5 Key Strategies for Successful Hard Money Lending with Bill Kenny

Mike Hambright (00:01.25)
Hey everybody, welcome back to the show. Today I’m meeting with an old friend, Bill Kenney. We were talking about how getting old ain’t fun right before this. we’re not going to talk about that today. We’re going to talk about how to be the bank. Bill and his partner Mike have transitioned largely, still do real estate deals as well, but have tried to be more passive. And part of that journey is becoming a hard money lender and doing less investing themselves and really kind of being more of a partner to investors by lending to them.

Bill Kenny (00:08.748)
I’m out.

Mike Hambright (00:30.562)
Bill, great to see you, but it’s been a while. Yeah, yeah, yeah. So yeah, absolutely. Glad to have you here. maybe you could share your story because you guys, like everybody, you didn’t come out of the womb flipping houses. You kind of found your way into that business. And I think also like everybody, you’re like, always have your eye on how do we do things that are more passive, right? But maybe just talk about kind of how you got into real estate investing in the first place, then we’ll take it from there.

Bill Kenny (00:31.654)
Yeah, good to see you, Mike. It’s been too long. Appreciate the opportunity to come on here and talk. Yeah.

Bill Kenny (00:47.75)
Yeah.

Bill Kenny (00:53.959)
Yeah.

Yeah.

Yeah, that’s important because everybody finds their way into real estate investing some way or another. And most people that I’ve talked to find their way through a book that we know about, Rich Dad Poor Dad. So I’d worked for FedEx and management for many years and then I transitioned out of that. I mean, that was just a major trade in time and really cramped my lifestyle. And then I worked for a government contractor for a number of years, but during

that I started to try to self-discover and see really what I wanted to do with my, know, what am I going to do when I grow up? And I read that book and that really kind of changed my whole mindset around, you know, wealth and assets and, you know, saving money and investing. And so I went out and bought a rental property and then I…

bought it and then I didn’t know what I was doing for four years. I joined a meetup group and that’s when things really changed for me. I met my business partner, I met plenty of associates, I learned how to buy properties, I learned how to wholesale. And I’d say that was about 2014, 2015. Started wholesaling, met my business partner, we joined up. Started to become successful wholesalers and then we started buying rentals individually.

Bill Kenny (02:17.426)
And then we said, well, why don’t we join forces here? We’re doing pretty good at wholesaling. Why don’t we join up? And that was around 2018. We joined up, we started buying properties in a joint portfolio, still wholesale, still flipping. And that’s when we joined your mastermind because we really wanted to learn the ropes of real estate investing and build out our, you know.

network, so to speak, of solid investors and mentors and things like that. And we also started our own local meetup at that point. And so that’s kind of where the story begins.

Mike Hambright (02:52.162)
Yeah, that’s awesome. Yeah. And I think as you start to start to get kind of older and wiser, you go through market downturns or the COVID period or whatever it it this is how evolution works. Right. It’s like, what, you know, you get better at what you’re doing and you either become more tolerant or less tolerant of what you have to do. And you start to decide not only what do I want to do, but it’s like, what am I not willing to do anymore?

Bill Kenny (03:05.861)
Yeah.

Bill Kenny (03:14.32)
Yeah.

Yeah, yeah, that’s the thing. You don’t know what you’re getting into, honestly. You start doing all these things like you said earlier, shiny object syndrome, like, hey, we can actually flip now. We’ve got all these opportunities, but flipping is difficult to say the least.

and we’ll take a chunk of skin off of you every time and really leave some scars. But we did that, we wholesale, which is, it’s like being an agent on the investor side, right? You’re just matching buyers and sellers, putting properties under contract. Flipping, rehabbing rentals, landlord, property management, and then running the meetup. So we were doing that pretty heavily until about two years ago.

ago and we really learned all those skills and got better because of the mastermind that you ran, Investor Fuel. So that was really key to our success. But we got to the point where we’re like, man, we’re just running around here, just working our guts out and…

really not passive at all. It’s the opposite of passive. And so we started to look for some new ventures and that’s when we threw a lot of conversations and different conversations and meeting different people, investors. We decided that we want to take two different routes and that was to buy storage businesses in the Mid-Atlantic and to do hard money loans.

