Hard Money Lending in Real Estate w/ Mike Bonn of The Cash Flow Company
Have you thought about becoming a hard money lender for a real estate fix and flip? In this week’s episode, I talked with Mike Bonn from The Cash Flow Company to learn his business model for short-term lending secured by real-estate. This alternative investment strategy puts you in the seat of the lender while keeping things straightforward and secured by real assets.
Key Takeaways:
Direct Lending, Real Security: Investors’ names are on the loan documents, not a pooled fund. That means direct control and security over your investment—plus, the potential to foreclose or sell the property should things go south.
Flexible Entry Points: No hefty minimums required! Whether you want to lend $15,000 or $2 million, you can start at a level that fits your goals and risk tolerance.
Attractive Returns, Simple Structure: Historical returns have ranged from 8.5% to 10%+, typically double what’s available from CDs or money market accounts. And there are no ongoing management fees eating into your profits.
If you’re looking to diversify outside the stock market and want to do it in a way that gives you more control and transparency, this episode is a must-listen.
To read more about The Cash Flow Company
Listen to the episode that was mentioned - How to Use Self-Directed Accounts to Invest in Alts with CNB Custody
Take the quiz - How Alternative Assets Can Fit in Your Portfolio
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Welcome to the Podcast
Welcome to the Unconventional Investor Podcast. I'm your host, Michelle Moses, certified financial planner, licensed realtor, and founder of Me Financial. If you're an accredited investor feeling overwhelmed by managing your portfolio and looking for alternative investment strategies that go beyond the traditional stock market, you're in the right place.
Let's head into today's episode so you can start taking control of your financial future. Hello everyone, and thank you so much for tuning in. I am really excited about this one. I've known about this investment for quite a few years. Actually. I have a client who I highly respect and he cannot say enough about our guest and this investment.
In fact, I think it might be mostly all of what he does because you are gonna see that it is fairly safe and straightforward and you're gonna be able to understand it. I know I always say this and I'm so excited, but I am very excited to have this on the show. It likes.
Meet Mike Bonn
Today I've got Mike Bonn, who is with the cash flow company and he's a seasoned financial professional with over 35 years of experience in banking and real estate investing.
He's closed over a billion dollars in conventional and commercial loans and worked with tens of thousands of real estate investors. His mission is to help you elevate your real estate investments to millionaire status so you can live the life you dream of. Thank you so much for being here. Yeah. Thank you for having me.
I appreciate it. Yeah. As we, Mike, we've talked like many years ago and I've mentioned your investment to quite a few clients. And so you have, I know you have two sides of the business, but we're gonna talk about one side of the business, everybody. And then at the end we're gonna get to the other side 'cause he does work with investors like flippers and all of that, doing hard money lending.
However, we are gonna talk about how you can become the hard money lender. Basically through Mike's business model and how that works. So Mike, can you explain the overall investment strategy of it and then and then I wanna do, get into the logistics about what some of the legal documents say a little bit later, but just give us an overview.
Hard Money Basics
Well, first of all, we're a short term lender, which means we're lending people money. Secured by real estate. So everything that we do it's, it's, there's not a guarantee, but there's, it's secured by a, a piece of real estate with a mortgage, with a loan, and the whole intent is to help people.
Buy properties that need work, need fixed up. Help really help the communities. 'cause a lot of people don't go in and fix up these order homes or homes that were left in probate and stuff. So it's really finding homes that need a lot of love, a lot of attention, and us giving them the finance to bring that up to standard.
And we do that through, keeping it. Safe in a sense of using, a mortgage and title insurance and regular insurance and some other, strategies and things that we go through from background checks to everything. But it's really just about lending people short term, which is usually six months to maybe 12 months, everything that we do.
Short term, because it's a person who's making money on real estate, but also, it's really changing the environment of the properties that they're doing in the neighborhoods too. Yeah. And I think it's important to have that 'cause it, a lot of times I think that stuff can be overwhelming to someone that's not a professional and have a team.
And so I think sometimes you are doing a service by coming in and actually, 'cause it costs so much money to fix up those houses from, 'cause you're thinking about the yard and the roof. There's just, there is a lot to do when there, it's a pretty dire situation. Yeah, there's, we've seen ones just as a newer build that the the whole roof was burnt off, so insurance companies didn't wanna do anything.
