Episode 42: The Dangers of Lending with a Partner and How to Protect Yourself

What happens when your lending partner takes everything and leaves you with nothing? In this episode, Rich Lennon breaks down a real deal gone wrong involving a private lender who brought in a partner for a $20,000 second-position loan and ultimately wiped them out during foreclosure. The borrower never worked on the property, and the first-position lender foreclosed, recouping their full amount while leaving their partner with nothing. Rich emphasizes the moral responsibility of those who structure deals, especially when using other people's money (OPM), and highlights how mistakes in loan structure, foreclosure sequence, and partner communication can permanently damage reputations and tax-advantaged accounts, such as self-directed IRAs.You’ll Learn How To:Evaluate the real risks of second-position lendingStructure deals to protect your partners and reputationMake ethically sound decisions even when legally protectedUse foreclosures correctly to avoid harming othersWhat You’ll Learn in This Episode:01:16 – 01:38- What second position exposes investors to01:41 – 02:23- If you’re putting the deal together, take responsibility03:32 – 04:15- How the first position foreclosure can be morally wrong04:20 – 06:13- Why foreclosing from the second can protect everyone06:57 – 07:37- The IRA trap: tax-free, now value-free08:02 – 08:32- Why legal action is rarely feasible for small loans09:02 – 09:44- Moral consequences of using OPM irresponsiblyWho This Episode is For:Private money lenders using self-directed IRAsNew investors partnering on real estate loansExperienced lenders lending in the second positionAnyone considering using OPM (Other People’s Money) Why You Should Listen:This episode challenges conventional thinking on deal-making ethics, exposing how legal doesn't always mean right. If you want to build a sustainable lending business that protects partners, reputation, and returns, this is essential listening.Follow Rich Lennon here:Website: https://richlennon.com/Facebook: https://www.facebook.com/rich.lennon.121Instagram: https://www.instagram.com/richlennon92/