Bill Kenny (04:53.254)
My business partner, Mike, he runs the whole storage operation. So we ended up buying five storage facilities. We sold two off just because they were too small. didn’t kind of meet our long-term.

standards and we now own three with, you know, we’ll buy another one this year. And then the hard money was basically just, it made a lot of sense to transition into that. We had already had a large meetup group in our local area. We’d already had a lot of raised a lot of private money to do the deals that we had done. So we basically took those two things and pointed them towards hard money. That was always a big question in our, in our meetup group and in our Facebook group was, you know, I need money. So we wanted to kind of solve that for our.

local area.

Mike Hambright (05:38.338)
Yeah, no, that’s great. We told you that we thought about starting a hard money lending business. We’ve got a bunch of people that are in our mastermind that have.

At least started lending on the side if not making it kind of moving down the path of making it their main business, right? And it’s you know, I don’t think there’s a better business to have run ahead of time which is wholesaling or fix and flipping yourself before becoming a lender because you kind of know where all the booby traps are, know, everything you need to know and what could what could go wrong, right and

Bill Kenny (05:51.697)
Yeah.

Bill Kenny (06:03.612)
Yep.

Bill Kenny (06:07.792)
Yeah. Yeah.

Mike Hambright (06:09.57)
You know, for a long time, I think when I first started my real estate investing business back in 2008, like I kind of probably not different from a lot of people you look at a lender is like an expense or a necessary evil. But the reality is, is like, if you understand that if you’re working with somebody smart that knows what they’re doing, like that person’s a partner, they’re going to try to help keep you safe, because they want their money to be safe, too. So they’re going to try to keep you safe, right?

Bill Kenny (06:32.668)
Yeah.

Yeah, yeah, that’s kind our value proposition to the people that we work with. And we do work with a lot of people that are new or done under five flips or so. you know, we come with that experience of flipping hundreds of homes, wholesaling homes, running the comps on hundreds and hundreds of deals, even as realtor and things that we’ve bought, knowing how to work with contractors, estimating rehab, all that kind of stuff that is difficult.

called in the beginning. That stuff is very difficult in the beginning. we can kind of tell them, hey, let us look at your deal and we’ll tell you where we would be. And, if we have a problem with the comps, we’ll tell you right now because, you you don’t want to get screwed in the end of this deal. Or if your rehab budget’s off, like think about this, this is some things that we’ve ran into. We’ve had this problem happen a lot. We’re in an area where there’s a lot of septics and that can really, really add a ton of money to the bottom line of the rehab.

if you miss that or you’re just dying to get that deal done because you’re racing to beat somebody else to sign up that wholesale deal. We learned that a long time ago that we just don’t do it. Like a septic inspection is always part of that. So there’s just a lot of little things like that that we can help our guys out with, the guys and gals that we lend to.

Mike Hambright (07:55.384)
Yeah. And as a local lender too, mean, the benefits you have, the benefits that people have of working with you is, know, you know, the contractors to use and to not use, and you know, the title companies to use and not use, and you can kind of train people on the people that you’re helping. You’re like, I want this to be smooth for you because I want it be smooth for me. And, you know, this is who to use and who not to use, right?

Bill Kenny (08:07.995)
Yeah.

Thanks

Bill Kenny (08:19.728)
Yeah, yeah, we know where all the dead bodies are buried in the local market, just like you do in yours. Yeah.

Mike Hambright (08:23.054)
Yeah. Yeah. So I think one the other benefits, obviously, we have a relationship at Investor Fuel with a couple of large national hard money lenders or private money. don’t like to be called hard money lenders anymore.

Bill Kenny (08:40.24)
Yeah, I know.

Mike Hambright (08:41.058)
The reality is, they have the, you know, those guys have a place. They have some of the best rates, but they’re not local. And so it takes, it takes a while to kind of get things closed. It takes time sometimes. And when you’re working with a local hard money lender, like you, I’m assuming you guys can move pretty fast, right?

