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PLP-062 The Art Of Raising Private Money with Alan Cowgill

PLP 62 | Private Lending

PLP 62 | Private Lending


The beauty in private lending is that private lenders get to set the rules. Alan Cowgill, owner of Colby Properties, LLC and President of Integrity Home Buyers, Inc., tells us how this goes down as he goes deep into raising private money. He shares how he got started in the whole real estate game, taking us into exit strategies, keeping investors and landlords safe, and paying private lenders. Alan also touches on 401(k)s and self-directed IRAs. Ending it with more great insights, he shares what he looks for in a lender and how communication is key.

Listen to the podcast here:

The Art Of Raising Private Money with Alan Cowgill

I’ll speak with Alan Cowgill who was the first person to put the concept of private lending into my noggin several years ago. I’m honored to have him on the show. Speaking of the show, you can probably tell that I’ve been making some changes here and there particularly in the format. Whereas I’ve gotten away from selling mid-roll advertisements mostly because I didn’t feel like it suited me. I like the flow of the show better without the adverts. I’m experimenting with that to see how it goes. I’ve also brought in some more plans, reevaluated a few things and I hope to broaden the topics of the interviews a little. I’m going to go into some areas that hopefully bring you, the reader value in other aspects of your life not just in investing in real estate. It’s very closely tied to all that. Let’s go ahead and cut to the chase and get to the interview with Alan Cowgill.

Lender Nation, I’m excited to introduce to you, Alan Cowgill, who is one of the people who got the private lending kernel in my brain about a decade ago. It’s an honor to have him on. Alan, welcome to the show.

Thank you very much. I’m tickled to be here. This is exciting for me.

To give the readers some background, I was introduced to Alan years ago. I went to a Larry Goins boot camp and he came up and said, “How many of you guys deal with private lenders? I need to work with private lenders.” Long story short, going to the real library, finding one of your old programs on cassette tape and whatnot, CD and trying to put it all together, here we are in 2019. I’m stoked. Thank you for coming on. Amongst the many questions that I have, I want to try to narrow it down for you to just a few. I’d like you to tell our readers how you got started in this whole real estate game.

I was broke. I got a quarter century in Corporate America. As I was climbing that corporate ladder, one day, I realized I had the ladder against the wrong wall. I had to do something else with my life. I’d seen so many of my family members work a job all their life and retired poor. I thought, “I don’t want that to happen to me.” What I was going through, I was broke. Even though I had been successful in Corporate America, I was living in a little dinky two-bedroom apartment and I was struggling to pay my bills. What was happening is I had this old beat up car and I needed to put some repair work into it, but I put that on the backburner as we do.

I was busy doing other things and paying my bills and going along. All of a sudden on a first date, this car paid me back. It’s an ugly story. I pulled up in front of this apartment complex to walk her to the door after our very first date. Halfway up to the door, I heard something, I turned around and looked at my car that had burst into flames. Keith, when I tell people this, when I speak on stage, somebody on the back room goes, “Hot date.” It’s more like first and last date. Can you imagine how embarrassing this is holding her hand, watching the firemen put your car out?

Here’s this successful middle manager in Corporate America. He can’t even afford to get his car fixed. Every morning when she woke up, there was a burnt charred mark in her parking lot. What an impression did she make that apartment complex? I looked into franchises but they take money. I didn’t have the money to get a franchise. I was trying to figure out what to do outside of Corporate America. I did decide to invest. I took my whole federal tax return that year and plunk it down on lottery tickets. You’re thinking not the sharpest tool in the shed.

I was worried about paying my bills one night. I couldn’t sleep. At [2:00] in the morning, I got up and turned on the TV and started to channel surf. I hit one of these real estate infomercials. It got my attention and I thought, “Maybe I can do this.” I picked up the phone. I ordered that home study system. I didn’t have the money to hardly do it because I spent my money on lottery tickets. They take a credit card. I ordered that system. I became enthralled with real estate. That year, I bought two houses in my very first year. The next year I bought five. The following year I bought eighteen. Since that point in time, I’ve done hundreds of real estate deals. Half the deals I do are without monthly payments. We can talk about that later on if you’d like because I’ve got private lenders but that’s how I got started in this business off the TV commercial. As a side note, I’m in three nationwide infomercials that’s played over the years.

I was going to ask you, what program did you purchase?

It was Carleton Sheets. He got a lot of people started way back then.

PLP 62 | Private Lending

Private Lending: In real estate, you focus in on what you hit on to what works, and you stay there.


What were your exit strategies? Were you flipping, buying and holding?

When I started out, the first property I bought was a side-by-side double. The goal was to hold it. I started to do that for a few years, buy and hold. I’d buy duplexes and side-by-side doubles and got into some single-family homes. I decided that along the way I’d like to buy, fix and sell. I started doing that. I realized that the areas that I was buying in that people would move into the houses and many times do a rent-to-own on it. They’d tear the house up and leave. They had more of a renter mentality where I was buying. I had to move up into higher level property and that helped quite a bit. I call it the model. What model do you want in this business? I started out buy and hold, then I went in to buy and sell. It’s a learning experience. You focus in on what you hit on to what works and you stay there.

How did you get introduced into private lenders?

