Hard Money Lending EXPLAINED [I lent $3,000,000 using this]

A 100 days ago, I made an investment that pays me $3,300 per day in profit off of a single deal that was struck. And I told you about this at the beginning of the deal, um what was going to happen. And so I wanted to do this as kind of a part two um of what actually happened in actuality. For those of you who don't know me, my name's Alex Rossi. I own acquisition. com. Uh it's a portfolio of companies, does about $85 million a year. The reason for this channel is because I know a lot of people are broke and I don't want you to be one of them. All right, so one of the things that I like a lot is hard money lending. I'm a big fan of it. It's private lending, which is basically like you are the bank. And the reason I like this is because you can uh determine the deal structure, which means that you can create the upside and the downside and then it's up to the other party of whether or not they want to accept that. Um, and that's valuable because if you can control a lot of the variables, then you can mitigate downside risk, which if you've heard any of my stuff, the ultra wealthy out there, it's not about trying to hit their upside. Like everybody who's poor buys lottery tickets because they only think about upside, but they don't think about downside. everybody who's rich who doesn't do that because they understand downside risk and how getting rich is about really just making fewer mistakes and letting time become an ally rather than a liability using time as an asset rather than something that is working against you. What I'm going to do is I'm going to outline the deal structure of what we agreed on um and then what happened and then there was one really curious thing that happened that was actually awesome and I think was probably the biggest takeaway from me and hopefully uh for you in this process. Big picture here, this was a $2. 5 million note. All right. So, I wired $2 and half million dollars in cash to a buyer. All right. And the buyer went to buy a building out of uh foreclosure. All right. So, they had a 3 and 34 unit, which if you're like, "Holy cow, how is a 334 unit building 2. 5 million? " Hence the reason I was happy to do the deal. All right. It was also in a war zone. Like the police officers don't even go here. Um, so this was a deal in Memphis. And so it's 334 unit building. All right. Uh, it was basically condemned. there squatters, drug dealers, you know, all sorts of stuff, right? And so here are the here are the risk factors, right? Which is what if I don't get the money back, right? Which means that I would have a building. And then how can I make sure that I get the money back? All right, so the first layer of defense here is guarantees. All right, so both of the buyers, there's two people um personally guaranteed the money. All right, and they had net worths in excess of two and a half million. All right, so we had that going for us times two. Next, the building itself. We have the value, right? Which the question is, well, if it was condemned and all that kind of stuff, do we know what the value is? Like, is it really worth $2 half million? Would you ever be able to sell it? Good question. So, we had uh three offers already on the building for between 5 million and 5. 6 million. So, an offer is one thing, right? But is there another level we can have? There was actually somebody put earnest money down, meaning that they had made the offer and it was accepted and they were going to put money in the deal. So there was earnest money of 300K. So they had said we want to buy it. It was these guys, the 5. 6 guys, right? Earnest money of 300,000 in the deal saying that as soon as you guys can transfer the title over to us, then great. All right. And the last thing was to make sure that we were actually, and this sounds minor, but this is how a lot of deals get messed up, that we were actually on the title, right? So that means that if for some reason we do not uh we do not get repaid, we are the first uh the first own you know the first people who have ownership or entitlement rather you know titled duh uh to the property. All right? So that there's no uh other leans against the property that we're the only ones um who are going to be uh receiving the property if something went in default, right? And so our cash was used to pay off the last person who had a lean on the home uh sorry on the homes or the building and then we took over that position as preferred. And so this was kind of the deal structure. All right. Now, this is how we got paid. All right. So, these are the payment terms. So, it was 4% per month. All right. Now, 4% times 2. 5 million, if you're curious, right, is $100,000 per month. All right. So, I was making $100,000 per month for the last three and a half months um for them to hold this money. Now, after the fourth month, so for some reason, they hadn't done this deal in four months, which it was supposed to be done in 60 days, which it wasn't. So, I'll talk about that in a second. Right? So, if it was uh if it was done in uh if it took four plus months, the interest rate would double. All right? So, then it would go to 200,000 per month. All right? Because then it starts to reflect that there might be more risk here, right? So, I need to start getting compensated more for this. All right? On top of that, what we did was a two-month minimum carry. uh which basically just means that uh even if they do the deal in 20 seconds, I still get two months of carry, which means minimum of 200k I'm going to get back for just risking the 2 and a half million, which means I'm getting 8% or whatever um no matter what just for doing this deal. So that's the minimum of 200k because it was a minimum two-month carry. All right, that's the key point here. Beyond that, what happened is after uh this deal ended up closing, um here's what happened. So uh the individuals who uh did the deal, they flew out to see us and have a kind of like a celebratory dinner. This was kind of interesting. So, they were like, "Hey, your lawyer sent over the note. Um, and it looked a little light. " And I