Bill Kenny (08:59.344)
Yeah, yeah, we can we can move very, quickly, depending on the funds that we have available. But usually, that’s not an issue. If you’ve been raising money for 10 years, you know that you can just get on the phone and

find it. Like, you know, everybody said in the beginning, like, it’s really easy to find the money, the deal is the hard thing to find. And we didn’t believe that in the beginning. But now that is actually the truth. There’s more money than we know what to do with, you know. But finding the deal or finding the right borrower, those are the two most difficult things to do in this business.

You know, as you know how the market’s gone, the inventory’s low and the prices are so high and wholesalers want to squeeze every dollar they can out of that thing. somebody new going in needs to get it at the right price or it’s just not going to make sense. You you’re not going to, you’re going to be leaving a lot of money in the deal or you know, it’s just, your profit’s not going to be there if you flip it.

Mike Hambright (09:59.958)
Yeah, yeah. What are some of the pros and cons of would you share with people that are listening to this on different types of lending that’s available? Like obviously there’s the large national lender, there’s local banks, there’s a local private, there’s absolute private money where you’re, you know, you’re going to somebody that doesn’t have business cards. They just family or friend type money. mean, maybe you can kind of share your thoughts on the different ways to lend, to borrow, I guess.

Bill Kenny (10:15.472)
Yeah. Yeah.

Bill Kenny (10:23.174)
Yeah.

There is a broad spectrum of money out there and obviously the best money that you can get is what we would call private money, right? It’s relationship money, it’s people that are in your sphere of influence, or it’s people that they know. And that’s pretty much where we’ve raised all our money. The money that we’ve ever done has been a conversation and a handshake with somebody we know, or we’ve been referred to somebody that they know.

And that’s really where you’re going to get the best terms, the best rates, the easiest access to funds. The second level up is somebody that has mastered that skill and now they may be called a hard money lender, right? They’ve got access to those funds and maybe you’re new to the game and you don’t know, you don’t have that skill of…

big network or understanding how to raise money. So you’re going to go to somebody that’s like us, that has that skill, that has capital available, and you can just focus on getting deals and, you know, work in your network to find deals and do deals and be an operator. And then you’ve got bank money. know, bank money is probably a little bit cheaper, but harder to get. And it just goes right on down the spectrum. There’s regional hard money guys like us, and then there’s big national hard money guys.

that are probably going to send appraisers out and not going to know the areas. Maybe a little bit cheaper, may have some more fees, know, it’s apples and oranges all over the place with hard money lenders.

Mike Hambright (11:59.552)
Yeah, and I assume like, you know, what are some of the challenges as a lender? Like, you know, where the bones are buried. We talked about this, you know, you know what the pitfalls, you know, hey, this has a water tower behind it or a power power like line going through here that’s going to cause problems on the back end. Like, you know, obviously, you’re looking out for those things. But

Bill Kenny (12:06.855)
Yeah.

Bill Kenny (12:11.77)
Yeah.

Mike Hambright (12:21.656)
During the process of a rehab, there’s a of things that can go wrong as well. So as a lender, maybe kind of talk from people that have thought about getting into lending, like what are some of the things that they have to look out for, which could be, know, like the timelines are taking a lot longer than they should. It could be they’re asking for repair draws, but you know the work’s not done yet. Like just things that could kind of go wrong. Like how do you look out for those things? I guess what are some of the common things that you see or have seen?

Bill Kenny (12:42.662)
Yeah.

Bill Kenny (12:50.226)
Yeah, we’ve probably dealt, I mean, we’re in our third year of this and we’ve dealt with all the problems already. It’s nothing new. Like we dealt with them all. Yeah, yeah. But I think the difference is, and I’ll answer the question, like what are the issues? A lot of times the issues are that they didn’t vet the contractor correctly. They didn’t get the right ARV.

Mike Hambright (12:58.99)
At least it feels like it, right?