What happened was I’m coming up to my real estate education, I believe the foundation of business and it is exactly what you and I are doing right now, is training. I focused on getting a solid education in this business. I’d go to REIA events and I’d go to boot camps. I heard this thing about hard money lenders and private lenders. I thought they were the same thing. I thought it was interchangeable terms. It’s extremely different for one to the other one because with a hard money lender, they set the rules. They want to have money down so you’ve got some skin in the game.

Mine wanted 15% down and that’s a showstopper for some people that are getting started. A 15% down and then they would have to get paid the way a hard money lender gets paid is they charge you with what they call points, which is a percent of how much money they loan you. They take that right off the settlement statement right off when you buy. That comes right out of your side of it. They want to turn this money over and over again. They put you on a short-term commitment on this where they have balloon payments. Typically, it’s within a year so that they can get that money back and get it working again, they can get another 5%.

After a while though, I realized that private lenders were different. I realized that I got to set the rules. There are only four parts of a real estate deal at the very pinnacle, at the very top. Number one is you’ve got to find a property that’s good to buy. Number two is you’ve got to have money. Number three is you fix the property to enhance value. Number four is you’ll flip it or keep it long-term. If you can’t get by this second item, you’re dead in this business. What happens is any other place you go to look for money out there, somebody else is setting the rules like a bank and lending institutions. That’s what hard money lenders are, they set the rules. I realized with private lenders from my education of going to these events once I had this untangled, that I got to set the rules. That was so appealing to have one of the biggest of the four items out there where I could set my own financing rules. I went back to my mom. She had committed some money because my dad had passed away. She took that money. She had not been taking care of the finances in the house when we were growing up. She realized that she could plunk that money down on a bank certificate of deposit.

She would study the rates. She would drive 45 minutes, one way to get a few pennies more on a CD because she knows she’d have to live off this money. This was twenty-something years ago. Now, she’s 93 years old. She’s still got some money out there. What happened was I went back to mom. I said, “You’re getting a paltry low rate of return on a bank CD. I can pay you three, four or five times from what you’re getting on a bank CD. I’ll give you a mortgage promissory note, a hazard insurance and lender title insurance,” and mom jumped for joy. I said, “I’ll even pay you monthly.” She loved that because that’s what the CD was doing. It was giving her a monthly income of a small amount. I could give her a lot more. Mom was my very first lender. What that did was by getting that first lender, it gives you the confidence to do it again, be able to talk to other people about it. It shows you the way how the paperwork’s handled. That got me out of the chute. That’s where I started.

I won’t borrow from my parents. I have the same frustrations. We’re looking at their finances as I’m sure your mother’s CDs aren’t paying anything. The reason I like private lending so much is because I could keep my day job and yet still invest in real estate in a relatively passive insecure manner. There are some works and some due diligence upfront. I espouse a very conservative view because at the end of the day, if I tell somebody, “Don’t ever do a second position lien,” I do them. There are certain instances where I will do them but by and large, I tell people not to. I like the fact that you said you were able to set your financial terms. That’s to me the beauty of the private lenders is hard money lenders. They want those points because that’s their money. That’s where they make their profits.

Any other place you go to look for money out there, somebody else is setting the rules.
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The interest is usually going back to someone who they borrowed the money from at a lower rate, generally speaking. They want to turn that money over. Private lenders tend to want to keep the money working and not have the hassle of going around and originating alone every six months on a flip or something like that. I recommend people do that at first. You’ll get tired of the process every three to six months of loaning on a flip to learn the process. Get in there, see the nuts and bolts, see the machine, the gears and then back out. Lower your expectation on interest rate a little bit and watch how long people like yourself will use your money and keep it coming in month after month.

That’s one of the things that attracted me to you when you spoke at the Goins boot camp. Now, you’re not just buying some flips or some rentals. You’re educating. You’ve got systems out there that I know took you a long time and a lot of the attorney’s fees to create. You keep people in line. Investors say if you show them the roadmap, I understand you’re not an attorney. You’ve used many of them to create this. It’s a roadmap of how an investor can stay safe especially with the Securities and Exchange Commission at the state and federal level. Whereas private lenders, we’re not regulated like that as long as we’re using our own money, we can do what we want. Check with your local state attorneys and whatnot. It’s the Wild West if it’s your money. If I borrowed your money, Alan, and then loaned it out, now we’re getting into a whole new, different situation. You figured this out. We’re in the same boat but on opposite sides. Walk us through how you keep investors who are the flippers and the landlords, how do you keep them safe?

What happens is first off, I don’t touch their money. I have a good old form of closing. The reason that’s important is because we commit to the private lender that their money is secured by real estate, number one. You don’t want to violate what you tell the private lender. You do what you say. I don’t touch unsecured money. Early on, I would have private lenders that would be so excited about giving me money there. They’d want to hand me a check on the spot because they wanted to get that high rate of return. They were so tired of the low returns they were getting. I learned early on that you don’t touch those checks. You let them go through the closing. In Ohio, we can close with attorneys or title companies. Let’s say for an example that I’m talking to you and I asked you if you want to loan me money. You say, “I like to loan you $200,000.” The first thing I’ll do is I’ll use my up the ante technique where I’ll ask you, “If I find a deal worth 400,000, should I call you?” If you say, “Yes,” then I instantly went from $200,000 to $400,000.