was like, "Uh, what do you mean? " They were like, "Well, uh, you know, we've had the property for 100 plus days now, right? And the note said 275K. " And I was like, "Huh? " And they were like, "Yeah, I mean, that wasn't what we agreed on. We agreed on paying you more than that. " And so, this was so here's what happened, right? So, uh, our lawyers messed up, for lack of a better term, they just messed up when they sent the, uh, the lo the loan invoice for repayment at the end of this. And what was interesting is that this individual, because he is long-term minded as well, and also a high ultra high net worth individual, and this is why I think this is probably more valuable than the deal itself, was like, yeah, my lawyer saw it. He was saying his lawyer saw it and said, yeah, let's just send the money like and you know that they made a mistake. Let's move on, right? to save ourselves, you know, almost 100 grand, which I'll show you in a second what the actual amount was. And he said, "A man," he's like, "Now you can't be my lawyer anymore. " And he was telling me this story over dinner. And it was so funny because we both had this kind of same, it's so the more deals you do with someone, there's a big fiveletter word that starts to occur, which is trust, right? The more times you lend someone money and the more times they pay it back as agreed upon, right? And especially if you have an instance where they have the opportunity to screw you over where most people would, especially if they think that they that you'll that you won't find out, which we might not have found out. But the thing is I might have also looked at these notes a while later and been like if I had free time and been like this is off. What is this? Right? And so anyways, he caught it. His lawyer said to go forward with it anyways. He chose not to and to bring it to our attention. And so we obviously are not going to use our lawyer anymore. He's his lawyer anymore because our guys made a stupid boneheaded mistake and that's what we pay them for is to not make these mistakes and double check these things, right? And his made an ethical error, right? So, mine was an error on skill. His ethics. And if you remember my how I picked mentors and vendors video, I talk about the three circles, right? You have the skill, you have the ethical component, and then you have the hardworking component. And so, both these guys worked hard, but they didn't have this. One of them didn't have the skill, and the other one didn't have the ethics. So, this is what ended up happening. All right. So 275 was the deal. Instead, uh we did the we had it was 10 and something days or whatever. So we had 300K plus 33 33 per day um until the deal was closed. All right. And so it ended up being like 350K or something like that with decimals, right? Um that we got paid back plus the 2. 5 million. All right. So we got a check back for 2. 85 85 million. And we have trust, which is the most valuable thing that you can have, right? And so this is ultimately one of those currencies that people do not understand who are new to business is that trust is the most valuable thing. I mean, we were talking about this over dinner and he was like, you only get one name. You know what I mean? You only get one. You only get one name. You only get one uh reputation. Let's see if I can knock the sun in my eyes here. And uh you know, we're obviously, you know, hoping to do bigger and bigger deals with you guys as uh you know, we earn more and more trust and we can do you know, $10 million deals, $50 million deals. Um and we'd rather have partners that we know uh we can rely on. And so it goes both ways. And so anywh who uh this was a very valuable experience for me in two ways. One obviously because the the whole deal worked out. Uh and for those of you who were like, why don't you run a mastermind? It's like cuz I could just move the money and not do anything and make [clears throat] almost 400 grand. That is why I'm just being transparent with you guys. like that's why I don't sell anything on the channel and that's why the the trainings we have on acquisition. com are free for all entrepreneurs and the book is 99 cents you can get it on Amazon because I just want everyone to win. So anyways, this was the deal. A lot of people like no one taught me how to do this stuff. So it was me just trying to figure this out as I go. Um so hopefully you can think through some of these variables if you ever get in that situation. And then also um and just as a side note here, I do have to pay 50% in taxes on this. And so that's why you need for me I have to have really high returns on any kind of private lending because uh the I have to realize those gains, right? And they're not capital gains to regular income. And so uh when you have that, I'm actually only making 175 after taxes on this deal, which you know, in terms of percentages on my original, I still would loan that money out again, you know, again this year. Uh so that I can still get at least, you know, 10 or 20% return on it. That's the big deal in terms of the money stuff. Uh the bigger deal was the trust um and the value of having trusted partners uh because they are worth uh their weight and gold and uh you know we should only be so lucky to have a handful of uh people that you can trust uh throughout your business career and uh you know my hope is that from this channel that you are one of them um in terms of uh in terms of yourself and then also maybe you know you grow your business to three or five or 10 million a year and then you let us uh invest with you so we can help you grow it more. So anyways uh keep being awesome Mosy Nation. Love you. Uh, if you enjoyed this video, hit the subscribe button. If you didn't enjoy the video, love you anyways. And I'll see you guys in the next vid. Keep being awesome. Lots of love.