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35: Finding Private Lenders For Your Flips

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Jason Bible shares how he works with private lenders to fund his house flipping. If you want to flip a lot of houses, working with private lenders is a must!

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Jason has been on the show now 3 times! It’s because he’s awesome and doing great things in his real estate investing business in Houston.

We have in on the show today to talk about finding and working with private lenders for your house flips.
Now, if you’re new to real estate investing, you probably want to start with working with a partner to fund the deal and split the profits or use hard money until you have a proven track record of several successful flips. This will make it easier to build relationships with private lenders.

In this episode we talk about:

  • What a private lender is
  • How they are different than hard money lenders
  • What criteria Jason uses to determine good lenders from ones he’d rather not work with
  • How to find these lenders during networking events

Jason really focuses on the “working” part of networking events. I think most investors in general just don’t fully appreciate the power of these events if worked properly.

When negotiating with lenders on terms, Jason likes to frame the argument by showing how he uses the lenders that give the best terms first and then moves up to more expensive ones afters he’s used all of the cheaper one’s money. So, they can ask for higher rates, but they won’t get their money out until the cheaper ones have theirs out first.

Jason also talks about his vanilla and chocolate options he gives private lenders. You’ll need to listen to the episode for that one though. 🙂

I have a guide that you use to find out exactly how to find private lenders and what to do to approach them. You can download that here:

Private lenders will typically lend at anywhere from 0 to 2 points and 8 to 12% interest. You can typically get 12 month terms and interest only or no monthly payments.

What to be careful of….
You have to be careful to only borrow from one lender for each deal. Do not pool funds from multiple people as that gets into securities and must conform to all of the laws regarding securities.

Also never market specific deals with numbers to private lenders. Find out more about this in the free download for this episode below.


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show transcription icon Episode Transcription

Welcome to the Flipping Junkie Podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivation to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.

Hey, welcome back to The Flipping Junkie Podcast. Thanks for tuning in for this week’s episode. I’ve got a good friend from Houston, Jason Bible. He’s going to be talking to us about finding private lenders for your house flips and real estate investments. Basically we’re going to cover what exactly is a private lender, how they differ from hard money lenders and then describe what makes a good private lender a good lender best on terms or requirements that they have, how fast they can close and how deep their pockets are. So we’re going to talk about some of those numbers and basically what we look for when we’re looking for private lenders to use for our house flips.

Now we’re also of course going to get into how to find these great private lenders to use for your house flips to save you money on interest and your money cost. Sometimes people will have a flip that they’re working for a long time and spend over a year on it and once they go to sell it and they pay off their loan on it, they’re kind of surprised by how much that money costs. You’ve got to be careful about that. Know what your costs are, have good estimates for your days on markets so that you don’t end up losing a lot of your profit to pay for the money that you used to do the flip. We’ll be talking with Jason about how. He got his first taste of real estate investing after joining a local real estate club. He’s been only really flipping for not very long, I think four years or so, but he’s done an incredible amount of growing of his business in Houston in that amount of time. I’m really impressed by the business that he’s built over there in Houston. I had the pleasure of flying my plane over there to Houston a couple weeks ago to be on his radio show. He’s just started a radio show in Houston. We’ll talk about that with him when we get him on the show here in a minute and you can tune in to him online to hear his show that he’s doing five days a week I think it is. Thanks again for listening to the Flipping Junkie podcast. I really appreciate it and you can find the show notes page for this episode at We’ll have notes on all the things we talked about and links that we talk about for other resources online here and I’ll have a guide that you can download on that show notes page for finding or working with private lenders. So that’s and you’ll be able to get that guide there. You can download Pedia for free. So thanks again for joining us and we’ll get started.

Danny Johnson: Alright. Hey, Jason are you there?

Jason Bible: I’m here.

Danny Johnson: Great. Thanks again for being on the show. I was telling everybody at the intro that I was on your radio show over there in Houston. You want to talk a little bit about real quick just to let people know about it.

Jason Bible: We talked about doing a radio show on business radio, one of the AM stations here in Houston. If you know anything about Houston Radio, Houston is a pretty major market and just an opportunity opened up for us. We have a buddy that does radio. So I called a couple of sponsors and they said they sponsor the show, so it works great. It’s a good marketing campaign for us. It’s on 1110 KTEK business radio. It’s on at 9 AM. It’s called Right Path Real Estate. If you’re looking for us, you can find us on Facebook. Our website is To be quite honest with you, it’s kind of an ugly website right now. We haven’t updated it yet, but you can find us here and we do the radio show every day 9 AM on 1110 AM KTEK.

Danny Johnson: It even sounds kind of “radioey.”

Jason Bible: You know what? We’ve been working on our radio voices, “Hey everybody! Welcome to the shooow…”

Danny Johnson: Yeah. I did that on a couple episodes back. I don’t think it came across very well, so I stopped. I stopped trying to do it. So are you ready to talk? I know you guys do quite a bit of working with lenders and things like that, so you are the perfect person to talk about this episode on finding private lenders and working with them. So do you want to get started with the basics like what exactly is a private lender?