In fact, I had a lady in my boot camp. I’ve got a live event. She asked somebody for money and let the other person, that lender said, “I’ll loan you $100,000,” and my student used the up the ante technique I gave you. They went to $200,000. Within twenty seconds, she had her up to $900,000. She kept asking the same question. That’s how powerful the up the ante technique. To follow on how we handle this is I would shake your hand once you say, “We can do $400,000.” I’d shake your hand and I’d say, “You made a wise decision.” Then I shift into what I call the mechanics, which means I tell you how the money is handled because being a new private lender, you don’t know. You might think, “I’ve got to cut a check now or get Alan the check tomorrow.” I want you to understand going in how this works. What happens is you don’t make the check out to me. What we’re going to do is go to a formal closing like you would if you were at the bank. In fact, you are my bank.

What will happen is I’ll have you wire the money into the closing that I tell you. I’ll call you up four to six weeks from now. We’ll close on the deal. I need you to be ready for that. “Does that work for you?” They always say yes. Let’s roll the clock forward. If I get down four weeks and I don’t have a property that I’m happy with for us, I will get ahold of you. Communication is so key with your private lenders because private lenders lend you money based on the fact that they trust you. You want to maintain that trust and keep everything out there that they understand what’s going on so they aren’t frustrated or confused. I would call you up and I’d say, “Just so you know, I don’t see anything right now in the market that is good for you and I, both together. Hang in there another four weeks and we’ll have something rolling.” They’re cool with that. What will happen is seven to ten days before closing, I’ll call you up, you send the wire in and we close. The lenders never ever go to closing.

I’m so glad that you said those three words, “Communication is key,” because the lender takes on the role of the bank, but this isn’t a bank where the tellers change every two weeks and nobody knows your name except the fees keep going up and up. The other thing I liked that you said is the handshake. One of the things I like to think, at least I espouse on this podcast, is what I call old world values. If you give someone your word, you keep it. If you shake their hand, you look them in the eye, there’s your contract. Having said that, that’s the trust part. Now, you’ve got to verify. Get that contract in writing, notarized or whatever you need to do to keep yourself safe. I’m glad that you said that.

Up to that point of where I up the ante with you now, everything before that, what I’m trying to do is attract private lenders in converting into private lenders. What will happen before that, I might invite them to a one-on-one meeting or I might have a group meeting. I’ll show my PowerPoint slides that I use. In fact, when I ratcheted up the business from when I got started after my mom, I decided to have a meeting with private lenders. I didn’t know if I was going to be alone or if I’d be up in there with 50 folks and eighteen people showed up. I had a PowerPoint slide presentation that I put together. I got up in front of them. I told them about my real estate business, my dreams and my aspirations. I showed them my PowerPoint slide. I flat out asked them to loan me money and I got to take heed. I didn’t know it was going to work but it did. I did it again the next month. I only had twelve people show up. A month or two later, I had grabbed a pen and I added it up. I had $1 million to go buy property and that’s how fast it can happen. I started out with mom and the next thing I know I’ve got $1 million.

You created these private lenders. That’s what’s so impressive about your stories that you hustled this together. You made it happen.

PLP 62 | Private Lending

Private Lending: If you give someone your word, keep it. If you shake their hand and look them in the eye, there’s your contract.


One of the other things I got thinking about before we started talking is I wanted to share with you what ramped my private lending business up. I went from a tiny stream of money to a river, to a flood. I want to talk about the flood of private money. What happened along the way is I learned that I could use IRA money. People had self-directed IRAs, I could use that money and it’s very powerful. People with IRAs are gold. What I realized was that people that have 401(k)s, qualified retirement programs, if they have quit, retired or gotten laid off, they can roll that money over into a self-directed IRA.

When I tapped into that, I got into a flood of money. It was virtually unlimited because what happened with those people is they get this money on stocks or wherever it is, in the companies that they’re with. Many times, it’s going down. They were concerned about that. A lot of times they got it in a low-end money market account. They don’t know what else to do with it. I come along and I can pay them a high rate of return and secure the money with real estate and they love it. Once I tapped into the 401(k), it turned my money into a flood. You’ve got to find people that quit, retired or gotten laid off. I would venture to guess everybody reading. There’s somebody that’s quit, retired or gotten laid off and that’s where you want to start.

That’s how I got started. I went to a classic Quest IRA. I didn’t know you can do this. I said, “Not very many people do.” The bulk of my lending is out of my IRA, from the old 401(k)s that I’ve converted. I don’t ever see myself retiring, unfortunately but hopefully so. I’ve even told my family. They are obviously on the podcast. It’s a great vehicle. If you’re a set it and forget it, you want to let someone else choose it, you don’t care and you don’t want to watch Wall Street or whatever. That’s fine. I don’t hate Wall Street. It’s self-directed. You take a little bit more initiative, a little more control, you can do some great things and get some good returns but also in the future create some interesting partnerships and ventures down the way. I love you said you had a trickle to the river, to the flood. Let’s go back to what you mentioned about setting up deals where you don’t have monthly payments. Let’s talk about in a typical buy it, fix it, sell it situation. Walk us through what you do with your private lenders.

