Private Lending 101: A Reverse Q&A with New Lender JJ Buckner

Bryce
Today, I’m really excited because we have JJ with us. For those who don’t know, we’ve got a long history of business together. When JJ told me he was getting into hard money lending, I almost booked a flight to see him—I couldn’t believe it! This conversation will definitely be more engaging than our typical episodes because JJ and I go way back. He’s a good friend, and we have plenty of history together. So, thanks for being here, buddy.

JJ
Yeah, man, thanks for having me. I’m excited to dive into this. You and John—I’m sure John will hear this—are the two main reasons I got into lending. I’ve had so many questions since I started, and I’m really looking forward to going over them with you. This will be super helpful for anyone just starting out or even those with a few deals under their belt. If I can help others avoid some of the mistakes I made, that would be awesome.

Bryce
Exactly! And I think it’ll be a great way for us to both share what we’ve learned so far. Not to say that our way is necessarily the perfect or only way, but hopefully, it’ll be beneficial for anyone listening who’s new to lending.

JJ
Absolutely. And we’re just getting started. It’ll be good to dive into the practical side of things. But first, let’s give the audience a bit of background on how we met. People don’t always realize we’ve been friends for years, but it all started through the internet.

Bryce
Yeah, it’s crazy! I think we’ve known each other for about five or six years now, but it’s all been through online connections. It’s wild, right? Who would have thought we’d become such good friends and business partners—all through the internet?

JJ
Right! My wife Lindsay always jokes that all my best friends are from the internet. Not sure if that’s a good thing or a bad thing, but hey, it’s the truth.

Bryce
Haha, exactly! It’s kind of like those weird kids in high school who had their niche group—whether it was Magic: The Gathering or playing marbles. You find your tribe online, and you stick with them.

JJ
Exactly! The cool thing about the internet is it lets you connect with people who share the same goals and mindset. In a small town, it’s harder to find people on the same path. But meeting you and others in the business world… man, it’s amazing. We’ve all grown so much. Some of us have expanded businesses, traveled the world, or even run crazy endurance races. It’s inspiring to see how everyone has evolved.

Bryce
Absolutely. It’s wild to think about where we started, and now look at where we are. But it all started when we met through YouTube. I was more active there at the time, and we both joined a mastermind group. We’d hop on calls, talk strategy, and help each other improve. Eventually, we met in person at some conferences.

JJ
Yeah, I remember it clearly. I was walking out to lunch when I saw you. I didn’t even expect to run into you! At first, it’s always a little weird meeting someone you’ve only known online. You don’t really know what to expect.

Bryce
It is weird. It’s almost like you already know a lot about the person just from following them online, but it’s still different in person. I could tell right away you were exactly like I imagined—genuine and down-to-earth.

JJ
Yeah, that’s the best feeling—when you meet someone and they’re exactly who they are online. I’m sure you’ve had that moment where someone is totally different than you thought. But with you, man, I felt like I knew you already. So, we went to grab some Indian food and just talked shop. That’s when everything started to click.

Bryce
Exactly. And we’ve stayed in touch since. Fast forward a couple of years, and I get a call from you while you’re on vacation in Hawaii. Even though you were supposed to be relaxing, your mind was still running a million miles an hour—just like mine.

JJ
Yeah, I’ve always been that way. We both like to stay busy. I think you posted something recently about how you love what you do, and it really resonated with me.

Bryce
Yeah, exactly. It’s crazy how much more fulfilling life feels when you love your work. I’ve been in jobs I hated, just clocking in to pay bills. But now, doing something I’m passionate about has made all the difference. It really changes the whole meaning of life when you love what you do.

JJ
I’m reading a book right now called The 38 Letters. It’s John D. Rockefeller’s letters to his son. The last one I read was about how the work you enjoy is like heaven, while work you don’t enjoy is like hell. When you wake up every day and love what you do, it changes everything. I’ve been in both situations, and trust me, it’s night and day.

When you wake up every day and love what you do, it changes everything. I’ve been in both situations, and trust me, it’s night and day.

Bryce
That’s so true. When you’re truly passionate about something, it makes every part of life better. And once you get your personal life together—whether it’s family, friends, or whatever’s important to you—finding work you love is the best thing you can do. It makes everything worth it. I was talking to my wife this week, and I said, honestly, I don’t even care what day of the week it is. The whole week just blends together. I was like, “Is it Tuesday?” I have no idea, because every day feels the same. And that’s because I love what I do. It’s honestly amazing.

JJ
Yeah, well, it’s Saturday at noon, and you and I were texting each other, like, “Hey, want to hop on the podcast?” And we just said, “Yeah, sure, let’s do it.”

