PLP-117 New Year Obligations and House Keeping for Private Lenders


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Hello Private Lender Nation and welcome to episode 117 of the Private Lender Podcast and the first episode of the year 2021. I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today, and I hope my voice finds you doing more than well.

If you’re looking for practical tips and advice on Private Lending and how to keep your money safe then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!

This will be the first episode of 2021, and probably one of the least controversial. But before I say something to get me canceled, I would like to take a minute for some housekeeping:

Private Lender Podcast Facebook Group

If you like the idea of private lending but find yourself a little hesitant to begin then click HERE to get your feet wet with the help of a professional Hard Money and Mortgage lender.

My friend Paul Lamnatos is ready to answer any questions you may have and help you get started on your Private Lending journey. Click the link on the webpage and provide your email address and Paul will reach out to confirm a time when you can speak to him about Ink’s lending criteria, their loan process, and how you can begin profiting from loans on properties located in the greater Houston area – in a very lender-friendly state!

2020 is now over, and we Private Lenders have some of our own housekeeping to perform.

The 1098

Even though the private loans I speak about are business loans, they are still considered a mortgage. Thus the lender is required to file IRS form 1098 and provide it to the borrower, indicating the amount of interest paid on the note over the course of the previous year.

· $600 or more of interest collected (including points charged).

· Remember, points count towards the Usury limit in your state. 18% in TX

· Must file and provide to the borrower no later than 31 January 2021

If you have your private loan serviced, which I strongly recommend you do, the note servicer/escrow company with do this for you and mail and/or electronically deliver the forms to you borrower.

I personally have one legacy loan with my partner Landon that I didn’t demand the use of an escrow/servicing company.

Here are some options if you don’t use a note servicer/escrow company:

· Your CPA

· Accounting software

· Quickbooks or TurboTax

· Online services

I just found 8 websites from a Google search (excluding Quickbooks and TurboTax)

The second order of housekeeping is the Fair Market Valuation for any investments, including notes, private entities, and real estate in your Self-Directed IRA.

1. Real Estate – Appraisal, Broker’s Price Opinion (BPO), County Appraisal Value.

2. Note – If amortized, attach the amortization schedule. If interest only, simply state the current principal value in the “EOY 2020 Market Value” box and that the note is interest only in the “Comments” area.

3. Private Entity – A letter from a managing member on letterhead stating the value or a balance sheet reflecting the value of the partner’s value.

4. Personal Property – Third-party valuation from a qualified professional.

In my case, I logged on and was able to quickly provide the fair market value of my loans and my investments in the commercial and multi-family deals I recently invested in.

Notes/Private Loans

The only loan that I don’t use a note servicing/escrow service is an interest only loan. Therefore, the principal balance is never reduced so the fair market value is always the original loan amount. I provide this amount and a note stating the loan is interest only, and I’m done for the next 12 months.

I do have 1 amortizing loan currently, but I use a note servicer who performs the calculation for an accurate remaining loan value. I simply provide an amortization schedule or my annual account statement to my custodian.

Commercial Building & Apartments

Since these Limited Partnerships just recently closed and acquired the properties there has been no change as concerns capital accounts or annual valuations. I have reached out to the sponsor and confirmed this, for 2020.

Next year I anticipate a different story and will report back to you guys as things move forward and I learn something new.


Here’s the deal: I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast, Spotify, iHeartRadio or whatever platform you are using to hear my voice.

It doesn’t take that long and I believe it’s a small price for to pay for the value I try to provide.

And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.

Next week we’ll continue with a lesson from the book The Richest Man in Babylon

That’s gonna do it for Episode 117 and just a few final thoughts:

1 – please join the Private Lender Podcast Facebook Group to connect, learn, inspiration and discussion

2 - Remember, the easy button to lending in the Houston, TX market can be found here

So, as I sign off I’d like to say besides self-awareness, I wish you safe and prosperous Private Lending.

I’ll catch you on the next episode. . . .

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