I started out one way and over the years I’ve come down to where I pay three different ways. It works great for me. The way I do that is I’m going to buy a property and fix it up. When I borrow money from a private lender, I tell them the total amount that I need. When you get to closing, it’s busted down into four areas. One is you’ve got to have money to buy the property. The other one is you’ve got to have money for rehab. The third area is there are closing costs involved. I add a fourth area, which I always borrow a little extra because you can run into a problem with the property after you bought it. I borrowed a little extra so if I run into a problem, I don’t have to dig into my pocket or I don’t have to go out and borrow it again. I got it all done up front.

The second thing that people ought to know is you don’t suck every dime out of this. You’re going to make so much profit on this deal. When I pull money out at the front end, I take out a little bit of money. I don’t take out a lot. It sure does avoid pain going down the road. For example, if you’ve doing monthly payments on this, if you have that extra money and you don’t have a tenant in the house, let’s say, then you can carry that with the amount of money you take out up front. You save the bigger chunk of money at the end when you sell a property so that you don’t end up going upside down or have an alligator or losing money on the thing. Let’s say the bigger chunk of money goes to profit. I do something that is such a blessing to my business to where I borrow money on the front end and the backend. You see these investors, when you go out and buy a property and you’re borrowing money from a bank or hard money lender, you don’t have that chunk of money at the front. In fact, with a hard money lender, they make you start out by using your own money to start the demolition work on the property. You build it up to a certain level. You call them up because they held money back in escrow, they will send an appraiser that you pay for. If you did what they said, then they’ll start releasing rehab money. You have your own money in the property right up front.

In my world it’s the opposite. When I walk out at the closing, I’ve got a check. I can do anything I want with that check, but I keep it to make sure that if I do have a problem with the property, with the gas line or furnace or something, I’ve got the money to do that. On these deals, when I borrow money, I like to make monthly payments. That’s why I started out and that’s what I do. For example, on a monthly payment right now in this market, let’s say I’m paying 6% interest. I will pay the lender back on the 15th of the month. The logic in that is I’ve got some rentals. On the rentals, sometimes tenants pay late. If the tenants are trained to pay on the first and if I pay my private lender on the 15th, I’ve got a couple of weeks here to get the money in so that I’m not coming into my pocket to pay that private lender. I always pay on the 15th. I pay monthly simple interest only, which means that when I sell that property, I still owe that private lender all the principal that they put into the deal. That’s one way. The other way is amortize. That’s a lower interest rate than the 6%. We might be at 4% or 5% right now and 4.5%. What I do there is I borrow money from a private lender. The beauty of this and this is my favorite way, is it pays down over time.

When I go to pay the private lender back, what they loaned me is going to be amortized down. They’ll get back less money than what they gave me which is a plus for me. In some cases, let’s say you buy a low-end rental and you set it up where you’re paying them simple interest only and you’re going to pay the place off in seven years, you’ve got a free and clear house. It depends on a structured deal. That’s the second way, amortization. The last way, which gets back to what we were talking about with the IRA folks, self-directed IRAs, these people don’t need monthly payments because they just want to get their money growing. I pay a higher interest rate. Let me take it back in time on this, how this came about is when I started out with my mom, the going rate in the industry is 15%. That’s what I paid mom and started paying the lenders. Over time, the market shifted and I got feedback from my private lenders that 15% was too good to be true. I lowered my interest rate to keep them happy. What happened was I went to 10% and 12%. I did a split. I said 10% if you want monthly payments or if you let the money accrue and you get paid when I get paid, which is when I sell the house. I’ll pay 10% and I’ll pay 12% if you left the money to accrue.

What I noticed was 100% of the folks with the self-directed IRAs picked a higher percent because they don’t need monthly payments. They picked the 12%. When I did this, I didn’t think anybody would do no monthly payments because my mom wanted monthly payments. The other people I was getting money from had CDs and wanted monthly payments or I thought they did. What happened was once I tapped into this 401(k) pool of money, you can move people over into self-directed IRAs from their 401(k), those folks always would pick the higher amount. I found that to be a gold mine. That’s a double-edged sword because let’s say for an example, I borrow $100,000 from you and I’m paying you 8%. At the end of the first year, I owe you $8,000 in interest on top of what the money you gave me. On the next year, I owe you another $8,000 which is $16,000.

By the time I get to the third year, I could be upside down. If you’re going to use this technique of no monthly payment, you’ve got to know how you’re going to get out when you get in. You’ve got to make sure that the timing is there. If you can’t get out, then what you can do is bring in another private lender and amortize a loan or let it start paying back down. You don’t have to pay off the first lender and bring in another lender. In this current market, as I told you about 4.5%, if you’re going to amortize 6%, if you’re going to pay monthly payments, simple interest. On this last one, if you want to pay a higher amount of simple interest but let the money accrue, no monthly payments, I’m paying 8%. That’s the three ways that I pay.