Bryce
Right, and that’s the lifestyle you’ve built. You went to breakfast with your family today, and I know you’ve got plans after this. I’ve got family coming over later, but it doesn’t matter. I’ll be working on the business later today, too. But also, if I want to go golfing on a random Tuesday afternoon, I can do that. It doesn’t matter because I love what I do. I’m so glad you’re at that point, too. I’ve been in jobs I hated before—jobs where five o’clock hits, and the existential dread kicks in. I’d literally count down the minutes until I had to go back to the office. That feeling is gone now, and I’m so glad we’re both in this place.

JJ
For sure, man. It feels amazing. Let me revisit something I mentioned earlier when I called you from Hawaii. Although I was there on vacation, my mind was still focused on the business. During that call, I asked, “How much would you charge me to make this?” You replied, “Let me think about it,” then added, “Honestly, you’re probably not going to be able to afford me.” Thank God you said that, because I probably would’ve gone bankrupt that first weekend.

Bryce
Haha, yeah, I remember that. I told you, “We’re going to have to partner on this, or you’re going to go broke!” The initial concept was something like 2,000 hours of work, and as you know, it turned into a multi-year project. My goodness, it’s been crazy. So yeah, thank God that didn’t happen the way you originally thought.

JJ
Yeah, man, that was crazy. But honestly, looking back, how cool was it that we got to grow something from nothing? I mean, it’s a successful business now. When I called you with that idea, I had no clue it would turn into what it has. You and I will always remember building that. Not many people get the chance to create something like that—building a software company from the ground up. We literally opened a checking account together, filled out all the tax forms, got the LLC started, and each threw a thousand dollars into the account. That was it! We didn’t put in any more money after that. We just bootstrapped it.

Bryce
Yeah, that’s right. We started as cheaply as possible and then slowly grew it as the business began generating revenue. I still talk about that time with my wife; it was such a fun chapter in my life. Honestly, I’ve been missing that feeling, so I’m excited to see where this whole hard money lending thing goes. I remember hearing a quote once that said, “I wish you could know in the moment when things are good, so you could really soak them in, rather than look back and say, ‘Those were the good days.’” We were pulling 12-hour days, hustling, fixing broken things, and dealing with customers. But looking back, those were the days. It’s not about the destination; it’s the journey.

JJ
Yep, we were on Zoom calls for hours trying to figure out simple equations that just wouldn’t work out. It was wild. I miss those days sometimes, though, even with all the stress.

Bryce
I totally get that. We were doing the math on the back of napkins, trying to make things add up, and I’m like, “Why isn’t this working?” Those were the good old days. But yeah, you’ve moved on now, and I’m still very active in that business, but you’ve shifted into the mortgage space.

JJ
Yep, that’s right. So, I bought my first two rental properties in 2019 and 2020. After that, I knew real estate was where I wanted to be. I actually caught the real estate bug around 2017 or 2018 when I started reading the BiggerPockets forums and attending local meetups. Finally, I told my wife, “We’re either doing this or we’re not.” I could only read so many books and learn so much; at some point, I had to jump in. So, I bought a rental property out of state, and that was the start.

During that time, my YouTube channel was growing, and my family and I decided to travel for a few years. Real estate wasn’t my focus then, because I wasn’t settled, but I still kept learning. I always knew I wanted to get into real estate more seriously. Now that we’ve finally planted roots in a place we love, I’ve had the time to dive deeper.

So, I started attending real estate meetups, meeting big investors, and I realized I wanted to do more than just invest—I wanted a career in the space as well. YouTube now only takes up about eight hours a week for me, so I had this extra time. I wasn’t working on anything else, and honestly, that started to weigh on me. You and I both know how it feels when you’re not growing. So, I got into real estate. Right now, I’m working on a flip, have a hard money loan out, and just passed the mortgage loan officer exam. I also got my mortgage broker license and am working for a broker.

I’m focusing on two things right now: building a career in real estate and growing my investing side. I’m meeting new people, getting connected with realtors, wholesalers, and just learning the ins and outs of the local real estate market. It’s all about building the right connections, and I plan to use that network to help my investment side grow as well. That’s my story on how I got into this space.

Bryce
That’s a great point. I actually recorded a podcast last week with a guy named Tad who had a similar story. He was in the mortgage space but got frustrated with all the red tape and the limitations of Fannie and Freddie guidelines. It seemed like they were turning away so many people simply because their loans were nonconforming or they didn’t fit the existing products. That’s what led him into hard money lending, where he loved the flexibility of it—it’s your own money, so you get the final say. I’m curious to see, down the road, if you feel the same way or if it becomes frustrating. Time will tell.

JJ
Yeah, time will only tell. Right now, as you saw from my reel today, I’m out on a street corner trying to get business! It’s a grind, but I love it.

Bryce
Haha, looking like a hobo with a cardboard sign. I love the grassroots approach. But real quick, do you have an office you go into, or is it all remote? Do you work from home?

