Blog - Page 18 of 31 - mspassiveincome

Private Lending (12) – Lend to Friends?

January 3, 2025 / 172

I never thought I would make such a rookie mistake, and I’ve never relaxed any underwriting procedures to loan applications, but I still underestimated the impact of lending to a friend.One deal was brought to me by a friend. They were flipping a small building on the West Coast, but the market wasn’t good, so they didn’t finish flipping it on time to sell, and they needed working capital to hold for a bit. When they reached out to me, even though we hadn’t been in contact for over a decade, the good memories from our good old student days... Continue reading

Private Lending (11) – Forbes-Recognized Borrower

January 3, 2025 / 165

First of all, let me say that I’m quite immune to any name-dropping. After all, I’ve been burned too many times, so I focus on substance rather than appearances. But considering the readership, I decided to include this headline, and there’s absolutely no padding. When we received this loan application, the broker on the other side emphasized that the applicant was on the Forbes list. We checked, and indeed, the name was on the list, with a very high net worth, but not a household name. Actually, this was a negative factor for us. Whether you’re on this and that... Continue reading

Private Lending (10) – Disappeared Borrower

January 3, 2025 / 177

Continuing from last post, after the pandemic, the market has changed a lot, and there’s been a surge in fake applications, fake documents, and scammers. So, apart from laughing after reading all the real stories I will be sharing in this and upcoming episodes, don’t forget to adjust your strategies based on the current market conditions!One borrower left a lasting impression on me. They kept missing payments, and when we followed the procedures and sent various default notices, the borrower finally came up with an excuse: “I was abducted by aliens.”We’ve heard many reasons for defaults before, usually along the... Continue reading

Private Lending (9) – Two Proprietary Algorithms

January 3, 2025 / 180

This time, we’re going to talk about two proprietary algorithms we’ve developed internally to better underwrite deals. In addition to the LTV discussed in the previous section, we also calculate two other things: a power of sale/foreclosure cushion and the homeowner’s repayment ability. It’s highly likely that nobody uses our methods to calculate these two things, but we absolutely must use our own methods and adjust our underwriting conclusions based on the results. Calculating these two factors involves gathering a lot of data discussed in the previous sections, ultimately leading to conclusions about whether to lend, how much to lend, and... Continue reading

Private Lending (8) – What to Calculate?

January 2, 2025 / 188

Continuing from the last post, after all the underwriting, what truly matters in the end is LTV. If the results are favorable, even if there are additional debts on the property, various plumbing issues, low credit scores, or if the property is located in a remote area, which most people would immediately reject, it’s still possible to proceed with the application. Conversely, if the calculated results are unfavorable, even with a credit score over 800, a desirable property location, good property condition, and stable homeowner income, the application cannot be approved. Why is that? Let’s delve into what needs to... Continue reading

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Private Lending (12) – Lend to Friends?

Private Lending (11) – Forbes-Recognized Borrower

Private Lending (10) – Disappeared Borrower

Private Lending (9) – Two Proprietary Algorithms

Private Lending (8) – What to Calculate?

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