How Private Money Lenders Evaluate Deals and Why Section 8 Housing Is a Smart Play

Why This Episode Matters

If you’ve ever wondered how to raise money for your affordable housing deals or how private money lenders actually think, this episode of the Affordable Housing & Real Estate Investing Podcast with Kent Fai He is essential listening.

Our guest, Jon Chan, is a private money lender, investor, and podcast host who has been involved in over 20 deals across multiple states. He shares exactly how lenders evaluate deals, how to protect yourself with the right legal safeguards, and why he actively invests in Section 8 affordable housing.

Whether you’re an investor looking for capital or someone thinking about lending for the first time, Jon’s insights will help you build trust, reduce risk, and succeed in real estate.

How Do Private Money Lenders Decide Who to Invest With?

When Jon evaluates a deal, he looks at three big factors: the borrower’s experience, the deal’s numbers, and the collateral.

• If the rehab scope is far beyond the borrower’s past experience, that’s a red flag.
  
  

• He checks the equity: If the borrower fails, can I take over the project or sell as-is and still get my money back?
  
  

• He ensures multiple exit strategies exist, not just a best-case scenario.

This mindset helps protect lenders and ensures they are backing operators who can handle surprises.

What’s the Difference Between a Private Money Lender and a Private Money Partner?

Jon makes a clear distinction:

• Private Money Lender: Provides capital at a fixed rate of return. The lender gets paid regardless of how the property performs. Lower risk, but fewer long-term benefits.
  
  

• Private Money Partner: Shares in ownership and upside, but also takes on the risks of repairs, tenant issues, and cash flow fluctuations.
  
  

For retirees or people looking for predictable income, lending often makes sense. For those building long-term wealth, partnership and ownership are key.

How Can You Protect Yourself as a Lender?

Jon stresses the importance of legal safeguards and communication:

• Always conduct a title search and secure your position.
  
  

• Add clauses to prevent other loans from slipping in without your knowledge.
  
  

• Use tools like assignment of rents so if things go south, rental income goes directly to you until you’re repaid.
  
  

• Require transparency and frequent updates from your borrowers.
  

These steps transform a handshake deal into a professionally protected investment.

Why Does Jon Invest in Section 8 Housing?

Jon’s family relied on government subsidies when they immigrated, so he understands the real impact of programs like Section 8. Despite the stigma, his experience has been positive:

• His Section 8 tenants are stable, motivated to maintain their housing, and backed by reliable government rent payments.
  
  

• By converting a $62,500 two-bedroom into a three-bedroom with a $4,000 renovation, he created a property that now rents for $1,297 per month under Section 8, while appraising at $88,200.
  
  

• He sees Section 8 as not only profitable but also a mission-driven investment that helps families secure safe housing.
  
  

Key Insights from Jon Chan

• Relationships first: Build trust with lenders or partners long before you need money.
  
  

• Multiple exits matter: Never assume a project will go perfectly—prepare for mistakes.
  
  

• Protect yourself legally: Title position, communication clauses, and assignment of rents safeguard capital.
  
  

• Lending vs. partnering: Lenders get stability, partners build wealth—choose based on your goals.
  
  

• Section 8 is undervalued: The stigma keeps investors away, but it offers stable rent and strong demand.
  
  

Best Quotes from Jon Chan

“The biggest thing is just building that relationship before you need money.”

“As a lender, you’re guaranteed cash flow. As a partner, you get the upside of ownership, but also the risks.”

“If tenants destroy the property or don’t pay, they lose their voucher. They’re actually incentivized to be good tenants.”

“When you buy a property, it’s not today money. It’s tomorrow money.”

Common Questions About Private Lending and Section 8

How do private money lenders reduce risk?
By vetting the borrower’s experience, ensuring equity in the deal, and securing their position with legal documents like liens and assignments of rent.

Why would someone choose to be a lender instead of an owner?
Lenders get steady, predictable returns with less hassle, while owners face more risks but gain wealth-building benefits like appreciation and tax advantages.

Are Section 8 tenants riskier than market tenants?
Not according to Jon. In fact, they are often more reliable because losing their voucher means losing access to stable housing.

How can I use retirement accounts to invest in real estate?
Self-directed IRAs and solo 401(k)s let you roll over funds and invest in real estate deals directly, instead of just mutual funds.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. Each episode breaks down real strategies and lessons from experienced investors and developers who are creating impact while building wealth.

DM me @kentfaihe on IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.