JJ
It’s about 50/50. The team I’m working with is great. I let them know upfront that I have a busy schedule but am committed to growing the business. I’ve got an office set up at home, and I’ve been working from home for the past 5-6 years. Honestly, if I had to go into an office full-time, I’m not sure I could do it. But after being on my own for so long, I do miss the camaraderie. I miss hanging out in the office, giving everyone crap, and building those relationships. So, it’s nice to have the option to work both from home and in the office. I’d say it’ll probably stay about 50/50 as time goes on.

Bryce
Yeah, there’s something special about that office culture.

JJ
Exactly. For important phone calls, I prefer to take them at home. I just concentrate better without the distractions. Cold calls, though? I can definitely handle those from the office.

Bryce
Got it. Yeah, there are so many different ways to approach this. We were talking before we started recording about social media, and I think you’re right—having a social presence is key these days. I’ve spent hundreds of thousands of dollars on ads for various businesses, but one of my biggest eye-openers was when I posted a TikTok. It didn’t get that many views—maybe 1800 or 2000—but I ended up getting 17 sales from that video. Meanwhile, I’d spent $5k on ads that week and got zero sales. The power of organic content is real. It’s something we should dive deeper into in another episode.

JJ
Absolutely. Everyone who owns a business should be making content. A lot of people worry they’ll never go viral, but they don’t realize that you don’t need millions of followers to succeed. If you find your niche and stay consistent, even with a small audience, you can make it work. Consistency is key. I know people with less than 10,000 followers who are killing it financially through social media. It’s truly powerful.

If you find your niche and stay consistent, even with a small audience, you can make it work.

Bryce
Exactly. You don’t need to go viral to succeed. Like you said, consistency matters. I remember one of my first truly viral videos—it got around 3-4 million views. It was just a silly bumper sticker I filmed in a drive-thru, and while it got tons of views, the people commenting weren’t my target audience. The right kind of viral video—one that hits your niche—is far more valuable. I’d much rather have a video with 2,000 or 4,000 views from people genuinely interested in what I do. That’s real value.

JJ
Yeah, I saw that bumper sticker video! It’s crazy how viral content can sometimes attract the wrong crowd. But you’re absolutely right. The real goal is connecting with the people who actually care about what you’re offering. It’s incredibly powerful—and free.

Bryce
I still laugh at that video with your wife doing the weights. You looked like a bird—it was hilarious! What did that get, like 40 million views?

JJ
Dude, you won’t believe how many views that thing has. It’s up to about 65 million now. Insane, right?

Bryce
Oh my gosh, that’s crazy!

JJ
Yeah, last time I checked, it was around 65 million. It blew up.

Bryce
And for anyone curious, how much money did you make from that video?

JJ
Not much from Instagram, honestly. They had just started paying through their creator program around that time, so I made about $20 off it. But if that had been a long-form video on YouTube, I’d have made hundreds of thousands, maybe even millions.

Bryce
Wow, that’s wild.

JJ
Yeah, with 65 million views, I definitely would have. It’s just crazy to think about. But the point is, you don’t have to go viral. It’s much more important to be in your target niche. Even if you don’t get millions of views, if you’re reaching the right people, that’s where the real value is. But yeah, we could talk social media all day.

Bryce
I hear you. Let’s shift gears a bit. I’m really interested to hear about your transition from the traditional mortgage industry to hard money lending. I think it’ll be cool to compare the two and see what you think as you continue to grow in this space.

JJ
Yeah, I’m curious too. So far, from what I’ve experienced, mortgage lending is very conservative—tons of rules. On the other hand, hard money lending feels like the wild west. It’s way more flexible.

Bryce
It absolutely is. So, I didn’t know you’d already closed three loans. I thought your first one was still in the works. Can you give me the details on all three?

JJ
Yeah, all three were with John. It’s a little different from working with a brand-new borrower. Right now, I’m in the process of doing my first hard money loan with a couple we’ve discussed before. They’re still trying to lock in the deal, so it’s still up in the air. But it’s perfect timing for this podcast since I’m actually going through the process right now.

Bryce
Got it, perfect timing. So the first two were with John, who is a private lender, right? You essentially invested in his deals. How did that work out for you?

JJ
Super smooth. It was nice having someone like John to help me get my feet wet in the industry. When you’re lending six figures, it’s a big deal. It’s kind of scary wiring money to someone, but I’ve built a relationship with John, and I trust him. He’s basically an internet friend, so that made it easier. He jokes that the money’s for his Lamborghini down payment.

Bryce
Haha, that’s funny. So everything went well with those two loans?

JJ
Yeah, everything went great. Both loans lasted about six to eight months. Now, we have one more deal that’s about to close in the next couple of weeks. Once it’s wrapped up, I’ll get all my money back from him and plan to set aside a separate pile for my hard money loans moving forward. I’m curious to see how that capital grows compared to my rental and flip accounts. Hard money is so much more passive.