The people living there didn't wanna do anything. So someone comes in, fixes it up, gets it marked ready again, so someone can live in it. They can move into a house that's, been completely remodeled. And that's what we do. We lend them the money to buy the property and fix it up. Typically in local markets because we know the areas, we know the markets, we know it's the real estate inventory and what it looks like too.
But we focus on the lending side. It's always private money that we're doing. So we're taking, people's funds who are looking for a little bit better return and giving it to people who need that kind of quick. Easy money to run their business.
Markets and Deal Types
And what states are you focused on in lending?
Our biggest focus, of course, is Colorado. That's where we're at. Texas, Oklahoma, Ohio. A lot of the Midwest where affordability is still there, where demand is still there. When we say Colorado, we're not in some of the bigger markets 'cause, most of our loans and homes we're looking for.
Someone who can actually afford a payment. So everything is usually 400 grand or below. We're now looking for million dollar homes to finance. They just have a unique market. And of course there's a lot of market out there, but it still comes down to affordability. When we do a loan, we lend it to sell and we wanna make sure, there's a way to make money.
If they don't sell it, they can rent. There's always something that they could do with that property. To make it a good venture for them. Okay. And if they are renting it, so then do they refinance it then out of your Yep. Program and into something else? Okay. Yeah. Okay, so go ahead. Sorry. I was, I didn't mean to cut you off.
You can't refinance with a traditional loan bank owner or anything if the property is not rent ready. Our loans are to get them up to the standards of the market so they can get permanent financing through a bank or a conventional lender. Okay. And are you working with a lot of the same at home investors, like the ho, real estate investors, or are you always interviewing new ones?
Our typical timeline is about two years with someone. We have some, of course we've had eight or 10 years, but typically it's two years. We have someone and they'll flip anywhere. Like we just have a new client. He's just flipped three properties in four months, but it's usually somewhere between two and four a year up to, we have some people are pretty aggressive and they'll do eight to 10 a year.
After about two years, they usually graduate to either bank financing or they have their own money, or they're just slowing down. But typically it's a two year window. We have someone come in. And then graduate to something else. Okay.
Investor Onboarding
And so let's talk about the other side of it, the investor side of it, the person that's bringing the cash.
So they, you ha can you explain to me how they come to you and I know that sometimes, they start off and it might be they're reviewing every single deal and then I assume that they start to trust you. Correct. Go through that timeline, like how much money does it usually take to get started to become a hard money lender and, yeah. And then what is that process of getting started? Yeah, typically, like you said, getting into anything new, takes a little bit of a learning curve and, a little clarity, a little confidence to understand what's happening. So it's usually people walk through each step to, everything from where is the house, what does it look like, what are they doing with it?
Who's borrowing the funds? They do anything and everything to look at it. Most of our. People who have money with or have, are doing loans with us. They started in 2009, 2010, so they've been around for a while, so they get used to it. But typically it is as we have a, we sit down and we say, okay, how much are you looking to put into it?
'cause we ha we have loans that are 50,000 and we have loans that are, 2 million different Okay. Different buckets for different people. And it is really about them to, so you don't have a. You don't have a minimum. We don't. I'm doing a loan here in a, probably tomorrow for a friend for 15 grand.
It's a small loan. We don't like to do a lot of those kinda loans, but in the same sense, it's a good loan. It's a quality loan. It's here local. It's easy enough if people want to, part of what we wanna do is make sure we have a, what we call an exit strategy. We're a short-term lender. We wanna make sure we understand what they're doing with the money and how we're gonna get our money back.
So if it makes sense, if the security is good in our world, security means there's a lot of value in the property. Say it's worth 200, we're lending one 20. There's a lot of equity in the property, unlike at FHE or VA, where they'll lent up to a hundred percent of the actual value. We don't lend there.
We're at a different loan to value. So typically people come in and they. It takes 'em a, some people takes 'em a couple months to get the feeling, the clarity that the confidence of doing this. And they have to understand what it is. It is just a loan to someone and we're securing it with a lien, a mortgage, a deed of trust on their property, and we close a title company who makes sure it gets recorded and everything is done.
It's a different, probably in se 1970 and be, before that a lot of people were into lending privately and banks took over and everything, and now it's not as common. So people have a little bit of a, stepping stone to get to and understand about lending people in your community.
Money. Again, we just do it secured instead of unsecured.
Security and Paperwork
And so when you're actually doing the documents at the title company, whose name is the lender on the document? Is it your company or is it this investor? More that, it's the person who is lending the money that we're just a, they hire us as a facilitator to find it and do that.