Bill Kenny (13:20.284)
They didn’t understand the neighborhoods well enough. They didn’t manage the process very well. They just kind of said, go, here’s, you know, go to it. And then we kind of see it getting off track and we want to, we can step in, but a lot of that can be mitigated on the front end. Like if you have a national hard money lender, they’re going to probably send an appraiser out and if it matches, they’re going to do it. And then they’re just going to wait for you to send them the pictures or whatever. And then.

if it’s not ready, they’re not gonna send you the money and that can kind of hem you up. With us, we’re gonna probably try to get involved in the beginning and make sure that you’ve got the right ARV, make sure you understand the market, make sure that the rehab is kind of lined up, and then also vetting the contract a little bit. Hey, we’ve done rehabs with this guy and this is probably what you’re gonna run into, or you may wanna consider somebody else, or no, this guy’s rock solid. We sign off on this guy.

So yeah, that’s kind of what you’re going to run into. you know, it’s, it’s a lot of lenders will say, all right, well, I’m more worried about the property because if they default and I’m in it, you know, 65 % ARV or 50%, I’ll just take it back. We don’t want to do that. We, we want to make sure that like, like you said, a partner, we want to make sure that they come through the end and they, you they meet their goals. So we really want to make sure it’s like that.

We’re looking at making sure that the borrower understands where he’s at going in and the property makes sense. And we haven’t had to take anything back. Have we had to step in and offer a little bit of help? Yes. A lot of bit of help? Yes, we’ve had to do that. But 95 % of the time, it goes pretty well. It goes pretty well. You’re always gonna have some issues.

Mike Hambright (15:09.644)
Yeah. And we talked about kind of being more passive. I know that’s why you guys have honed in on this is it’s not completely passive. It’s still a transactional business, right? But what are some things that you guys do to communicate during the process? Because I think a lot of lenders are like,

Bill Kenny (15:19.26)
Yeah.

Mike Hambright (15:27.182)
they’re not gonna reach out to you unless there’s a known problem or a payment issue, right? But is there anything that you guys are doing differently in that vein of kind of being a partner to just like check in or is there anything you do communication wise to kind of make sure that if there’s an issue that’s popping up that you know about it before it becomes a real issue?

Bill Kenny (15:32.135)
Yeah.

Bill Kenny (15:38.662)
Yeah, I mean, yeah.

Bill Kenny (15:45.574)
Yeah, yeah, they’re.

We’re going out to the properties and we’re visiting to make sure that the work is done and they’re on track. And they also have access to us as really true partners. They can text me, they can text Mike, and they can get us on the phone. We’ve had to come in. As you know, there will be things that neither we can’t see at the onset that they can’t see either. Just things come up.

had to give additional money, like do kind of like a little bit of a refinance. And I don’t know if other lenders will do that. But you know, we’re really kind of there to make sure that they’re successful. And and being on site and looking at the property and, you know, taking their questions, you know, providing more funds if necessary, we’re we’re available to do that kind of stuff.

Mike Hambright (16:43.522)
Yeah, it’s great when you can make a decision. It doesn’t have to go to a committee or back through underwriting or something like that, right? And so.

Bill Kenny (16:47.642)
No, it’s like, yeah, it’s like, you want to do this? Yeah, let’s do it. All right, Yeah.

Mike Hambright (16:54.786)
Yeah. you know, upfront we talked about you were looking for something more passive and a lot of people think rentals are passive. mean, you know, we know that they’re not as passive as what anybody thinks. I have a single family portfolio and we have a property manager that manages them. It does most of the work, but they’re still not passive. And we still have.

Bill Kenny (16:59.932)
Yeah.

Bill Kenny (17:04.284)
Mm-hmm.

Mike Hambright (17:12.718)
You know, it’s like, well, you know, anything that’s like over $2,500 make ready is like they come to me just because those are the parameters we’ve said. And, know, it’s not uncommon for us to have a 20, 30, $40,000 make ready or a house that burns down or whatever. There’s stuff that happens and it’s like they’re throwing it over the fence to me. So definitely not passive. Right. But for hard money, like how passive is it compared to what you thought it was getting into it?

Bill Kenny (17:22.064)
Yeah.

Bill Kenny (17:27.068)
Yes, I know. Very discouraging. Yeah.