Bryce
It really is. So, with the terms, did those loans compound, or did you get paid interest monthly?

JJ
With John, everything compounds and gets paid on the back end, which is fine for now since I’ll be getting my money back soon. But with my new borrowers, I’m doing interest-only payments. It feels better to have regular payments coming in.

Bryce
Gotcha. That makes sense. People seem to either prefer interest-only payments or the compound model. There are pros and cons to both. From an accounting standpoint, I prefer the compound method because it’s simpler when managing multiple loans. But once you’re handling 20 or 25 loans, the accounting could get out of hand. You’d have to track payments, late fees, and issue 1099s. It can get pretty messy if you’re not organized.

JJ
Yeah, I can definitely see that. If I ever get to that point, I’d probably switch to the compound model for simplicity. Right now, though, I’m only doing one or two loans at a time, so the interest-only setup works well for me. It just feels good getting something every month.

Bryce
Yeah, you don’t want to wait eight months for a lump sum payment.

JJ
Exactly. But if the volume goes up, I could see how the back-end payment model would be more manageable—less to track, fewer payments to worry about. If you have 25 loans and one of them is late, it could be a real headache.

Bryce
Yeah, it’s all about staying organized. Some of our bigger investors with half a million or more will spread their capital across several projects. They get paid off at different times, but it’s almost like getting semi-regular payments. It’s a good model, and most investors are fine with it.

JJ
That makes sense. It’s good to know that model works.

Let me ask you this: as someone who’s just getting started in this space, would you recommend sticking with a lump-sum payment at the end and not worrying about interest-only payments? This could be something I offer as a private lender, telling borrowers, “Hey, don’t worry about monthly payments. Just pay everything at the end when your project is complete and you have the capital.”

Bryce
That’s a good question. I’ve seen both models work, and it really comes down to personal preference. My background is in flipping houses for about five or six years, and when I had multiple projects—sometimes up to six at once—my lender didn’t require monthly payments. I loved that, especially with big loans like $250,000 per project. If I had to pay $30,000 to $40,000 a month in interest payments across all those projects, it would have been incredibly stressful. So, I liked that it could accrue and be paid off at the end.

JJ
For sure.

Bryce
But there are benefits to collecting monthly payments too. For one, you get paid regularly. Plus, if payments stop, you can spot issues earlier. If they miss a few payments, you can address it before things get out of hand. If it all accrues to the end, you may not know there’s a problem for six months. However, with good communication—calling every 45 days, for example—you can mitigate some of those risks. Ultimately, it’s all personal preference. But I really like having everything accrue at the end, and my borrowers tend to appreciate that as well.

JJ
Got it. Well, I’ve got some questions now that I’m in the process of obtaining my first non-relationship loan. I met a couple at a real estate meetup—really great people. First question: How do you decide on loan terms when you meet a potential new borrower? For example, how do you decide on points upfront? Do you have a minimum charge for small loans? What does the interest rate look like, and does it vary depending on the project or loan size?

Bryce
Great question. For me, it’s the same across the board for every loan. I charge 3 points and 14% interest, no matter the size. The reason for that is, once you scale up—trust me, you will, even if it doesn’t feel like it now—you’ll have 20 loans going at once. Trying to remember different rates or points for each one becomes a nightmare. It’s easier to keep it simple, so I just use a standard structure: 3 points, 14% interest. Everyone knows that. I don’t have to check the deal every time.

We do have a minimum origination fee. For example, if it’s a $40,000 loan, 3 points would be $1,200, but that’s not worth it for me. So, I have a minimum fee of $2,500, or 3 points, whichever is greater. It’s worked out well for us.

JJ
That makes sense. So, you’re charging 3 points and 14%. Is that because of current interest rates? How did you land on those numbers? I was considering 2 points and 12% for this couple I’m working with, but I wasn’t sure if loan rates vary based on location or other factors.

Bryce
Good question. When I was borrowing money, 2 points and 12% was standard across the industry. However, I don’t mind charging a premium. Every day, I get calls from borrowers who were working with another lender but are running into delays. They need to close quickly, and they’re willing to pay a little more for that. I’d say that at least 70% of the time, after they hesitate, they come back and say, “Okay, let’s just do it.”

JJ
You get what you pay for.

Bryce
Exactly. Don’t be afraid to offer a premium service.

JJ
Yeah, we had a similar discussion when we were in business together. I was always about keeping prices low, but after we raised prices and saw an increase in revenue, it was a no-brainer. I’ve definitely come around to your side of things.

Bryce
Ha ha, that’s awesome. It’s a tough lesson, but pricing is one of the biggest levers you can control in business. Charging more often attracts better customers. It’s counterintuitive, but it works.

It’s a tough lesson, but pricing is one of the biggest levers you can control in business.

