Read the Fine Print Before You Become a Hard Money Lender
To become a trust deed lender, often called a hard money lender, it is important to get started slowly and with diligence. So what is a trust deed loan, also called a hard money loan? A hard money lender is a type of private money lender that uses “hard” assets as collateral for loans. The most commonly used asset for these loans is real estate. In order to become a hard money lender, there are four important things to consider:
- 1. Do you fully understand how trust deeds work in the State you’re lending in? Further do you understand the foreclosure laws in the State you are lending in?
- 2. Do the new laws in the State you are lending in allow you to make loans without a license?
- 3. In what form will you lend your funds? E.g. as an individual, as an IRA, as a business entity?
- 4. If real estate is the collateral for the loan, are you comfortable owning a piece of real estate should a loan foreclosure occur?
So how does one become a hard money lender? Start by carefully considering the questions listed above and many others, and certainly consult with an attorney. By taking careful, slow steps in the right direction, you can find good loan opportunities and create a win-win with real estate investors who are in need of loans.
