Why This Is a Lender’s Market (and What You Can Do About It)

Hey Team,

We’ve had a strong run in the markets the past couple years — but that momentum is starting to fade.

Inflation is sticky, interest rates are still high, and the stock market is showing real signs of weakness.

In times like these, smart investors shift their mindset from growth mode to capital preservation and cash flow.

And that’s exactly why this is a lender’s market right now.

I recently dug into Oaktree Capital’s latest market report — and while they operate at a massive institutional scale, the themes they outlined apply just as much to passive investors like us.

Bottom line? Credit is king right now.

The Setup: Risk Is Rising, So Is Opportunity

The report highlights a few key warning signs:

• Equity valuations are still elevated

• Risk premiums are low

• Geopolitical and fiscal uncertainty are growing

• The economy looks “fine,” but stress is building under the surface

That’s not a doomsday call. But it is a signal to lean into strategies with more control, shorter duration, and built-in yield.

For me, that means doubling down on private lending and capital-efficient cash-flow plays.

Where I See Opportunity Right Now

1. Private Lending: Predictable, Passive, and In Demand

There’s still real demand for capital — especially in real estate.

Investors need to refinance, flippers need short-term funds, and traditional lenders are dragging their feet.

That creates a clear lane for us to:

• Lend at 10–12%+ interest

• Use strong collateral (1st or 2nd position)

• Structure deals we understand and control

Whether it’s a $50K note or a $250K bridge loan, these are the kind of deals that create monthly passive income without market volatility.

This is the exact playbook we’ve been running at 42 Solutions, and it’s working.

2. Filling the Gap: Small-Scale Mezz Lending

Private equity firms aren’t the only ones needing junior capital.

At our level, it plays out like this:

• Someone’s buying a property but is short on capital

• You step in with a second-position loan or gap funding

• You get paid well for solving their problem — often 12–16% with some potential back-end upside

I call these “hybrid plays” — they’re not fully equity, not fully debt, but they reward you for stepping into the middle.

They can be structured for cash flow, protection, and performance — all without owning the asset.

3. Special Situations: Where Stress = Opportunity

Higher interest rates are squeezing even solid operators. I’m seeing:

• Landlords offloading deals that no longer cash flow

• Investors looking for fast, creative funding

• Developers needing short-term capital to bridge construction gaps

These are real-world dislocations, and they open up chances to step in as a lender or partner and structure better terms.

In this environment, it’s not just about finding good returns — it’s about protecting the downside and picking your spots.

Control, collateral, and cash flow are everything.

Final Word

Big institutions are pulling back from risky equity bets and leaning into credit — and we should be doing the same.

This market rewards the investors who:

• Stay patient

• Focus on asymmetric risk/reward

• Show up with capital when others can’t or won’t

If you want to build passive income and protect your wealth in 2025, don’t chase hype — be the bank.

Lend smart. Structure well. Play defense and still win.

Let me know if you want help finding or evaluating deals like these — I’m always down to share what’s working.

—

– DK