Bill Kenny (17:42.989)
Very, very passive. I’ll just say that. I would say most of the work is…

And you can mitigate this with good systems and good people, but there’s a lot of accounting work in hard money. There’s a ton of accounting work. You’ve got draws, you’ve got capital investors, you’ve got loans, know, payoffs, you’ve got all this kind of stuff. You’ve got to pay your capital investors every month. You’ve got to collect payments from your borrowers every month. There’s a ton of accounting there. that can kind of, you know, usually around the first of the month, that can kind of be a lot, but you can put systems in place and people in place to do that, to take care

that. The other part of it is just like any real estate business, you have a lead generation part of your business which can be a lot, know, that can be a lot, you know, if you’re if you’re paying for PPC or you know like we do, we’re spending time in our meetup and we’re

working our database and things like that. I don’t think you ever get away from that in any kind of transactional business. But as far as the deals go that we have on our plate, it’s pretty passive. It’s a great business. Yeah.

Mike Hambright (18:51.949)
Right.

Mike Hambright (19:02.734)
What are some pitfalls that people are looking to start a lending business? What are some things that they should consider? Maybe some lessons learned that you guys faced that if they were to buy you a beer, you’d tell them, but I’ll owe you a beer for sharing it here, Bill.

Bill Kenny (19:12.391)
Yeah.

Bill Kenny (19:17.724)
Yeah, I would just say set it up right from the start. That’s one thing that I kind of eased into it with, you know, like.

Bill Kenny (19:30.758)
spreadsheets and stuff like that. You don’t want to do that. Like get some kind of robust software. Hire a good attorney. You’ve got to have great docs. You’ve got to have, you know, you got to have a first position deed of trust on every property. Don’t, don’t do seconds. Like there may be some lenders that would do seconds, but we won’t do seconds. You know, personal guarantees and.

Bill Kenny (19:55.676)
all the paperwork that goes along with it to make sure that your money is very secure and that they’ve got to go through with it and make sure you get paid off at the end. But yeah, a good attorney and good systems are probably something that everybody needs to consider at the onset.

Mike Hambright (20:16.302)
Yeah.

And I think, you one of the things you talked about a minute ago is you’re running pay-per-click ads, you’ve got a meetup group. I think that that’s what a lot of, you know, if you’ve been a real estate investor, if you’ve been a single family real estate investor for sure, you understand the importance of lead gen, finding opportunities. If you’re more of a financial person and you don’t really have a lot of experience in this industry, you might forget that, I’ve got money, but you got to find those people that want to borrow, right? So like, I know you guys already had your meetup group prior to,

Bill Kenny (20:31.09)
Mm-hmm.

Bill Kenny (20:41.424)
Yeah. Yeah.

Mike Hambright (20:47.156)
Become a lender because you were finding ways to JV and do deals together and you guys like to educate and teach people and I don’t remember you guys We’ve talked before about doing some coaching so if you ever really did did a whole lot of that But it basically became a vehicle for you to find people that need money because they’re doing deals,

Bill Kenny (20:51.688)
huh.

Bill Kenny (21:02.0)
We dipped our toe into that, but yeah.

Bill Kenny (21:08.784)
Yeah, yeah, our network, the meetup was exactly what you said. It was to make great relationships in the local networks, get to know all the different players, bring people together, do more deals. And it’s always been that. But then it can kind of snowball into a bigger network where you can have opportunity to come your way. And that’s what this has been for us.

like a mastermind or a meetup or something like that, you’ve got to give to get. You know, it’s not like a one-way street. So the more you give, the more you get. And that’s been very valuable to us.

Mike Hambright (21:50.978)
Yeah. And if you do the right thing, like repeat business from those you lend to, right? I you want them to be successful because then they’re going to use you again, right? And of course then word of mouth sets in as well.

Bill Kenny (21:57.319)
Yeah.

Bill Kenny (22:02.652)
Yeah.

Yeah, that’s a good point. That was one of the things that when Mike and I got together, we were like, all right, we’re, we’re kind of the same cloth. We’re going to do this, you know, with integrity and honesty. And if we say we’re going to do it, we’re going to do it. And that’s just the way we’ve run our whole business. And basically we started with, you know, we have an LLC and an operating agreement. We don’t even know what it says. Like we started with a handshake and it was based on those kinds of tenants of getting started that we’ve.

we build our business and done it that way. And those same things that I just talked about are how we, you know, do our business with other investors or borrowers or anybody. Yeah. Yeah.