JJ
Absolutely. And less headache too.

Bryce
Exactly. More money, less hassle—it’s a win-win.

JJ
So, we talked about loan terms and how you decide on your rates. My next question is about loan duration. What does the term look like for your loans? And what happens if they go over that term? For example, if a borrower has a year to pay back the loan but it takes longer, how do you handle that?

Bryce
Great question. Our standard term is six months. After that, we offer two optional three-month extensions, each with an additional point, so a total of five points if they extend the loan for a year. This model works well because, if I were to charge 5 points upfront, people might be turned off. But by making the extension optional, it gives borrowers the flexibility, and it helps me ensure my money is always moving.

JJ
Smart.

Bryce
Yeah, it’s worked out really well for us. If they need more time, the extra points offset the risk of the extension.

JJ
That leads me to my next question. If a loan extends beyond the agreed term, how do you handle it? Do you just adjust the terms, or do you have other options?

Bryce
I prefer flexibility. If a project is taking longer but the borrower is communicating and still making an effort, we can extend the loan. We might settle up on the interest owed and reset the loan if needed. It’s really a case-by-case situation. But if the borrower isn’t communicating or seems uncooperative, we move toward foreclosure. The key is maintaining good communication.

JJ
And how does the foreclosure process work?

Bryce
It varies by state. In Idaho, for example, if the property is 20 acres or less, the foreclosure process takes about six months. If it’s larger than that, it can take up to a year. But in most cases, I don’t handle the foreclosure myself. I’ll just have my attorney start the process. They’ll file a notice of default, and we’ll proceed from there.

JJ
So you don’t handle it directly. You contact your attorney and let them take care of it?

Bryce
Exactly. And I don’t want to go down the foreclosure route if I don’t have to. There are other ways to deal with a bad borrower, like a deed in lieu of foreclosure, where the borrower hands the property back to me instead of going through the entire foreclosure process. Some lenders even have borrowers sign a deed in lieu at closing, but they don’t file it unless there’s an issue later.

JJ
That’s good to know. Do you set up that deed in lieu in advance?

Bryce
Yes, it’s part of the closing documents. It’s a smart little hack, though it’s not common in this industry. Another option is to have the borrower sign a quitclaim deed. If things go wrong, you just file it and take the property back. It’s a simple process.

JJ
Got it. That’s really helpful information.

JJ
Another question: How did you find your lawyer? Is he a real estate-focused attorney for these kinds of deals?

Bryce
Great question. There are plenty of attorneys who claim to specialize in real estate, but they’re really just handling basic property transactions. For private lending, I recommend finding a lawyer who specializes in that niche. I use a firm called Geraci out of Chicago. They focus specifically on private lending. They have a tool called “Lightning Docs” that generates custom documents based on your loan parameters and state laws.

JJ
Nice, that sounds really useful.

Bryce
It is. It’s a bit expensive—about $400–500—but it’s totally worth it if things ever go south. You’ll be glad you invested in it.

JJ
Absolutely. If something ever goes wrong, that’ll be money well spent.

Bryce
Totally. I would highly recommend that. They’re also great from a compliance standpoint. A lot of people aren’t sure whether they need a license in their state or not. It’s tricky, right? You can call them up for a free consultation, and they’ll walk you through the process. Whether you’re in Missouri or any other state, they’ve got everything laid out for you.

JJ
Yeah, that’s huge. That’s golden right there. Cool. So, we’ve covered loan terms and what happens during the duration of the loan. Now we’re at the payout stage. The closing is done, papers are signed, disclaimers are in place. How do you disperse the money to a borrower? Let’s say they’ve got a $100,000 property and need $50,000 to fix it up. So, they’re budgeting $150,000 total for the project. How do you release that money? Do you give them the $100,000 upfront to buy the property? What about the $50,000 for the remodel? Do they pull draws like in a typical construction loan, or is it given upfront? And what happens if they go over budget? Do they have to pay more points? How does that work?

Bryce
Great question. First and foremost, you never give the funds directly to the borrower. Everything is always done through the title company. You ensure that both the borrower’s and lender’s title insurance policies are in place, and that there are no legal issues like encroachments or easements. You also make sure the borrower pays for these policies. In private lending, you get to set the terms, so you can make the borrower cover certain costs. If they don’t like it, they can go elsewhere. It’s very flexible.

Some lenders charge junk fees, like a $1,000 commitment fee, but I don’t do that. For example, I charge a $40 wire fee because my bank charges me to wire funds. If you’re wiring funds, you’re paying that fee.

JJ
And this is all borrower-paid, right? Sorry to interrupt.

Bryce
Exactly. Some people also charge document prep fees. I try to avoid adding unnecessary fees. I prefer to offer a quality product. So, everything goes through the title company. In the case of a $150,000 loan, I’ll file a lien for the full amount, even though I’m only disbursing $100,000 initially. This gives me legal standing if something goes wrong.