Jason Bible: Yeah. I mean, the way we look at it there are really three types of financing. There are those hard money lenders out there that are really the professional real estate investors and other real estate investors. There are institutional financiers, so that’s banks and hedge funds and all that sort of stuff and then there are the private lenders. And really the private lenders are folks just you and that have got a couple hundred thousand bucks in a checking account earning zero or in the future or less than zero or they’ve got somebody sitting on their IRA somewhere. So those are really kind of the three distinctions. The first two groups, the institutional lenders and the other investors that are hard money lenders are really real estate. they’re lending focused full time. That’s their full time job and most of these private lenders are just guys like you and I that are guys and gals that are just looking for a decent return on their investment. That’s really the difference between those who are kind of professional full time lenders and those that aren’t.

Danny Johnson: Yeah. And so would you say a lot of private lenders who are approached by investors with the idea of lending for the deals or do you think that they’ve sort of sought out investors to borrow their money?

Jason Bible: My preference is to work with private lenders that are already private lenders. I see a lot of folks that teach real estate education in such a way that they tell you, oh, you need to go to all your friends and family that might have an IRA or might have a couple hundred thousand bucks in a checking account essentially convince them that whatever they’re doing now is wrong and that they need to (A) invest in real estate and (B) invest in your real estate deals. Maybe it’s just because I’m lazy or I’ve got other stuff to do during the day, I just figure it’s a lot easier to work with lenders who are already lending and in a lot of times they just approach us. In fact, I have one funny story. I was sitting here in my office one day and it’s like 8:30 in the morning, got my cup of coffee and I hear somebody walk in to our hotel lobby area there where our admin sits and he says, “My name is Alan and I got money to lend.” And I’m like, “What is going on?” So admin opens my door. She goes, “Alan’s here. He’s got a million bucks he wants to lend you.” And I’m like, “What is going on?” So I sat down and lo and behold he’s a real estate investor here in town. He does a lot of commercial. In fact when you were in Houston, we probably drove by one of his buildings. He came down during the RTC days during the last big real estate crash in the ‘80s, bought a ton of stuff, very very wealthy guy and in any case he’s one of the lenders. It’s guys like that I like to do business with, the traditional, kind of the folks that are in real estate. I don’t have to explain to him what we’re doing, right? I don’t have a sales pitch. It’s like, “Hey, this is what we do. Are you interested in lending to us or not?“ It’s pretty simple. So like I said, I’m kind of lazy in that regard. I’ll tell you one of my favorite groups to raise money from are lenders who have gotten burned. A lot of times, I don’t know that when I’m first meeting with them until we’re sitting down at the conference table and we start talking about how we do a deal and raise that first laying position. We don’t pull money. It’s either in a deal or sitting in escrow in your account. We kind of go through the whole process of what that looks like and all the legal framework. A lot of times we’ll give them our attorney, our closing, the company we always close with and a couple other references and say, “Hey, go check up on us to make sure were a legit organization.” And about halfway through the presentation, their shoulders slump and their head kind of goes like this and we go, “Hey, what’s the problem?” “Well, I just had to foreclose on below Joe investor and the deal didn’t work out and our attorney told us if we had set it up like you had told us to, then we wouldn’t have as many issues.” So I really like people who got hurt before because when they come to see us they know why we do things a certain way. I’m hearing some horror stories. Now I’ve been in Houston for a while we’ve been doing this for almost three years now. I don’t want to say that we’ve got our eye on everybody in the market, but between all the investors that we talk to and all the lenders all the bankers now, we have a pretty good idea of what every investor is doing in Houston and it’s amazing to me some of the stories I hear through the grapevine. I did not look at it this way. I didn’t know this industry was as crooked as it is. Let me put it that way. I told you all the stories. It’s mind boggling. Once you start doing a lot of lending and borrowing with other investors that are lending and borrowing, you start to hear all the stories about who’s really doing what. You see some things on Facebook and then you talk to the lenders that are really where the rubber meets the road and there’s kind of a big disconnect there.

Danny Johnson: So what are some examples of that because people listening including myself don’t have any idea what you’re referring to with some of the—

Jason Bible: Perfect example. There was a guy here in town, big real estate educator, charge tens of thousands of dollars for real estate education and his specialty was in private lending. Little did we know that he had a project that he borrowed some money on from a mutual investor that we know and something happened. Let me just put it that way. Something happened and he ended up getting unsecured lines of credit based on that particular property. How we convinced real estate best to do this, I don’t know. But he was so overly leveraged just on this one asset. Where essentially he was taking a newbie private money lender and he would tell the lender, “Oh, do you want to borrow against this property?” And he never did this stuff at a title company and a new lender doesn’t know that, so there was no search to see what other lanes were on it, how much leverage is on it, what it was worth, how much rehab. I mean it was just no deal evaluation. So he just goes and starts borrowing money almost as like personal lines of credit are against this house even though the loans were never tied to the property and according to one lender I ran into he said, “This guy should have filed for bankruptcy five times over.” And I would love to tell you that’s a unique story but it’s not. So about eight months ago, me and a buddy of mine, Brant, he’s another investor here in town. We have a lot of respect for.

Danny Johnson: He’s been on the show too.

Jason Bible: Oh, Brant Phillips has been on the show?

Danny Johnson: Yeah, yeah. I had him on the show. He’s back probably about 15 episodes ago.

