lend more $$ on a property than the value of that property.

You always want to lend LESS than what a property is worth, not more. If there is a lender already on the property, they are first position, and you HAVE to know what they are owed before you consider putting more debt on the property.

Comment below if this provides clarity! Remember do not ever rush into deals, especially if you don't know what you are looking at.

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