JJ
Okay, so how do you file the lien? Do you use a lawyer for that?

Bryce
Nope, that’s all through the title company. We provide a lender instruction letter with step-by-step guidance on what to do. It includes all the fees, like origination, commitment, wire, and recording fees. The letter specifies the loan amount—$150,000—but the initial disbursement will only be $100,000. The title company will file the lien, and we’re good to go.

As for the draw process, we actually don’t offer draws, which is a bit unusual in the industry. We want borrowers to have enough capital to fund the rehab themselves. It ensures they have “skin in the game.” If you do offer draws, you’ll need to require a scope of work. They’ll outline what needs to be done and the costs involved, and you’ll need to review it carefully.

JJ
Do you review that before they close?

Bryce
Yes, absolutely. It’s part of the underwriting process. I want to ensure they’re realistic about costs. If a borrower thinks they can rehab a house for $5,000 when it really needs $50,000, I’ll catch that early. For example, one borrower submitted a scope of work with a line item for extending a garage. I visited the property and saw that there wasn’t enough space for what she wanted to do. She didn’t know about zoning setbacks, so I had to cancel the deal. It’s crucial to catch these things early.

JJ
Wow, that’s smart. So, you go out and see the property to make sure the plan is feasible?

Bryce
Exactly. You can’t always trust what they put on paper. Going out and seeing the property helps you spot things they might not be aware of. In this case, the borrower didn’t realize it would cost $30,000 to build a two-car garage in such a small space. We had to back out of the deal.

JJ
Yeah, I can see how that would be an issue.

Bryce
Right. So, once the scope of work is approved and everything is in order, we’ll do an initial draw—usually about one-quarter of the rehab budget. If the rehab budget is $50,000, we’d give them $12,000 upfront. But before they can request another draw, they need to submit photos and receipts proving the work has been completed. They’ll also need signed releases from the contractors saying they’ve been paid and won’t file a mechanics lien on the property.

JJ
Very smart.

Bryce
Thanks. We need those releases to protect ourselves. Without them, contractors could file liens and complicate things. Once we’ve received all the documentation, we’ll approve the next draw.

JJ
Got it. So, the contractors need to sign that they’ve been paid before the borrower can get the next draw?

Bryce
Exactly. They must pay the contractors first, and then they can submit for reimbursement. That’s where their skin in the game comes into play. They need to make sure the work is done before they get the funds.

JJ
That makes sense. It’s easier to spend someone else’s money than your own.

Bryce
Exactly. And you can do it either way. The borrower can front the money and then get reimbursed, or we can wire the money directly to the contractors. It’s flexible.

JJ
I like that approach.

Bryce
And there’s a definite benefit to them paying the contractors first. It ensures they’re invested in the project and motivates them to get things done.

JJ
Okay, that makes sense. So, it sounds like everything gets sent to the title company in an escrow account. When the borrower needs to access the funds, they either come to the title company or you release the money directly, depending on the setup.

Bryce
Yep, exactly. It’s all handled through the title company. I like the flexibility of managing the funds myself, though. Once the lien is in place, I can submit the draws directly, typically through ACH. Some lenders use escrow holdbacks, but I prefer to handle it myself.

JJ
Okay, so you control the funds once the lien is in place.

Bryce
Correct. But there’s a cautionary tale I want to share. Some lenders have gotten into trouble because they promised certain rehab dollars and didn’t have the funds available when the borrower requested them. That can cause serious issues, so it’s important to ensure you’ve got the capital to cover what you’re lending.

JJ
Good point. As a lender, you need to make sure you have the funds to back up your side of the agreement.

Bryce
Exactly. You’re obligated to fulfill your end of the contract, just like the borrower is.

JJ
For sure. So, speaking of risk, what’s the biggest risk you face as a lender? What should you be looking out for, and how can you prevent it?

Bryce
The biggest risk is losing all your money, plain and simple. One major risk right now is wire fraud. Fraudsters send fake settlement statements with incorrect wire instructions, and people have lost six figures because of it. It’s horrifying. I’ve never experienced it, but I know it happens.

JJ
Oh, man. That would make me sick.

Bryce
Yeah, it’s terrifying. The key is to always verify wire instructions before sending any funds. Call the title company to confirm them—don’t just rely on emails. Even if it’s a title company you’ve worked with many times, always double-check. Never let them call you; you call them.

JJ
Got it. Always verify.

Bryce
Absolutely. It may seem like a hassle, but it’s worth it.

JJ
Okay, so that’s the wire fraud side. What about the scenario where a borrower comes to you and says, “Hey, Bryce, I can’t do this anymore”? Let’s say three or four months after the election, the economy tanks, and borrowers are like, “I have nothing. I can’t pay. What’s the process on your end as the lender? Do you take the property back?”