And then, it's, John doe's IRA or, 'cause you could fund these with self-directed IRAs or savings, but it's ideally their. Information and it's it's in their name. And the reason is then it's their, it's their mortgage, their deed, anything happens around the world. They still have that lien and that mortgage.
And they have a title report or title policy, insurance policy stating what lien position they're in, into. And this is why I re really like your investment, is because it isn't your company on the loan documents that it is IRA Or if you put in cash, then it is actually the, John doe's name.
Yeah. Because then if something happens, then they could, floor close or take the house back. But I know that we'll get into that. You have other investors that the house would probably get sold to and then other things would happen. Correct? Yeah. Yeah. Yeah, the idea is, when we sit down and we talk to people, it's about risk tolerance, just like anyone else would do, what is, what would you like worth risk?
And in our world, risk is we just did a loan for someone to own the free. A home free and Clear is worth 500 grand. We gave our 50 grand low risk in our world. It's in Denver. We know the area that's a low risk, probably a lower return too than someone who will take a little bit higher risk.
We have, people who their whole lives has been in the finance world, so they understand loans and everything else like that as investors. And there's people who just want something a lot better than a cd. They don't want three and a half or four and a half. Yeah. They want something.
This is a lot better than a cd. Yeah. Yeah. Understanding each person is unique and what they like, and that's what it's, that's true. That is very true. And so when you're do, and I got, I don't know, I have all these questions that I wanna ask. Is that, so you have the you do the loan, you have the investor, you actually have the investor on the actual loan itself.
And so are you taking a fee on the settlement statement at the title company for each transaction? Is that how you're then making money, right? Yep. Okay. Yeah.
Returns and Fees
And then can we talk about what is the going rate for, or what in the past has been the rate that people have been making? Because I know that we can't project into the future.
Yeah. And it's changed a lot over the last six or seven years. 'cause there's a lot of Wall Street money, chives and everything who's come into this space before there was none. So they're more prime based. So they're probably, lending out at, like right now this Prime is 6.7, so they're probably lending out a prime plus two or two and a half.
So it, it's, I would love to say, it's nine, 10 or 11, but if they keep, the Fed keeps dropping, a lot of these Wall Street companies will drive our whole market a little bit lower. I, I know like in 2000 and 20, our low was about eight point a half percent. Now it's over 10. Yeah, but it will fluctuate somewhere in between there.
All I say is, we'll fluctuate with prime a little bit, but so will any other options they have out there. But it's still at least double, which you're gonna find from any bank. But prime or money market you mean? Yeah. Or money market. Okay. So it'll be double whatever a money market is usually.
I don't know what a money market is. I know like CDs are like three and a half to four and a half, but I don't know what. What? Yeah, they're about the same. Yeah. So right there. Okay. Okay. So that can be what you expect.
Servicing and Preferences
And so are they splitting any of that interest with you when they make it, or are all the fees paid when you close At the title company, that's where it comes down to.
Are we helping them? Collect the, like service payments and stuff. A lot of people, we have Aach H sub, so we collect the payments and we send them out. Other people are more hands on. They are, they're just like, find me a loan that looks like this. We find it, we get a close, we set it up, we get our fee and we're done.
And okay. They take it from there because that's what they want to do. Other people are like, no, I don't wanna do any of those kind of things. Because it's still alone, there's still things that you have to go through and like why is it keep track of yeah. Keep track of and all these other things.
So it just depends what someone wants. And I say that because. There are so many different requirements that people want. I just want commercial properties. I just want people with homes in it. Like everyone has their wants and likes and wishes. I want something downtown. I want something in the country.
It's a, it's everyone has a comfort level where they like their money. Okay, so they have a comfort level of where they like to lend. Yep. And so then that depends on how much they make. And then there's also a comfort level in if they wanna manage. The service, the loan. Yeah. We'll say, yeah. So some people wanna service the loan.
I can't imagine. Anyway, they must be really smart 'cause to keep track of all the interest and the daily interest and all that. I know there's tools out there, but I don't know, I don't know that I'd wanna mess that up. Yeah, AI don't have a chance of messing that up. AI helps a little bit and banking now helps a lot, from Venmo payments too.
Stuff like that. It's a little bit easier than it was even, eight, 10 years ago. Yeah, no, I'm sure. I'm sure still. I don't know. Okay, that's really great.
Why This Model Works
I mean, that sounds like a really great investment, honestly, and straightforward. And I think that's why I've always told people about your investment is that it's just, 'cause a lot of the other investments that I've had on the show, it's more, you're putting it in a pool and then the pool of x, y, Z corporation is the one that's lending to the flippers.