Jason Bible: Okay. So Brant’s fantastic. We’ve been buds for years. In fact I went to his flip school way back in the day, so he’s one of those guys who taught me how to flip houses. So Brant and I the day of who he is. He’s one of those guys who taught how to flip houses. Brad and I decided to put on this private lender summit because we kept seeing all these lenders just get absolutely screwed by investors. We sat down and said, “Okay, we got two options here. One is I run these folks out of town on social media” which is probably not conducive to my time. And the second one was, “Why don’t we do this, let’s just teach lenders how to lend. And in that way these guys can’t get any. They can’t steal.” Essentially it’s fraud. They can’t steal anybody’s money. So we started doing that. We started our first private lenders summit back in October 2015 and we only do it every quarter. So we do a meeting once a quarter we thought, “Hey, if we have 20 people show up for this thing, it will be a big success.” We had 90 folks show up. And so, now we average anywhere between 150 and 200 people show up and it’s a good event. We teach lenders how to land and ask a bunch of questions and what happens when something goes, what if you got a foreclose, how you evaluate a deal. For a lender’s standpoint, there are two parts, evaluating the asset and evaluating the borrow and we really go into what that looks like. So we’re hoping that there’s a lot less of this kind of fraudulent stuff that goes on in our market.

Danny Johnson: Yeah. Let’s talk about that as far as what you – just like a condensed quick version, notes of what you coach them on so that people listening looking for private lenders can also coach and show that they know what they’re talking about to any private lenders they’re looking at using. Before I do that though, I wanted to mention also one of the benefits of working with private lenders that are already doing it also in addition to what you said in my opinion is that you don’t have somebody that might be a little bit nervous or might need to have the money or change their mind two months down the road and say “I need my money back” and you have to refinance and get their money back out and all that kind of mess. I think you deal with that a little bit less if you’re using people who have been through the process.

Jason Bible: I’ll tell you the real horror story. There are two scenarios in which a private lender can really screw something up. One is it’s the proverbial day before closing, day of closing they get real nervous they go, “Oh, I’m not lending on this deal” and then you’re screwed because you got to find money in a matter of hours and we’ve never had that happen to us, but I know that’s one thing that can happen. Another one is where a private lender doesn’t set aside their construction in escrow. So some borrowers want the construction money all upfront, right? I think we’ve done enough business now. We just finished our 200 flip in three years. I’m going to go out and video that at some point. But let’s say we’re buying a house for $100,000. It’s worth $250, it needs $50,000 in rehab. I know we could go to our lenders and say, “Hey, go ahead and fund that $50,000 on the ___ and we get $50 grand at closing. But I don’t know why, I don’t like doing it that way. I just much rather say, “Hey, hold on to that $50,000. We’re going to go to the rehab but then I’m going to ask you for a construction draw and when it’s done, then wire that $50,000 over to our account.” The other scary thing is that two things can happen from a borrower’s standpoint. They can back out at the last minute or – and I’ve heard this happening a lot – they don’t have that construction escrow just sitting in an account somewhere and they’ll end up doing another deal with it and essentially charging you interest on it, but then when you need it, they don’t have it. So now you’re $50 grand into this deal and there’s a huge cash flow issue there. From a borrower’s standpoint, that’s one thing you got to be really really worried about and I could tell you that one of things I would like to say is, “Look have you lent money to somebody else for real estate before?” And if they say, “no” I’m really like, maybe you need to go do – why don’t go this with somebody else first. We don’t do a lot of first time borrowers. In fact our wholesale deals when we wholesale, we do not wholesale any properties to new investors. We want seasoned people who have always done a couple of deals because it makes the transaction so much easier, but I would ask the same thing if I were a lender to a borrower. Have you borrowed money on a real estate deal before? And they said, “no.” I’ll just be perfectly honest with you. I don’t think you ought to be doing the deal with them. There’s a lot of hard money lenders out there, hard money lenders see a lot of deals and they know what they’re doing and typically a hard money lender will not let you screw a deal up. However a private money lender doesn’t have that same level of experience. I have told all – we’re now teaching – we’ve gotten into real estate. We’re teaching a couple of folks and that’s been really signing last two weeks. We’ve got this mastermind really put together. Last night was our second meeting. We’ve already got somebody who’s got one other contract for a really great deal. They said, “Hey, would you mind introducing your private lenders to us?” And I said, “Have you done a deal before?” He said, “No.” And I said, “Absolutely not. You going to use the hard money lender first because I want you to see what it takes to put that whole deal together.” Now what you’re going to do as a borrower in the future is you’re got to put together a lender packet and it’s very similar to what a hard money lender would ask for and then you got to present that to your private lender. So your lender can make an educated discussion or an educated decision on if they want to do that.

Danny Johnson: That’s a huge point for new people that haven’t done deals with private lenders before to use hard money or partner with somebody. It’s kind of put up the money and split the profits, get some experience, put together the package and then work with private lenders and getting them to lend will be a lot easier because you’ve already proved that you can do it. I don’t want to forget about the condensed version of maybe what your seminar is for the private money seminar thing where you teach the lenders. Would you give us a quick rundown of what you’re basically teaching?