Bryce
Good question. For simplicity, let’s say we’re dealing with a $100,000 purchase price. We would never do a $100,000 loan because that’s 100% Loan-to-Value (LTV) with zero cushion. We always require at least a 20% down payment, sometimes 25% or 30%, depending on the deal. This ensures the borrower has skin in the game. If you look historically at the market, something catastrophic would have to happen for it to drop more than 20%. On top of that, properties we’re financing are often undervalued by 40-50% because they need work. So, we have a built-in cushion. Even if something goes wrong and we foreclose, we’re still in a strong position because, by day 180, the project is fully renovated and ready to sell.

JJ
Right, that makes sense.

Bryce
Exactly. The riskiest part of the deal is day one when the property is in its initial condition, before any renovations. But once the property is fixed up, it’s a much safer position. We can usually sell it and get our money back. In contrast to an FHA loan, where a borrower puts down only 3.5%, there’s little to no cushion. If things go south, the borrower could quickly be upside down.

JJ
Got it. So, you’re in a strong position because of the cushion built into these deals. It sounds like private lending is a lot safer.

Bryce
Exactly. As long as you set yourself up well, the security is just incredible.

JJ
Got it. So you’re doing a lot of deals now. Do you still analyze every single one?

Bryce
Yes, absolutely. I look at every deal myself. I have one other guy on my team, but he doesn’t have flipping experience, so I’m the final decision-maker, but I can look at a deal and know within 10 or 15 seconds whether it makes sense. Most borrowers are overly optimistic with their numbers, using comps that aren’t entirely accurate. I typically take the borrower’s comps, knock off $20–30k, and then see if the deal still makes sense. Since construction always takes longer and goes over budget, I want to make sure there’s enough cushion built in.

JJ
So, are most of your deals local, or do you also lend out of state?

Bryce
95% of our deals are here in Idaho. However, we do have a few projects in places like North Carolina, Alabama, and Oklahoma. We trust some borrowers who relocated out of state, and they’ve performed well, so we continue to work with them. But like I said, the vast majority are local.

JJ
Got it. Now, you mentioned earlier that you’ve flipped homes before, which helps you analyze these numbers. If someone has six figures sitting on the sidelines and is considering lending money, but they’ve never flipped a property, do you recommend they start with lending or flip their own properties first?

Bryce
Great question. It depends on the person. For someone like you, I know you’re conservative with your money, so I’d say, go ahead and jump in. But if you’re someone more comfortable with risk, I’d recommend flipping a few properties first to get the experience. If you’re still hesitant, you could also joint venture with someone experienced or start with a private money deal, like you’ve done in the past. It’s important to learn the ropes before diving in headfirst, as there’s a lot of risk involved, especially if you’re not familiar with the process.

JJ
Yeah, that makes sense. So, if someone is newer to flipping and comes to you for money, what do you look for in the borrower? Do you check their credit, background, etc.?

Bryce
We do a thorough check on the borrower. While some hard money lenders say they don’t care about credit, I don’t believe that. If someone can’t manage their personal finances, they’re likely not going to handle a big renovation project well. We do a credit check, background check, and make the borrower pay for it. I also look for evidence that the borrower is responsible in other aspects of their life—whether they have a stable job, family, or other signs of responsibility. You don’t need to be a Harvard graduate, but you have to prove you’re not a liability.

JJ
I agree. So, you really want to see that they’re responsible with their finances and life in general.

Bryce
Exactly. Also, social media is a great tool. A borrower who posts frequently makes it easy to track their progress. When they go silent for a couple of months, I typically check in to see what’s happening. A sudden disappearance after years of daily posts, however, is a red flag.

JJ
Do you Facebook stalk them?

Bryce
Haha, yeah, sometimes I do. If their social media activity suddenly drops, I know something’s up.

JJ
Got it. So, if a first-time flipper comes to you for funding, how do you handle that conversation? What do you ask them?

Bryce
That’s a great question. If someone hasn’t flipped a property before, I need to see proof that they’ve worked on similar projects, even if it’s just their own personal home. We don’t lend to first-time flippers anymore, unless there’s a really good deal on the table. In that case, I’d be willing to joint venture with them, but I’d take a bigger cut of the profits to offset the extra risk.

JJ
I’ve been running into that a lot lately—first-time flippers asking for funding. If they’ve never flipped a property, but they’ve done a personal home flip, do you still offer them funding? And how do you structure that deal?

Bryce
If they’ve done a personal flip but no true flips, I’m still cautious. If they have a good deal and are willing to give up 50% of the profits, I might joint venture with them, especially if I can see the numbers work. But I’d take a larger cut of the profit because it’s a higher-risk venture. The only way I’d do a deal with them is if I felt confident that it’s a good deal, and I’m going to protect myself and my investors.

