Realtor · Gallatin, TN · Member since 2009 · 292 posts · 164 votes
I'm not sure how many HML's are on these boards, but I would love to get some information from you.
I'm thinking about lending, as I have quite a bit of extra capital that is collecting all .45% sitting in MM Savings Accounts.
Instead of putting all my eggs in one basket, I think I'd like to branch out. I own a couple properties free & clear, plan to finance a few within the next year or so, and lend a bit.
I guess these are some of my main questions I have:
1) Amount of capital you started with.
2) I assume you stick to area's/investor's around where you live?
3) What type of team did you need to build to accomplish everything?
4) Is there a resource (book, online, etc...) to really learn the in's & out's of HMLing?
Lastly ... If there are any HML's in middle TN who would like to put me under their wing, I am ALL ears :D
To be a true hard money lender, you will need a license in the state in which you lend (for many states) since the interest you will charge will usually exceed the state usury limits. The last thing you want to do is make a usurious loan to a borrower.
You may want to hook up with another experienced lender, have them lend out your money for you, however, you would most likely only get the interest and they would get the points.
You could also provide private lending to yoru borrowers. You still need to be careful of the usury laws in the state in which you lend, but if you have existing relationships with the borrower, you can get it done.
Actually very very few states require you to be licensed to be a private lender on NOO properties. Will is in CA, one of the states which has strong usury laws so he is probably more sensitive to the usury issues than is necessary.
TX and CA are the only states I am aware of where usury laws would come in to play on Non-Owner Occupied Loans (and there are easy ways around in those states too).
If you make owner occupied loans, the whole game changes and the regs are many.
Keep it NOO like most of us do and you have almost no reg or reporting or licensing issues. It is one of the least regulated businesses I have ever been in.
To be a true hard money lender, you will need a license in the state in which you lend (for many states) since the interest you will charge will usually exceed the state usury limits. The last thing you want to do is make a usurious loan to a borrower.
You may want to hook up with another experienced lender, have them lend out your money for you, however, you would most likely only get the interest and they would get the points.
You could also provide private lending to yoru borrowers. You still need to be careful of the usury laws in the state in which you lend, but if you have existing relationships with the borrower, you can get it done.
Excellent, excellent info ... Licensing didn't even cross my mind. Will definitely start researching that.
As for teaming with another lender, would love to do that! Do a few deals with a lender to learn the ropes & pay my dues, then try and branch out on my own. During the time, capital rising the entire time!
I have a better Idea when I was doing residential I had a hard money lender who was a great friend. What i found worked better instead of a license is you find another hard money lender in your area and you find a deal and both of you loan on it together. The greatest thing about that is if you had to take it back you have a great deal and didn't have to find it they find you!
I have a better Idea when I was doing residential I had a hard money lender who was a great friend. What i found worked better instead of a license is you find another hard money lender in your area and you find a deal and both of you loan on it together. The greatest thing about that is if you had to take it back you have a great deal and didn't have to find it they find you!
Then yoru friend or HML "partner" better have one as I am sure you both will be lending above most stae usury limits.
As far as getting a great deal, you would have to file the proper legal notices of default, take the property to trsutee sale and complete the foreclosure process. That is not something HML's want to have to do and the time and expense makes the good deal, a not so good one.
To be a true hard money lender, you will need a license in the state in which you lend (for many states) since the interest you will charge will usually exceed the state usury limits. The last thing you want to do is make a usurious loan to a borrower.
You may want to hook up with another experienced lender, have them lend out your money for you, however, you would most likely only get the interest and they would get the points.
You could also provide private lending to yoru borrowers. You still need to be careful of the usury laws in the state in which you lend, but if you have existing relationships with the borrower, you can get it done.
Actually very very few states require you to be licensed to be a private lender on NOO properties. Will is in CA, one of the states which has strong usury laws so he is probably more sensitive to the usury issues than is necessary.
TX and CA are the only states I am aware of where usury laws would come in to play on Non-Owner Occupied Loans (and there are easy ways around in those states too).
If you make owner occupied loans, the whole game changes and the regs are many.
Keep it NOO like most of us do and you have almost no reg or reporting or licensing issues. It is one of the least regulated businesses I have ever been in.
This is what I have found on Tennessee Usury Information:
TENNESSEE, the legal rate and judgment rate of interest is 10%. The general usury limit is 24%, or four points above the average prime loan rate, WHICHEVER IS LESS.
If you are serious about this business it might be a good idea to go to an AAPL conference. http://www.aaplonline.com/
You will meet some successful hard money lenders as well as vendors to help you in your business. I just learned of this group and went to my first conference this year.
Steve, when I was chatting with my lawyer about usury laws, he said that they no longer apply throughout the country except for people who are not represented by a lawyer and do not know what they are doing. As Eric has mentioned, there are so many ways around the usury laws these days that the only people who get caught in the net are people who do not know what they are doing. So don't worry about usury and just make sure that your first few deals are vetted by a competent attorney.
What you guys are missing when you discuss usury is the exceptions.
Almost all states (except CA and TX that I know of) have exceptions for commercial loans. Which means all non owner occupied properties are exempt. No limit.
It’s a remarkably easy business to enter so long as you have the funds. Announce at a local real estate club that you have money to lend and you’ll instantly become the most popular person in the room with friends you didn’t know you had. At its barest, you’ll need a note and deed of trust. In California there are a whole host of disclosures and waiting periods you also have to comply with. Sorry, but I don’t know if any of these apply in other states.
There’s no need to partner with anyone or give anyone the points. I’m sure an experienced broker in your area would be happy to do the dirty-work for you for a nominal charge. In this day and age, many brokers are hungry. You agree to find, negotiate, and fund the deal and they fill out the forms and work with the escrow company.
I forgot to add that though I’m generally loath to recommended attorneys, this is one time you really need one. Before you do anything, find a competent real estate attorney with substantial mortgage/lending experience in your state and buy an hour of his/her time to answer questions and maybe provide some advice.
The best way to do this is to ask several title companies and HML’s who they use. I can’t stress enough that a good general real estate attorney is not enough (I initially made this mistake). Ideally, you want someone who does mortgage work for a bank or other lender. He or she should know the law.