Mike Hambright (22:49.538)
Yeah, yeah, your word of mouth goes a long way. And I think, you know, once people use you and they realize that you’re on their side and, you know, have an experience of working with you, then…

I mean, the easiest customer to get is a repeat customer. mean, you’ve already, you’ve already like have the whatever expense you had to acquire that customer. I that’s one of the things that makes single family investing kind of hard is lead generation is really important, but you’re generally not going to have any repeat business. mean, I’ve had a couple, but it’s rare that you have repeat business from anybody that you, a home seller generally for sure. Right.

Bill Kenny (23:06.086)
Yeah. Yeah.

Mm-hmm.

Bill Kenny (23:14.514)
Totally agree. Yep.

Bill Kenny (23:20.817)
Yeah.

Bill Kenny (23:25.212)
Yeah, yeah, that’s why, you know, doing the job right and offering help and making sure they’re successful is just gonna come back to you, especially in the hard money business, because they do one right, they’re gonna wanna do another one right, and maybe three, four, five, six, seven, eight, nine, 10, you know, that single family seller’s probably not gonna sell more than one house.

Mike Hambright (23:49.356)
Yeah, it’s happened, but it’s rare. Like, it’s usually not more than two. They’re like, well, you bought our mom’s house and a couple years later, yay, our dad just passed away. We wanted to, you know, like I’ve had that happen a few times, but it’s not, there’s no flow of business, you know, not from an actual seller, maybe from somebody else in the industry that could, a title company or somebody else that could bring business your way. But yeah.

Bill Kenny (23:51.642)
Yeah, it is rare. you know, they’re angered or whatever.

Bill Kenny (23:58.8)
Yeah, you gotta do some heavy volume to see.

Bill Kenny (24:03.579)
Mm-hmm. Mm-hmm.

Bill Kenny (24:11.28)
Yeah, yeah, the margins, yeah, and that’s a tougher business. The margins are much higher. But that’s, you know, the work that it takes is much larger. Yeah.

Mike Hambright (24:23.97)
Yeah. So Bill, if folks wanted to learn more about you guys, your lending company, your meetup group or anything, drop some links here. Tell us where they should go.

Bill Kenny (24:34.982)
Yeah, our meetup group is called the I-81 Real Estate Investors. We have a Facebook group that they can join, especially if they’re in our general area. It’s a pretty hard, yeah, the area, so we’re in Western Maryland, Eastern West Virginia, Southern Pennsylvania, Northern Virginia. It’s kind of all that outer DC, Baltimore.

Mike Hambright (24:46.638)
Tell us the area by the way, I don’t know if we ever mentioned it.

Mike Hambright (24:59.086)
Center of the universe.

Bill Kenny (25:01.166)
Yeah, yeah, it’s like all these different states that are all tangled together right there. But yeah, that’s kind of, it’s kind of like the mid-Atlantic region. Yeah, we’re about 45 minutes to an hour west of Baltimore and both DC.

And we do kind of slide into those areas at times. So that’s kind of the general area we do. Yeah, our meetup group is called IED1 Real Estate Investors. Our hard money lending business is called Jump Capital. So you can find us at jumpcapital.loans. And our storage business is called Sandpiper Storage. And we’re going to buy.

And yeah, you can find me on Facebook. It’s Bill Kenny, K-Yen and Y, or I’m on Instagram also as BillKennyRei.

Mike Hambright (25:47.426)
Awesome. Well, thanks for joining us today, Bill.

Bill Kenny (25:50.032)
I appreciate it, Mike. It was great to see you again and I appreciate all the help you’ve given our business over the years.

Mike Hambright (25:52.482)
Yep, good to see you always, buddy.

Mike Hambright (25:56.982)
I appreciate you guys. So everybody, hope you have a great day and we’ll see you on the next show.

Bill Kenny (26:02.61)
See ya.