JJ
Yeah, it makes sense to start with smaller risks if they’re new. If it’s a good deal, the 50% profit split might be worth it for both sides.

Bryce
Exactly. It’s all about getting a feel for the borrower. If you have that gut feeling that they’re trustworthy and the numbers work, it’s worth taking the chance. But I’m definitely more cautious with first-time flippers.

JJ
Yeah, for sure. Starting small makes sense, and over time you get a better sense of who you can trust. Thanks for the advice.

Bryce
One thing we offer is if you can’t find another lender willing to work with you due to your lack of experience, we can JV on the deal and hold your hand through the process. Of course, since we’ll be more involved, we take a larger cut than usual. Some people are hesitant, but others are happy to have the support. It’s a great way for them to get started with someone guiding them.

JJ
Yeah, it’s essentially paying for mentorship. Instead of taking all of the profits, you’re getting the money to fund your deal, but also the expertise to help you through any challenges. If issues come up, you have someone who’s done it before, who can help you navigate through tough situations and solve problems quickly.

Bryce
Exactly. And a lot of people stress about the points and fees—whether it’s two points versus three points—but honestly, those fees are irrelevant if you can’t afford an extra $5,000 on the deal. If you can’t make room for that, the deal probably isn’t going to work anyway. Our typical deal is three points and 14%, but most projects take about six months, so you’re really paying more like 7%. The bottom line is, a small problem like mold can be easily handled with some bleach. A little experience goes a long way in avoiding major costs and delays.

JJ
Right. It’s all about knowing how to manage the smaller details, like dealing with mold. A new flipper might freak out, but someone with experience knows it’s just a quick fix.

Bryce
Exactly. Like the other day, a guy came to me with a plan to renovate a property for an Airbnb. He wanted to wrap a tall chimney in expensive veneer stone. I told him, “No, just stucco it for $1,500.” Nobody cares about the exterior rock; they care about the space inside. That’s the kind of thing that experience can help avoid—wasting money on unnecessary upgrades.

That’s the kind of thing that experience can help avoid—wasting money on unnecessary upgrades.

JJ
Haha, yeah, right. They’re not staying there for the look of the chimney.

Bryce
Exactly! When you’re starting out, you just don’t know what you don’t know. That’s why experience really speaks for itself.

JJ
For sure. And this is a good point for me too. For the people I’m working with, maybe the best move is to do a joint venture. I can lend the money but also take a percentage of the profits for our first deal together. If it goes well, then I can be their go-to lender for future projects.

Bryce
Yeah, and I recommend putting defined dollar amounts in your paperwork, rather than just saying, “We’ll split profits 50/50.” For example, you could say, “I’m going to make at least $25,000, and anything above that is yours.” That way, if something goes wrong, you still have a guaranteed amount, and it’s all in writing.

JJ
Ah, that’s smart. That way, if the deal doesn’t work out, you’re still covered.

Bryce
Exactly. If you only focus on profit percentage, you could end up with nothing if things go sideways. A minimum guarantee makes sure you’re still compensated.

JJ
Good point. That’s all I’ve got for now.

Bryce
Awesome questions. I love how you’re thinking about this. It’s easy to forget the things you don’t know when you’ve been doing this for a while. But these questions are gold for the audience.

JJ
I need this info myself! When we came up with the idea for this podcast, I was like, “This is perfect for me right now.” I’ve done three deals, but they’ve all been with guidance. I haven’t done one completely on my own, so I’m excited to take that next step. I’ll definitely share this episode on social media—there are people who have asked me about private lending, and this will be really valuable for them.

Bryce
For sure. And as you continue doing deals, you’ll see it gets easier. Once you’ve done a couple, it just becomes second nature.

JJ
I love that idea. Once you’ve done a few, the process becomes much smoother.

Bryce
Exactly. But in the beginning, it’s nerve-wracking. You have a lot of money on the line, and a lot of moving pieces to keep track of. You just want to make sure you do it right, especially in the beginning.

JJ
Yeah, definitely. You’ve got to be thorough.

Bryce
And you’re asking the right questions. Keep taking those precautions, and you’ll be successful. One thing I’ve noticed is that when you put yourself out there—especially on social media—people start reaching out with money. A lot of people want to invest in real estate but don’t know how, so they’ll come to you. That’s how we grew our business.

JJ
Yeah, that makes sense. I can already see that happening.

Bryce
Once you get started, it scales really quickly. You start making money with other people’s funds.

JJ
I love it. Thanks for all the insight!

Bryce
Of course. Well, this was great. For everyone reading, if you’re looking for a private lending software, check out Lendr. It tracks your payoff statements, investor details, interest rates, and generates your loan docs. It’s a one-stop shop. If you’re looking to get into private lending, definitely check it out at joinlendr.com.

JJ
Thanks again, man. Let’s do this again sometime.

Bryce
Absolutely. See you guys!

 

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