Lesson 02 — Funding Deals — Cash, Partners, IRA, Private Lending

10 scenes · ~866 words

Every deal needs money before it needs a strategy. Today, four honest ways to fund tax lien and deed investing, your own cash, partners, a self-directed I R A, and private lending, what each one actually costs you, and why the fastest money is never the cheapest.

I'm Ayo, this is the TaxLienSimple Academy. There are four honest ways people fund this business. First, your own cash, the simplest source, no partner, no one else's rules to follow. Second, partners, you bring the deal, they bring capital, and you split what it makes. Third, a self-directed I R A, retirement money invested in liens or deeds instead of stocks, inside a strict set of rules. And fourth, private lending, borrowed money that moves fast, at a real cost that eats into your return. Four sources, four very different tradeoffs.

Line up all four and the tradeoffs get obvious. On speed, cash is instant, it's already yours. Partners are slower, you need an agreement first. A self-directed I R A is slower still, the custodian has to process it. Private lending is fast, that's the whole point of using it. On cost, cash carries no interest and no split. Partners cost you a share of the profit. The I R A costs nothing extra as long as you follow its rules, but private lending carries real interest that eats into your return. And on complexity, cash is simplest by far, partners need a written agreement, the I R A needs a custodian, and private lending needs a lender and repayment terms.

Here's the line to sit with. Where the money comes from decides how much of the upside you actually keep. Cash keeps all of it. A partner or a lender takes a piece before you ever see a dime.

Zoom out and it's really one tradeoff. All cash is simple and safe, but it caps how many deals you can run at once, because you only have so much of it. Leverage, whether that's a partner or a lender, lets you run more deals at once, but every source of leverage has a cost attached, a split or an interest rate. Neither one is wrong. It's just a choice about speed versus simplicity.

If you're considering a self-directed I R A, here's the mechanism, five steps. Step one, open an account with a custodian, a specialized custodian, not a regular brokerage, has to hold and administer it. Step two, fund the account, by rolling over or contributing retirement money into that self-directed account. Step three, direct the purchase, you tell the custodian which lien or deed to buy, and they execute the purchase, not you personally. Step four, keep it hands off, you cannot personally benefit outside the account, no using the property yourself, no self dealing, the penalties for breaking that rule are real. And step five, let the returns flow back in, the interest and proceeds return to the retirement account, not to you directly. None of this is advice, talk to a custodian and a C P A before you move retirement money anywhere.

Most people move through funding sources in a rough order as they scale. Early on, you start with cash, small and simple, entirely your own money. As you're growing, you add a partner, more capital for more deals, split fairly and always in writing. For the long term, you might layer in I R A capital, working on a longer horizon inside its own rules. And when you're being opportunistic, you use private lending, fast capital for a deal that won't wait around. None of these are required, and plenty of investors stay on cash alone for years.

When you do bring in a partner, there are really two things you're splitting. Most deals split the profit, an agreed percentage of what the deal actually returns, decided before either of you puts in a dollar. Fewer deals also split the risk, spelling out who covers a loss or a shortfall if a redemption doesn't go the way you expected. Get both of those in writing before the money moves, not after.

Your one action today, before you fund a deal with anything but your own cash, get one real conversation on the books, a self-directed I R A custodian if retirement money is in play, or a C P A if you're weighing partners against private lending. This is not a place to guess.

So lock in the funding picture. Cash is simplest and keeps the most upside. Partners add capital but take a share. A self-directed I R A adds a longer horizon but comes with strict rules and a custodian. And private lending is fast, at a real cost. Whichever source you use, put the terms in writing before the money moves, and talk to a custodian or a C P A first, this is not a place to guess. Next, in Lesson three, we turn one-off deals into an actual system, a repeatable pipeline you run every month. That's Lesson three. This has been the TaxLienSimple Academy. My name is Ayo. No hype, just the receipts. Educational content only. Not financial, investment, tax, or legal advice.