The beauty of the private lenders is you get to set your own financial terms.
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I’m glad you said it’s a double-edged sword because one of the things I espouse is always having some type of a trigger. Let’s say there’s a six-month loan on a fix and flip. You don’t take any payments on it. As a lender, I can’t do anything for six months if something goes south on the deal, foreclosed or whatever. If the borrower is communicating with me, there isn’t going to be an issue as long as I’m comfortable with what they’re doing and everything makes sense. I’m going to go worst case, I don’t hear a word from anybody. I still have to wait those six months. That’s not to say you can’t insist on very small payments or some type of quarterly payment, not the full thing or specifically a performance-specific default triggers like let’s say if the roof isn’t on after four months or whatever.

This is where the trust comes in and the interpersonal aspect of lending is, “Yes, I’m loaning on a house. My money is going to be secured by real estate or a piece of property,” but I’m loaning on my relationship to that investor. That’s at the end of the day. The fact that you’ve identified that. You put it out front. That’s one of the things I like about your system and everything that I’ve come to know about you because there’s no hard and fast rule for lenders. As a lender, I wanted to get into this notion of you borrow extra. Let’s do some easy math here, $100,000 house, you’re going to buy it and fix it. Either sell it or put a tenant in it and refinance it or whatever. The loan to value is that I would limit it at 70% all-in. We’re coming in a little soft right now. I’m pulling back a little bit, go down into the 65% to 60% to give myself some cushion because it might take longer to sell or whatever because of the softening market. However, my personal belief is and I’m not talking about someone who’s coming up to me to the first time to borrow money.

If I have a relationship with an investor and they come to me and they say, “Keith, I’m going to pull an extra $5,000 out as a contingency. I’m worried about that waterline or maybe the sewer line is going to have to be replaced or the foundation work or whatever. As long as the LTV, everything is under my threshold, I’m fine. I don’t mind a borrower being upfront and saying, “I’m going to put a little extra cash.” If they don’t need it, great, they’ve got an extra $5,000 when it’s all said and done. As long as I’m paid as agreed, I’m happy.

First off, when I asked you to loan me money, I would give you a number. I have already built in those four different items that I talked about. One is the contingency money that you and I are talking about where I add a little extra. I don’t go to my lenders and say, “I need so much for rehab and so much of that.” What happens with you as a lender is you’re savvier on this stuff. You want to look at the numbers so you can see where the LTV is and stuff like that is what I’m gathering. In that case, you would see that. What the lender will do is they’ll build it into the rehab costs rather than saying, “I need $10,000. I need $12,000.” The extra $2,000 is the contingency money I’m talking about. You do more analysis on this thing than what my lenders do. My lenders, what they do is they agreed to loan me money. They sit back and wait for me to call them. Once I pay them back their money, then they’re in a nice way coming back, wanting to know how they can get their money going again because they want to keep it going.

That’s a nice way of calling me a troublemaker.

You’re doing it the way I would do if I was the lender. There are different strokes for different folks.

One of the things I like to see as a borrower come to me and say, “My rehab budget is $10,000 but I want to put another two or three in there to be safe.” If it meets all my lending criteria, I’m fine.

If the math works, you got it.

PLP 62 | Private Lending

Private Lending: When it comes to lending, you are not only loaning money but also building a relationship with that investor.


That’s the key. I’m glad you went back over that. Here’s the funny thing too. You’re a bit of an anomaly. You’re not the normal investor who is going to go out and look for private money. You’ve basically created this universe of, “This is what I do and this is how I work. Look at my track record, it speaks for itself.” That is so powerful. They hit their first REIA meeting. Everyone tells them, it’s hard money. You can use the bank if you can, it’s the cheapest and so on and so forth. Hard money is there for a reason. If someone hasn’t done ten deals, direct them over to the hard money lender. They’ve got ten solid loans with a hard money lender and if they’ve performed as stated, then you can start looking, “This person has developed a track record, so on and so forth.”

In your case, your track record precedes you. It’s a little unfair comparing you to the readers. Nonetheless, I like the way you operate. That’s the bottom line. I am at a little analytical. I work in an oil field insurance as an adjuster. I deal with risk. I see everything that blows up. I handle a lot of other people’s money. It’s refreshing to know, to see everything and to look. Alan, you can walk into a house and within five minutes you can know that this is not going to work. They’re asking this. I need them to come down $30,000 or they are not motivated enough. It’s not going to happen. The same thing I think for lending as well is I see people, “This is what I want to do,” which sounds like a great idea. Once I look into it, I’m like, “There are too many traps there.” There are too many things that have to go absolutely right to make this happen rather than here’s a plan that could take a few hiccups and if a few things that went wrong, it would still be successful. You told us that you like people 401(k)s and self-directed IRAs, what else do you look for in a lender, someone analytical?

My lenders are amazing folks. Every now and then you can run into a stinker out there. That is somebody that wants to tell you how to run the business. I’ll tell you what happened to me early on in my career is I had those luncheons. It was like throwing a pebble into a pond because the ripple effect that went out was I started to get calls from other people. I live in Ohio and I got calls from a guy in St Louis. It’s pretty big. I never took any money from him. I did get a call from a guy in Springfield here and the guy said, “Tell me three properties that you’re on.” I gave it to him. He went out and he looked at them. On that night in my office, on my computer, he was telling me why I should not buy them. This guy in my estimation had $1 million to loan. To me, it was very attractive to let him loan me money, but I had a gut feeling that this is not a guy I want to do business with. I didn’t. I remember him walking out of the office. I let him think he won and we never did do business.