Jason Bible: Oh yes. We’ll talk about something. One quarter we talked about how to estimate a rehab. Now the way we estimate rehab is walk a house and this is what you can do this in what you can do in five dollars per square foot increments. So for a lender, they don’t need to know that rehab is $22,500.32. They need to know if that is either $20,000 or $25,000 or $30,000. That’s all they really need to know. We’ve taught them how to do that. We’ve talked them how to vet a borrower especially their experience, maybe a little credit or criminal background check, look at some of their assets, look at some of their experience. I’ll give you a good example. So one thing that folks get all hung up here at Houston about which I always find so funny to be honest with you, but I understand where comes from, is when someone says “Well, I don’t want to approach a lender or a hard money lender or whoever about lending on a deal because I don’t have any experience real estate.” And we go, “Okay. Well, what do you do for your day job?” He go, “Oh, well, I built half a billion dollar rigs in the Gulf of Mexico.” And then you go, “Well, since you’re a project manager for $500 million projects, you can probably manage $20,000 rehab or a $200,000 rehab.” Let’s just be honest right. So there is a lot of those translational skills. So we talk a little about look what skillset is good for of a borrower. So we’ll talk about whatever the topic of this sure is for that particular private lenders summit and then we have two sponsors. We have the Patten Law Firm which is our Texas American title. It’s our title company here in our town and they explain kind of the ins and outs of doing a deal with private money and explain some of the documents. So we’ll have two vendors, Patten Law Firm and Quest IRA and Quest will be there to say, “Hey, this is how you get your money to the IRA. This is how you get your money out of your IRA to your real estate deal.” It is a prohibits transaction here, so they kind of do a quick spiel and then we’ll do or whatever our topic is, how to vet a borrow, how to vet an asset, how to a rehab and then we’ll do a case study. That case study will typically be a deal that Brant or I has done and then we will bring up the lender to the front of the room that’s done the deal with us and talk about the deal from the lender’s point of view. One of the things I always find fascinating is that there’s all these case studies around town about private lending, but they never have the private lender give their side of the story. So we’ll put a private lender in front of the room and then they’ll discuss how to do the deal on some of the deals they’ve done. And then if we’ve got time we’ll put a panel together of all the folks that they have presented – the lender, Brant and I will be up there, title company, sponsors and we’ll just get up there and folks will just ask us questions for 30-45 minutes. That’s the typical format of these things. The networking is obviously where it’s at. There’s a lot of high quality networking as you can imagine in that category, but that’s how the events work.

Danny Johnson: Alright, great. That’s pretty helpful to know. How would you describe a good private lender? If you’re talking to several different lenders and you’re trying to determine who is the guy that I want to borrow from, what would you say are the points you’re looking for from them regarding terms and maybe what their requirements are, appraisal surveys, etc. What kind of things are you looking for to determine which guys you want to borrow from?

Jason Bible: This is going to be a shocker to a lot of people, but I don’t look at what that money cost me. What the money cost me is not the number one factor why I would borrow money from them and I’ll tell you why. Hard money when you really get down to it is not that expensive. I mean it’s expensive but it’s not – it’s cheaper than a partnership, right? It’s cheaper than going 50/50 with somebody. However I will tell you this, if you have a private money lender regardless of how cheap their money is that is constantly blowing your phone up, is always on the job site, is literally in your business 24/7, that is going to be much more costly than paying a couple of points and a percentage and 12% or 14% interest from a hard money lender. I really look at what are their expectations as a lender. Now for us, if a lender wants to go out look at the house before they buy it, they’re more than welcome to do that. If they want to go and check in on construction every once in a while, we tell them, “Hey, give us a call. We’ll schedule it so you’re not in the middle of a work zone.” Most of the folks we deal with are at or near retirement and then they’d only be walking around the construction site, but if it’s somebody that’s constantly blowing my phone up, I need weekly progress checks and all that, I don’t need your money that bad. I’ll go to a hard money lender. Really, it’s how they work is really important to me. A lot of our lenders, they fall into one or two ___. One is they want to learn about real estate and they want to kind of see what we’re doing and then the other one is “Just put my money to work. I don’t even want to talk to you. Whenever you need more money just give me a call.” And most people we work with are really easy to work with. They’re like, “Hey, I want to go look at the house” and then they may want to pop in and say after we do a big construction draw but because I get so busy around here in the office, I don’t even ask for the construction draw until it’s already listed on MLS. So a lot of time I send them the MLS listing and say “Well obviously it’s done. It’s been done for a week. So I need to draw because we’ve got ten of you guys I’ve forgotten to get draws from any my checking account is looking pretty bare.”

Danny Johnson: And that’ll happen with ten rehabs.

Jason Bible: Yeah. When you get a lot of them going on, you’ll have a quarter million to a half million bucks out here. You’re sitting there in a meeting with the wholesales team and “Hey, where’s all the money? Did you ask for the draws on those?” “Oh, I guess I will do that.” In any case, what I really look for is how do they work, what is their expectation. I have a table of all this by the way. And then we have their cost of money and really that’s their terms, how many points and what percentage interest they want, and then that fourth column is how much money they have to lend. If it’s somebody that’s got $150,000 bucks then that’s it. I mean, we made you one deal. I really like establishing those longer term relationships where I can put $5, $6, $7 million bucks at work all at one time. So we do this deal that we put in the next one, next one, next one, then we roll their funds over from deal to deal because it’s a lot easier to manage five or six lenders when you’ve got a robust business than it is to manage 30 of them. That’s what we look at.

Danny Johnson: So what are those what are the terms? Just for people that don’t have any frame of reference for what occurred were good terms for private lenders and then the amount of money that you would consider a good amount of money to have to be able to use it for several properties, the basic terms that you would consider good for people that don’t have a frame of reference.