And I'm calling flippers 'cause both sides are investors. On this. And that doesn't really give you security because then if there's a foreclosure, then it's the company that's dealing with it and then taking the fees for dealing with it, and like when they're managing things and they're obviously taking a fee for all of that, and then they're taking a fee every single month or year to just be managing the fund, whereas yours is very different where the investor can actually have their name on the note.
And there is no middleman, if something goes wrong. No, they have complete authority. They could they could extend it if they want. They could do they could do so many different things that they want to do if they feel comfortable doing that. And the other beautiful thing about a short term loans, like six to 12 months, there's not gonna be a lot of market changes, unless something really crazy happens. But there's not gonna be a lot of changes that are gonna happen that you have to go through, like over a five year period. There's a lot of ups and downs and if you're, trying to get outta your note when it's down there's just a lot of variables that you just can't control. But I could see what's gonna happen in six months typically, like within some variable. In the next five years, it's a little bit different where values are going in and everything like that. So we like to keep it short term.
We like to keep it, of course, non-owner. We don't do anything where someone lives in the property that owns the property. Just totally different rules for that. No, I think this is a great investment. And are there, I haven't heard of other people doing. Like what you do the way that you do it?
Or are there just a ton of you and I've never heard of it. I think there's a lot I mean there always has been, kinda like in the cottage industry, like here in Colorado, Denver, I would say there's a hundred people lending private money. A lot of it's just their own money. Some of it they raise like through Reg D or Reg A and they, they raise some money and put it in a pool, right?
They put it in a fund or their minimum's like a million, it's just not where normal people could. Invest. Exactly.
Resources and Wrap Up
Um, yeah, and I want to tout Mike A. Little bit here too, because a lot of his website is touted towards the flipper side of teaching people how to flip houses. And he even has a book.
So I'm gonna put his website in the show notes. Then you can go and, either side is he can help with a lot. If you're looking to find [00:18:00] financing so that you can get into real estate investing he can also help with that. I have read your book, Mike. And it, very simple, easy to read, easy to understand.
Again, I just think it's a very straightforward, unlike if you guys have been listening to the show for a while, there's a lot of investments I've had on where there's just fees all over the place, and I think this is just so straightforward. It's, yeah, I love that. It's easy to understand.
We, we've been lending to each other for, thousands of years. It's just a different ticket. I'm gonna send you, like how to do notes with your retirement or whatever. I'll just send you the PDF. And I don't know if you could add that to the website. Yeah, I don't know if you could download PDFs.
I'll just send that to you so you can, I can just access it right there. That would be great. And guys, I will also put in the show notes, the episode that I have with self-directed accounts with CNB custody, who is who I use for my self-directed accounts. And I don't know if you only work with certain people, but you can work with, you can lend you can do this through your IRA or whatever accounts that you want, as long as it's self-directed.
And you can do all kinds of things as self-directed. Yeah. I've even heard of people buying cows. I had heard that one. That's new to me. Yeah. Yeah. There's all kinds of things in the, like even some like African animals for Yeah. Hunting and stuff. So been, I know, been very interesting.
Yeah, I've seen it all. Mexican cows. There's probably, there's probably some kind of money in there, but buying animals and, yeah. Yeah. Interesting. Yeah, I don't know. I don't know. There's different strokes for different folks. So that is it. That is perfect. Put. Yeah. Mike, this has been great.
Thank you so much for being on. I know that I talked to you many years ago and I've stayed in touch, so I'm really glad to know a little bit more details about what your business is and I can't wait to talk to more people about it. Sounds good. I appreciate it. Thanks. Yeah. And you guys, thank you so much for listening and let me know if you have any questions or wanna book a call with me.
I do offer a free 15 minute consultation if you need anything or if you wanna see what it's like to work with me. I do specialize in alternative investments inside and outside of the stock market. Thank you so much for listening. This is a lot of fun to do and I hope you have a wonderful day.
Final Outro and CTA
Thank you for listening to the Unconventional Investor Podcast. I hope you feel more confident in how you can grow your wealth using the strategies I shared in this episode. If you're ready to take the next step in diversifying your portfolio outside the stock market with alternative investments, head to me financial.net/contact us to book a 15 minute consult call with me.
Let's discuss how we can work together to achieve your financial goals. Until then, I'll see you on the next episode.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.