I don’t know if he had a clue how to buy property or why he thought they were good or bad or anything. I don’t know if he ever bought a property. I knew he wasn’t someone that I wanted to be part of my team. My lenders are awesome. If you run into somebody like that or if you end up getting a lender that annoys you or in my case annoys my office staff, I’d fire them. I know this is odd on a call like this podcast and talk about firing lenders when we’re talking about attracting and converting them. It doesn’t hurt and it’s a good thing to know. Here’s how I fire somebody. If somebody loans me money and I decided I don’t want to be in business with him, I pay him back. I bring in another lender. I pay the loan off. I’ve got a new lender on that property. Every time that lender that I don’t want to do business with comes around, I’ll tell him that I’m good. I’m always good whenever he comes around that I never need money. That is rare though. If you’ve got 40 lenders that might happen to you once every three years or something like that. It’s rarely.

When I said, “I don’t want you to bug me,” when you ask me that question, what happens is my lenders loan me money and they sit back and wait for a bigger check and that’s it. I’ve got a lady, her name is Blanche, a wonderful lady. I met her in a group meeting. She had a yellow legal tablet with a bunch of writing on it. She asked me question after question after question. I thought, “This lady showed up to make my life miserable.” I definitely answered all of her questions. I remember her walking out the door and I thought, “This lady doesn’t have two nickels to rub together.” You know how we prejudge folks. She came back. She loaned me $25,000, $35,000, $45,000 and $110,000. She is up around $250,000.

I realized in retrospect that half the questions were about me, the private money lender and the other half is about being a real estate investor. I’ll be darned if she didn’t buy a rental property. It was dead flat straight across the street from one of mine. I could stand on my porch and wave at Blanche on her porch across the street. She would come into the office every now and then because she’d want to get a rental application for her tenant and things like that. We took care of her. Normally, they’ll loan you money. I’ve got a note lender in town that has subways. He likes to get together to have coffee every now and then or tea. We’ll get together every couple of months. He’s a great gentleman, a great lender, a smart guy. He’s traveling the world quite a bit now. He’s a wonderful person. He got me into oil wells. You talked about what you were doing down there. I’ve got 45 oil wells, pieces of them.

You sound like a Texan. You’re in Ohio though?

Yeah, but he got me into the oil wells. That wasn’t my idea, I bought a bunch. What I’m leaning to right here is when you’ve got private lenders, you’re dealing with people that got money. They can get you into some other cool things. They can hook you up with some other great people. It’s a good place to be. That’s another benefit of working with people’s private money because a lot of them are well-to-do.

Your network is going to affect your net worth. That is totally true. I’m going to throw you a curveball, probably not difficult but it might need a bit of an explanation. I’m curious, do you one lender per property or do you create securities? How advanced do you get in with your private borrowing?

Private lenders tend to want to keep the money working and not have the hassle of going around and originating alone every six months.
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You can do one lender one property but sometimes that lender doesn’t have enough money to cover all your costs in those four different areas I talked about earlier. They don’t have enough to cover rehab and all that. You bring in a second lender and you can have as many mortgages as you want on a property. If you’re somebody in the 73rd position, you’re not going to be too tickled. Typically, it’s one to one but it can be two. Over the years, I had three from time to time because I needed a property to secure the loan and park the money for a while. For some people, they had a low amount of money.

You just don’t know where to leverage a property, that’s exactly what you were talking about before when you were talking about the LTV and the 70% and all that. You don’t overdo it. I took a look at my property at one time and I averaged about 63% on my properties. You can have more. The nice thing about and the beauty of what we’re teaching here is you got total control. Here’s the deal. If your lender that you’re looking at doesn’t have the money to that. You go get another lender and bring them in and have one person, or you can keep that first lender and bring in a second lender. The bigger chunk of money gets the first position and the lower chunk of money gets a second position.

You put them in subsequent positions based on when they come into it. In the lien position, that’s what I was curious about.

I’m wondering you said something about do I create a security?

A mortgage is a security however, generally state laws, as long as it’s my money, there’s no security law there. In a sense like, do you do syndications? We’re speaking primarily on single-family residences right now. I was wondering if you do any multifamily or commercial industrial to where you’re maybe sponsoring a deal. You’re bringing in a lot of other people, more than one or two investors. Do your houses get a little fancy? I assume Ohio is more expensive than Texas as far as the cost of living.

When I buy a property here that’s got a toilet in it, that’s a luxury home for me sometimes. Let’s talk a little bit about this. About 35% of my student-base is commercial folks. When you talk about a security, the promissory note creates the security. There’s some big document that if you look at there with the SEC, they’ll say, “Here’s what creates a security.” It means that the Securities and Exchange Commission has the right to set rules on stuff like that. They have the right to set the rules on the promissory note. The thing of it is so many people are concerned about that because they don’t understand what the SEC is or if it’s Wild West and they don’t come into play or do they come into play?