Jason Bible: Well, I’ll tell you one thing. I’ll tell you what our terms are these days, but one of the things I tell lenders is they say, “Hey, what interest do you pay?” I’ll say, “I don’t know. What do you want? And they’ll say, “Well, we want 20% interest plus 10% of the back end.” And then I go, “Okay. Well that’s great.” Let me back up and let me tell you what is important. One of the things that some lenders especially new ones believe is that you’re their only financing option. So they really try these confiscatory rates. They’ll try to pass those things on you. And the reality is, look man, I’m just trying to get this cheaper than hard money. I mean that’s really what we’re trying to do. So I’d sit down and say, “Hey look, I’ve got hard money lenders that are 3 and 13 or 2 and 12 whatever the number is. So I’m just trying to get rates below that. I’m trying to get cheaper money.” So if someone says, “Well, I want the most return I can. I want five points and 15 percent.” You go, “Hey look, I can go to the hard money lender next door and he’s 3 and 14. So what’s an appropriate return for you.” And then they’ll give you whatever their number is. But this is what I’ll, I draw a chart up on a whiteboard and I say, “Look, I run a business right?” They go, “Yeah.” I say, “What am I trying to do in business?” “Try to make the money you can.” “Absolutely.” So your cost of money is a cost to get making the most money I can. I said, “For us, I’ve got some 0 points and 5.75% money, I have some 0 points and 6%, 0 and 7, 0 and 8, all the way up to 1 point and 14%.” Now I’m a business guy. You’re a business guy or gal. Typically people have money. I have some business sense and I’ll say whose money do you think I’m going to use first? And they just look at me, they go, “Well the cheapest one you idiot.” And I go, “Yeah, absolutely.” So this guy’s got $300,000 so I’ll mark right through the cheapest guy and we’ll use all his money first. And this gal right here, she’s got half a million at 0 and 8, I’ll use all her money. And then you start going up the list and they start look at how they go. “Oh so I got to be somewhere between X and Y” and it’s like, “Well, you can be wherever you want but I’m telling you I’m using all these people’s money first.” And I’ll tell you one of the secrets we learned in the private lending game is that if they have 80% utilization, meaning they’re using their money 80% of the time, their money is out working 80% of the time, that’s a really high watermark for them to hit. So if you’ve got somebody that’s let’s say 10%. They’re 0 and 10%, so in reality, how often is your money really at work? They’re working out like a full time job. Their money is really only out 80% of the time. So what’s their annual return? It’s only 8%. So if you’re somebody like us who can really turn the deal volume, you can get much lower rates because you’re keeping their money to work much longer. With regards to other terms, we’ve got some folks that have money with us for five years. We set up a little LLC, we call it our chocolate and vanilla option. The vanilla option is we do one deal, we put your money in the deal, you’ve got a first lean, and there’s a construction out there we do the deal, we take the money out of the deal when it gets sold and we buy another deal, the money goes back in. We’ve got one guy that came to us and said look I want to partner with you guys, but I only want to make 8% return and we’re like, “Okay.” And he says, “I just want a check every month and I don’t want to hear from y’all because I like you guys but I don’t want to deal with all this.” I’ll tell you what, we start working with private lenders. They’ll go, “Oh yeah, I want my money to work all the time.” I’m like, “Okay. I’m going to put your money to work but it’s going to be constant.” I mean, it’s like it moving through. So it’s going out of accounts, it’s coming back in, we’ll drive. Some lenders, particularly the older guys who are in their ‘80s and they’re trying to have their retirement life, they’re like, “Man, you’re driving me nuts.” I got one guy right now and he’s like, “You are driving me crazy. You are in and out of a deal so fast.” I said, “We know that is a good thing, right?” He goes, “Oh, I understand that.” With one investor we had this issue with, he said, “Look, you guys are great, but I don’t want to talk to you all the time. I just want my money ___.” So I called my attorney and said, “Hey, how should we set this up?” He said, “Well, you could set up a little LLC. Everybody’s a partner in the LLC and you’ve got a checking account and everybody’s got access to the checking account and it’s a passer.” So our company pays this company who then pays our lender which is not really a lender but is more a partner. But that pays his partner 8% and it doesn’t matter if that money is in a deal or sitting in that checking account. It pays 8% or 1/12 of 8% every single month. So that’s how we set that up. We’re starting to see lenders that we’ve got a longer relationship with. They just want to start to go to that model. And what we tell them is that money sits in that checking account or there is a first there is a lean against the property in the name of that entity. So when it goes to closing, the money is either in the checking account or a deal. That’s worked really well for a lot of our lenders because we do drive them crazy eventually with all the deals we’re working on.

Danny Johnson: Yeah. That’s a great way to set it up. Let’s get into finding these guys and if you’ve got some tips on how to find the good private lenders or even any private lenders to start working with, what would you say to people?

