Loan money, rehab or buy notes?

Hello all,

I want to first say thank you to everyone on this board for ur advice. It has helped me gather my thoughts and continue my planning for re-entry into RE investing. After talking with Equity firms and private investors, I have come across a private investor I had not though of. A relative. My grandfather. He informed me that he had over $200k in retirment investment money he recently cashed out and at the age of 95 he stated “he’s not afraid to risk some of it to help me out”.

We spoke about it briefly and he mentioned the max he could give me for investing is $100k. That almost made me fall off my chair. No intrest, no points, no set pay back schedule. So now I have a few options to consider:

I have a good business relationship with an investor I’ve nkow for 9 years who buys multi’s and store fronts and is always looking for capital to keep moving forward. I am considering approaching him about partnering on a few of his deals for a 10-12% return on my money.


Partner with the rehabber who got me into the business, do fix and flips with him, however, his model was fix, refi and rent, I wonder if I can get him to follow my fix and sell model instead? Teaching old dogs new tricks. How hard would that be?

or Lastly

Buy notes at a discount. I have only done this once before but things went well with me earning 15% on the money I invested on the note. Tax leins I have studied also however I have never purchased one due to the fact that it will not superceed a 1st mortgage or chapter 13 which is very risky.

I’m open to suggestions and opinions to consider from the very knowledegable memebers of this board.

Happy Superbowl Sunday



Assume you did any of the above where you expect to earn about 15%. What happens after a year? You have $15K minus some costs and you need to pay ordinary income tax on the money. You might end up with $7K to maybe $12K if you have a current income. Translation: unless you are broke and make no money you are going to pay a good bit in tax.

As a lender what is the down side? Just how bad can a deal go? What part of the $100K will be lost? How many future deals will you need to complete successfully so you can get back to zero?

All three options have positives and negatives. Just do not assume a 15% return from a ‘loan’ is going to work so well. Look at the credit crisis. Lenders lost a lot of money on deals that went bad. It happens.

Other than a pot of cash, where can you add value? How can you build your competence over time so you add even more value?

The money is a tool. It can be used to grow a future and a business. Do not be dumb money so know the business better than the people who want to borrow your funds. Even people who normally run things smoothly will run into problems. You have to factor in losses as they will happen over time.