The rules are very simple. The problem of it is most real estate investors don’t know what the rules are. In fact, I believe it’s about 95% of real estate investors don’t know what the rules are with the SEC. I hired an SEC attorney. As you said in the outset, I’m not an attorney. I hired an attorney. We search every state in the United States and Canada. When he got done, he called me up and he said, “I want to thank you.” I said, “Why is that?” He said, “I’m moving into my new house and we bought it.” That’s how much money I spent with the guy. Having that knowledge is tremendous. You see it’s like a sporting event.

I was a high school offensive and defensive guard. When I went out for football, the coach would teach me how to block, tackle and how to play the stance, to get in the stance. What he also did was hand me a rule book. With that rule book that said, “If you’re carrying the ball and you go ten yards, you had first down. If you’re carrying the ball and you go across the goal line, you get a touchdown.” What we do as real estate investors is exactly the same as a sporting event. When you’re dealing with private lenders, you’ve got to have the knowledge on the blocking and tackling, which is how to buy right property and how to rehab the property and how to sell the property. You also need that rule book. That rule book is on the SEC. There are seven programs underneath the umbrella of the SEC that we can use.

PLP 62 | Private Lending

Private Lending: In real estate, it is so important to be safe; so just follow the rules.


Some of those are federal and some of those are state-specific. What has happened to me and has been a tremendous blessing is because I hired that attorney when I speak all over the nation is I can teach exactly what folks are allowed to do in that state. There are five areas that are controlled in every single state that the SEC has boiled this down to where it’s simple. Number one is you can’t jump off this call in this podcast and start advertising to get private lenders unless you filled out some paperwork. Most of it is extremely cheap and simple to do. Then you can go advertise and you’re allowed to advertise. You have to fill out the paperwork first. That’s rules to SEC since they control this. The other one is pooling. That means what you were talking where you put two or more lenders, where I was talking about stacking up mortgages, but you put them onto the same promissory note. In that case, then that would be pooling money. That’s like advertising. You have to fill out some paperwork before you do that.

The other one is commissions. You’re not allowed to pay commissions. The reason for that was there was this dude called Charles Ponzi. Back in the 1920s, he came over from Italy. He realized that stamps over there were low. They call them coupons that were cheap. Over here, they went for a higher price. He wanted to set up this investment thing where he would buy the stamps in Italy and sell them over here. He started to find private lenders to do that. In February 1920, he had $56,000. By the time he got to July, he had millions. The only problem is he forgot to buy the stamps.

What he did though was anybody that loaned him money, he told them if they would find another lender, he would give them a commission. That was back in the ‘20s. The SEC was created in 1933. They look back on what Charles did and said, “No, you can’t do this. We don’t allow commissions.” There are only three states out there that allow what’s called finders. Your state is one of them. They allow finders. You can’t pay the people commission. You pay them a flat fee, but you can hire people to private lenders for you. The other two items of these five that I’m giving you, which is allowed every single state is thresholds. One is the number of lenders that you can have in a year. In my state, it’s ten. At sixteen months here, we are the only one that goes out. In your state, I believe you said 35.

Basically, private lending under 35 is safe in Texas.

That is the number of lenders that they allow you to have within a year. You can go unlimited but you have to fill out a piece of paper to go unlimited. The last one would be the dollar amount, how much you can raise. Typically, it’s $1 million but you can go unlimited too. You need to know how to do that and you fill out some paperwork and you can do that. In fact, I teach people how to raise $5 million and only have to pay $700 in the last two-page form, which was something my attorney uncovered, which is powerful. The point is on these SEC pieces, people should not shy away from that at all. You just need to learn about it and like anything else, get in the real estate business. You’ve learned about how to rehab, you learned about the rules. You follow the rules and it’s so important to be safe.

Even though private lenders aren’t necessarily regulated or governed, the people who are borrowing the money, they need to know what they’re bound to. At the end of the day, I laughed when you said, “The SEC has made it easy because they’re a government entity.” They have. It’s paperwork and to stay compliant, letting them know, “Here’s my situation. This is what I’m going to do. Here’s my fee. Here’s my paperwork.” They look at it. They bless it. You’re fine. Now you can go raise money. I’m not going to get into the whole accredited, non-accredited and sophisticated investor. Let them know what you’re doing. Keep everything above board. To me, it’s akin to you not taking a direct check from a lender. Let’s put this in escrow at the title company. Let’s do everything above board. It’s the same thing. You not only invest, but you teach the single-family how to get private lenders multifamily. I’m wondering with all the success you’ve had and looking back on your career, is there anything you would’ve done different or is there something that you saw coming, but you didn’t jump on or any regrets?

What I’d done is I would have learned the SEC stuff quicker because I was out buying property and borrowing money from banks and stuff like that. Along the way, I found out about private lenders but I didn’t know the rules. In fact, I was down in Florida at someone’s boot camp. There was a guy there that had private lenders. We were talking out in the hallway and I said, “What are the rules?” He says, “There aren’t any. You could do whatever you want.” He was totally wrong. There are some rules. I hired an SEC attorney to make sure that I knew the rules for myself and then also for training. I wanted to make sure that I knew because when I first hired that attorney, I thought the guy down in Florida was right, that there weren’t any rules, but I wanted to be sure. He was dead wrong. There are some rules but the rules are easy to follow. You just need to know what they are. That is probably the thing I would have done. I would speed that up and done it quicker in my career.