Jason Bible: Go to networking events. One of the things I think a lot of people miss when they go to networking events, they forget the root word which is “working.” It’s a networking that’s working. You are working. I realize you have a beer or a glass of wine in your hand, but the reality is it’s a working event. And if you’ve ever seen my business partner and I work a room and it didn’t matter how big the room is, first we go to the bar because that’s the most important, get an adult beverage and then I’ll start at one end of the room and then he starts at the exact diagonal opposite. And then we start chatting with people talk-talk-talk-talk-talk-talk and we meet in the middle, compare notes and then we go to the other corners of the room and we go to the room. And really what we’re doing is we’re qualified people just like we do leads that come into our business and we sit down or we walk in the room we go, “Hey what do you do?” “I’m a real estate investor.” And we’re like, “Yeah. No kidding. Everybody is the real estate investor.” So how many deals did you close last month? I mean we get real. I don’t want say “pushy” but once we get through kind of the pleasantries of, “Hey, who are you? Great. You’re nice. I like your hair” so “What do you do?” “Oh, I’m a real estate guy.” “Okay great, What do you in real estate?” “I’m a landlord.” “Okay. Well, how many houses do you have? “Oh, I got five.” “Well, how many did close in the last month?” “Well, I haven’t closed in two years.” “Are you really a real estate investor? You’re probably not. I mean, you are because you like to show up to the events, but the likelihood of us doing a deal together is about zero.” You’re basically writing to the guy or gal that says, “I’m a flipper and animal land law and I’ve been doing this 20 years.” Well, I’ve got a portfolio of 55 houses and I flip a house or two a month.” Those are the guys that you’re, “Hey, I can wholesale deals to you” and you go like, “Hey, are you doing any lending?” And I guarantee you they do. If you’re a successful real estate investor after a while you get play money put into different stuff. That’s typically how it works or you’ll actually run into a lender and you’ll say, “Hey, what do you do?” And they go, “I’m a private lender.” They’ll just tell you like, “Yeah, I’m a lender. I’m looking for people like you to sell my money to.” A bank and a private lender are no different than like a used car dealership, right? And one puts these puts these financiers on this pedestal, I’m like, “No man. They’re selling you money.” I mean, it’s no different going to a car dealership. How many people love going to a car dealership? About zero, right? It’s because they’re selling your car. Well, you know what? Lenders are trying to sell you their money. So treat them just like you would a car salesman, right? When you’re sitting down with a lender, then you can have that. And typically I don’t have – if someone says, “Hey, I’m a lender. I’d love to sell you some of my money.” – They don’t say it like that, “…but I’d love to lend you some money.” I just get their contact information. I’d move on to the next person. You say, “Hey, we’ll chat later.” So that’s how I would do it. I just start going down into a room and just start having a lot of conversations. Now someone may say, “Oh yeah, I’m a lender.” “Okay, great. How many deals did you do last month?” “Zero.” “How many did you last year?” “Zero.” They’re not really a lender. You really want to find those people that are active in real estate especially early on because those folks ___ as those people could be mentors for you some day. That’s how we do it. We find most of ours through those sorts of events. I’ve had realtors approach us or real estate agents who’ve been real estate agents many years and made really good money. I’m trying to think who else has approached us, but typically networking events are the best events. I buddies of mine here in Houston that hang out in cigar bars in the middle of – like a cigar club in the middle of the day on a Tuesday. All of those guys are pretty wealthy. If you’re hanging around smoking $5 and $6 cigars during the workday, you probably got some actual put to work on other stuff. I mean really, it’s just where do people who got excess capital hang out? For us, we like to do it at networking events.
Now I’ll tell you the other thing that’s nice if you’ve got this growing business and you started doing some deals, I highly recommend start pitching to people who put on these real estate events to do a case study for them. Because if you’re the one that’s standing there at the front of the room talking about a deal you did that has huge social proof. It goes a long way in establishing credibility. So we do that at every little chance we get. That’s kind of how I do it. And I’ll tell you another thing too, one of nice things about working with hard money lenders, a lot of those hard money lenders, they’ve got a social media campaign set up. So if you partner with that hard money lender on the marketing side, in other words you go to your hard money lender and say, “Hey, it’s my first deal” – But I’m going to take a bunch of pictures of the before and after maybe during and put in on your Facebook page and I’ll put it on my Facebook page, I will share it with everybody. I guarantee you there’s other real estate investors that are watching that. And then when you have that discussion with that private money lender at a networking event, you go, “Oh yeah, Joe did you see all the pictures we put up?” I borrowed some money from Joe Blow hard money lender and we did this deal that worked out really well. So there is a way to leverage. It’s not always just about the points and the interest. One of things you and I were talking about earlier is my guys that are 1 in 14. It’s a duo, they’ve been friends for 50 years and someone asked me “Why do you sending deals to those guys.” I said, “Because they’ve got enough money and enough wherewithal that when the market does crash those are going to be the investors I can count on.” So sometimes it’s not all about your cost of money. I think a lot of folks raise to reduce their expenses too fast in their business and they really need to be focused on generating more revenue and if you’re generating more revenue, don’t get me wrong, you want to keep your costing capital advantageous as you can. But on the flipside you also want to keep those folks. Remember, banks are your cheapest form of financing. I mean ___ unless someone gives you the money. It’s just about the cheapest. We’ve got some lines of credit that are lines plus 1.25 and 1.5% which comes out of 5.25 and 5.5%. Anything below 7% is really free money when you get right down to it. But the problem is let’s say, we’ll be three years old this year, so we can start getting these larger bank lines $3, $4, $5, $6, $7 million dollars, what happens when the market crashes? Those bank lines evaporate overnight. So you have to maintain a relationship with your private lenders. You always have to have private lives. So that’s kind of the way we look at it and really it’s a future business or business continuity issue when the market changes.

Danny Johnson: Yeah that’s a great point and something you touched on, it’s probably been about 5 minutes now, but you were talking about whenever we met these people at these networking events and you find out they’re a private lender and you get their contact information and say we’ll talk later. I immediately thought of how a lot of people that I talk to that are looking for private lenders, they don’t know how to approach them. They feel like they’ve got to beg them to lend the money and really it’s not that way. What you’re doing is providing a great safe way for them to make a great return on their investment and put their money to work for them instead of letting it sit in a checking account not really earning anything. And so that’s how you really look at it and what you said this represents that. I don’t need to sit here and kiss his butt and try to wow him. It’s like, “We’ll talk later and see if we can work something out.” But you’re not having to sell yourself so much you don’t need to treat it like something where you’ve got to impress them and sell yourself too much.

Jason Bible: No. We are like anti-sales over here even when we’re buying houses. A lot times we ask people why don’t you call a realtor? Why am I here to buy damn house? Call a real estate agent. What am I doing here? And we do the same thing with money. One thing to keep in mind is that where else are they going to get the return. If you all listen to my show on business radio, there is a show that comes out in Houston and I know he’s all over Texas. He might be nationally but he’s a money manager. He’s talking about how the next 10 years are going to be like the ‘70s where you’re getting 4% and 5% rates of return. In the capital market, in the stock market where all the risk is, 4% or 5% return. So when you’re talking to these people and you get an 8% to them on a house that could be – I mean we’re using this in a fictitious stash, but literally you could be buying their neighbor’s house right fix up and sell or fix up and rent and they can be making an 8% return on that. What’s the risk in that? There is risk, sure, but is it as much risk as on the stock market? I don’t think so. And I can tell you right now, there are way more people who’ve got money that have deals, way more. It’s not even close. I could tell you since some of the turmoil has happened in the market starting last year, I mean they are investors that are just throwing money into real estate deals. I’ll give you a good example. You can call Quest IRA today, they don’t publish this publicly but they talk about it in some of our event, they have a $180 million dollars in cash. They are a self-directed IRA custodian, so it’s not their cash. It’s their IRA account holders’ cash. I have two accounts over and it’s my cash ___. They have $180 million dollars and I can tell you $$180 million dollars, it sounds like a lot, but it’s not a lot of money. But $180 million dollars just sitting there, earning a goose egg. If somebody hand me $180 million dollars today, I couldn’t use it. And my burn rate is $3-5 million bucks. It’s like, I couldn’t even use it all. Brant couldn’t use it all. Sure Brant and I have been talking about a fund forever, when you start thinking about a fund $25 million dollar fund, they have $180 million over there. I’ll tell you where it is, that’s a scarcity mentality. It’s just the same way with sellers, I got to kiss their butt to buy their house. No you don’t. Because you know who the customer is in the relationship – it’s the person who is handing over the money. I’m the customer when I’m buying a house and I think a lot of people get that mixed up in their psychology. They’re like, “Oh they’re the customer because they’re selling me the house.” No they’re not because you’re taking on the problem. You’re the customer. You got to sell me on why I should buy your house, same thing with a real estate investor that wants to lend on a deal. You got to sell me why I should use your money because you might be a pain to deal with and I don’t want to deal with you. Your rates might be nuts, I mean they need to sell you on that. If you if there’s only one or two people you’re talking to about doing lending, you need to talk to some more people. Again, you go back to networking. The root word is “working.” You need to be working those events like a full time job. That’s how you pick up private lenders.

Danny Johnson: Great, great. Do you know if people are sending mail or anything to anybody to talk about possibly lending on deals? Do you know if there is any FTC things to watch out for are you aware of any of that?

Jason Bible: I have no idea. We don’t do that. I don’t know. You probably could run afoul some issues.

Danny Johnson: Yeah. I think it’s talking about specific numbers and then as far as reaching out to people with specifics on deals and stuff like that is a no-no and then if they haven’t requested information, I think there’s some issues with that. But I’ve got a guide I’ll have on the show notes page so that people will have I think a little bit more information about that, but definitely be careful.

Jason Bible: [Crosstalk] – Facebook and they post like, “I need $100,000 loan at 12%” and I’m like, “Who the hell is going to loan?” One of the things you always hear is private lending is relationship based and it totally is. So while you’re spending time and money on stuff like that, you could just be going on networking events. Most networking events are free. It might cost you a bar tab and trust me that’s so much more worth your time because not only are you networking for private lenders, you’re networking with wholesalers, people can bring you deals. You’re working with other investors that you could sell deals to. I mean, there are all kinds of stuff that happens in that networking event. I think if you’re doing that stuff, it doesn’t really work although I never tried it. So maybe it does work but I just never thought it will work real well.

Danny Johnson: Right and you’re going to watch out. I think it’s mainly just kind of reaching out and saying, “This is what I do and let’s meet and talk about it.” And then it’s not something where you’ve got documented letters and stuff going out to them trying to request funds.