I want to give you an opportunity to give us some links, give us some contact information, how can people learn more about you, about your programs, your education. I highly recommend readers to check out Alan’s offerings because they are thorough, to say the least. If you look at his website, you’ll see very quickly that you’ve done the due diligence and the groundwork. How can we get in touch with you and learn more?

I’ve got some free stuff here. How about if we give some information on that? I used my name,, you get a free eBook on private money, 21 things about private money. What I need to tell you is once you get your free eBook, I’ve got a hugely discounted offer behind that. Once you get your free book, then you’ll get another page. If you want to take advantage of it, I’ve got a private lending home study system that’s $697 on my website as a hard copy. I put it on this page as digital for $197 and you get it instantly. Anybody reading right now, you want to get started on the easiest way to get private money, to give you a little background on this system.

Your network is going to affect your net worth.
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This is how I got started with the techniques that are in this system. At my live event, I teach these techniques the first day. We raise multimillions of dollars within 24 hours of my live events. There’s no place else on planet Earth that it happens. We’ve raised over $500,000 billion of private money in the first 24 hours using the techniques that you’ll find in that home study system. I’ve got a couple of other free books for you, and you get six reasons why you need private lenders. It’s a great little eBook that I created for you. The third item, Keith and I talked about in the SEC. How about if I give you something on the SEC? You can go to It’s what they do and how to stay off the radar with the SEC. That’s three eBooks. You’ll love them.

Thank you for providing those. I don’t hate Wall Street, but I love not needing them for investments. I like not needing banks. It’s very libertarian and individualistic. Stay compliant, play by the rules and there’s no reason you can’t build wealth the old way that we’ve been doing it for thousands of years with handshakes. Alan, thank you so much for coming on. I will definitely reach back out to you. I’d like to have you on again. We’re in the same boat just on the opposite end. I definitely want to stay in touch with you and bring you back and see how things are going in the future.

This has been a real pleasure. I want to thank you very much for asking me. I enjoy this. I hope it’s good for your folks.

Thank you so much.

I’d like to give a big thank you to Alan Cowgill for sharing his time and his thoughts with us. I’d like to also thank Alan for unknowingly setting me on the path in life and investing that has ultimately led me to his interview on my podcast. It’s hard to explain. This podcast is completely free of charge. All I ask in return is that you please spread the word and help others find the show so they can read and learn as well. You can do this by leaving a rating and review primarily at iTunes or Google. If you could go to iTunes, leave a review, I would greatly appreciate it. It will make my day. I’ll ask us for an honest review. We’d love five stars, but please give me an honest review. You can also connect with me on social media, Facebook, Instagram, Twitter, LinkedIn and BiggerPockets. I want to thank you for your time and consideration. Besides health and happiness, I wish you all safe and prosperous private lending.

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About Alan Cowgill

PLP 62 | Private Lending

E. Alan Cowgill is the owner of Colby Properties, LLC. and President of Integrity Home Buyers, Inc. Alan invests in single family and small multi-family properties in Springfield, Ohio.

Since 1995, Alan has done hundreds of real estate transactions. Alan uses Private Lenders, to fund his real estate purchases. Alan looks for “Win – Win” situations, where the seller, the lender, and the eventual homeowner can all “Win”. He is not a Realtor, but a Private Investor.

Alan has served as an elected official to the Board of Directors for the Clark County Property Management Association. He is an author, consultant, and national speaker. He has been asked to speak on the topics of “Investing for the Beginning Investor.” and “Finding Private Lenders.” His home study system, “Private Lending Made Easy”, shows new and seasoned real estate investors how to find private lenders for their own real estate business.

In addition, Alan:

  • Holds a BS Degree in Business Management.
  • Appeared in 3 real estate infomercials that were shown nationwide.
  • Featured in the Business Section of the Springfield News-Sun newspaper in an article on real estate investing.
  • Published Author: Walking With The Wise Real Estate Investor – the book also includes other popular contributions.
  • Adjunct Professor for 5 years at Clark State University.
  • Is a published author not only for Real Estate but also in American Industry.
  • Has over a quarter century experience in Business Management.
  • Acknowledged in the book “e-Mail Basics” ISBN #0-9676313-1-9.
  • Business trainer and consultant.
  • Speaking Engagements include Yovel, England; Dallas, Texas; Fort Collins, Colorado; Atlanta, Ga.; Jacksonville, Florida; Cashiers, NC.; Las Vegas, Nevada, Springfield, Ohio and many more.

And best of all, Alan is married and the father of (3) children.


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About the author, Keith Baker

My ultimate goal is to create an economy for Real Estate (and other) Investors where banks are no longer needed. An economy where every day people look to each other for leverage and support. During the day I am an insurance adjuster for the oil field, where I handle millions of dollars of other people's money (OPM), and by night I invest in Real Estate and host this podcast. I hope you have an excellent experience and find real value within this website and the Private Lender Podcast. Please leave comments or submit your questions on the Contact Page.

I wish you prosperous, safe and happy lending and investing!

Thanks for listening


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