Jason Bible: I’ll tell you what, I could see partnering with somebody like Quest or partnering with a REIA and developing that mailing list for an educational event at that REIA or with Quest or somebody like that where you say, “Hey, I’m a real estate investor. I’m going to be a guest speaker at this event for private lenders. I would love to see you out there at the event.” I think that that makes a lot more sense and not from trying to get around any sort of legal issues but inviting them out in a very non-salesy way where they could come out to an event where they can meet everybody and you can establish your relationship and that sort of thing. I think that means a lot more sense than saying, “Oh, it looks like you’re a private money lender. Would you like to lend me money for a deal?” That sort of thing.

Danny Johnson: Alright. And I think I said FTC. I don’t know if that’s SEC actually—

Jason Bible: It should be SEC.

Danny Johnson: Right. It’s SEC, so be careful with that if you do decide to do those kinds of things to anybody listening. As far as working with investors, I guess the thing that some people have asked about is either they’ve got other people interested in lending for their deals, can they use multiple investors for a single deal because the lenders that they have don’t have a whole lot of money, maybe $20,000 $5,000 or $10,000 and how do you feel about that?

Jason Bible: Well, here’s how we do it. In fact, I didn’t even know it was going on until I reviewed one of our lender docs and with one of the lenders we work with a lot is one of the guys that we’ve worked with since the very beginning and I sent him an email and usually he takes everything on email. He sends me an email back and he says, “Let me get back to you tomorrow about this.” I said, “Okay.” So I get the note back – we sent it to our real estate attorney, he draws all the docs up and looked at the note and there’s got to be eight accounts on this note and it’s like his IRA, his wife’s, his next door neighbor’s HSA, I mean it’s like all this stuff that he pulled together to go do this deal. And so, my understanding is that as investors, as the borrower, we can’t go and get all these people together and put it together. Now if one of our lenders goes out and pulls a couple of their buddies and then they lend to that LLC, that’s fine. But for us, it’s not something we’re going to do. I know our lenders that deal with us all of us all the time. One guy will do a deal with us and then I won’t know until I get the note because I just contact – they’re like my one contact, right? So let’s say I’m working with Bob, so Bob and I will do a deal and Bob’s got like $200,000 bucks, we put $120,000 into a deal and so he’s got another $80,000 grand. So I may send Bob an email and say, “Hey man, I think you only got 80 G left but here’s one that’s like 150.” He’ll go, “I’ll let you know tomorrow. I’ll be right back.” So then he goes and gets a couple of his buddies at the office that have got $20,000 bucks at a Quest IRA and then this guy’s wife’s got $20,000 grand sitting in an account and they’ll pull it altogether, and they’ll work with our attorney which technically represents them. I don’t even know it until I look at the note. I’m like, “Oh there’s Bob, there’s Bob’s IRA, there’s his wife’s IRA, and there’s his next door neighbor, his drinking buddy. Here’s a guy he plays on the bowling league with.” I mean, they’ll do it all on their own. So I don’t do any of that. If they want to do it, I don’t care. A lot of times though when they’ve done one or two deals, they’ll put their little LLC together and then put all their accounts in through that LLC. They are the ones that have pulled all the stuff together. I don’t deal with anybody.

Danny Johnson: Yeah it’s too much of a hassle.

Jason Bible: And I think there’s some legal issues associated with that, but like I said, it’s them that are doing it.

Danny Johnson: Yeah. So recommended one lender per deal basically.

Jason Bible: Yeah. It’s one lender per deal. So even though they pulled those funds together, that entity is the one that owns the first lien position.

Danny Johnson: Right. So that is something to be aware of. Well I think we’ve pretty much covered all of the things that I wanted to talk about. It’s a great episode on what exactly a private lender is, how to find them, how to determine whether they’re somebody you would want to borrow from for your deals and all that kind of good stuff. I really appreciate you sharing all this with us.

Jason Bible: Oh yeah definitely. Go raise a bunch of money, buy a bunch of houses guys.

Danny Johnson: Alright. And be sure to listen to his radio show. It’s an awesome show. What was the station and time again.

Jason Bible: 1110 KTEK, Business radio and that’s at 9 AM in the morning. Did you get the podcast from the show we ddi?

Danny Johnson: No. I never got it.

Jason Bible: Oh, let me email you the podcast link and you can download it.

Danny Johnson: Yeah. Send it to me and I’ll put it on the show notes page here for this too which is You can listen to our radio show together, me and Jason, and also have that private lender guide for finding and talking to private lenders that you can download also on the show notes, Thanks again Jason. Have a great week.

Jason Bible: Yeah. Thanks. I appreciate it.

Thanks again for listening to The Flipping Junkie Podcast. That was a great episode with Jason Bible about private lenders. You can go to the show notes at to download that finding and working with private lenders guides that I’ll have on there for free and then also a link to the radio show that I did with Jason about a week and a half ago – actually, it will be two weeks now when this comes out. Thanks again for listening to the show. Next week, I will have – I’m sure we’ll be talking either about partnering with people or hard money lenders and how to get some funding that way, which is a great way to start either of those options when you’re just starting out and don’t have a track record yet. It’s great to build up that track record and then move into working with private lenders. Have a great week and of course be sure to check out our real estate investor websites at It’ll give you the ability to take advantage of all the things that we’re doing to stay on top of what works best for generating tons of motivated seller leads online and also our CRM system keep track of all your leads and deals and the follow up and that mostly allows you to keep track of everything and work with the team. You can check that out at Have a great week and see you next week.


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