I would like to get into lending. What steps do I need to take? I know of plenty of people looking for hard money, I just need to know the right steps, so I can move forward. I have the money and want to lend out. Any good resorces out there?
Thanks,
Kris
Thanks for the compliment, Jon. :D
Back in the day (1999 - 2004) we loaned to 80% ARV but the max we will do is 70% and that appears to be serving us well. Our program is very specific - for rehabbers only and it is a private loan not a hard money loan. Meaning I underwrite it exactly as a conventional underwriter would in terms of income, assets, DTI and the borrower's credit. In addition, we are very careful with values. I work with one appraiser and one appraiser only. No exceptions.
I am proud to say that I've been brokering and personally underwriting this program in CO since 2002 and we have never had a foreclosure. We have had 3 deeds in lieu that we turned for a small profit and have had several note extensions but so far no foreclosure so I think we make good decisions.
We charge 4 points and 15% interest only and that seems to price us a tad out of the market here but it is on purpose since we have limited capacity.
I have a friend that runs a rehab fund in CA and he gets 6 points and 10% interest. My borrowers would laugh me out of town if I charged 6 points and my lenders would laugh me out of town if I only charged 10%, so every market is truly unique.
I could loan at 70% as-is all day long but that would put me in the foreclosure bail out business and I have NO interest in that business. I like investors and I love being able to provide the strong ones with maximum leverage with our 100% loan to cost (LTC) loan.
There are lots of resources for learning about becoming a private lender. George Antone at Wealth Classes has a three day private lending mastery class that is pretty comprehensive. He discusses strategies that involve lending your own money as well as other people's money and making money in the spread or through arbitrage.
I broker private money between private lenders and borrowers and I also run a private equity mortgage pool. My best advice is to work with an experienced broker or fund manager and be VERY clear on your rules for lending or "guidelines". There are a lot of bad deals out there and you have to know how to separate the bad from the good in order to be sucessful.
Susan taught me everything I know about this business, so listen to her. I absolutely agree with the idea of getting hooked up with a good broker.
Thanks for the compliment, Jon. :D
Back in the day (1999 - 2004) we loaned to 80% ARV but the max we will do is 70% and that appears to be serving us well. Our program is very specific - for rehabbers only and it is a private loan not a hard money loan. Meaning I underwrite it exactly as a conventional underwriter would in terms of income, assets, DTI and the borrower's credit. In addition, we are very careful with values. I work with one appraiser and one appraiser only. No exceptions.
I am proud to say that I've been brokering and personally underwriting this program in CO since 2002 and we have never had a foreclosure. We have had 3 deeds in lieu that we turned for a small profit and have had several note extensions but so far no foreclosure so I think we make good decisions.
We charge 4 points and 15% interest only and that seems to price us a tad out of the market here but it is on purpose since we have limited capacity.
I have a friend that runs a rehab fund in CA and he gets 6 points and 10% interest. My borrowers would laugh me out of town if I charged 6 points and my lenders would laugh me out of town if I only charged 10%, so every market is truly unique.
I could loan at 70% as-is all day long but that would put me in the foreclosure bail out business and I have NO interest in that business. I like investors and I love being able to provide the strong ones with maximum leverage with our 100% loan to cost (LTC) loan.
why don't you experiment with online lending clubs like prosper.com; its less risky because you loan to people with good credit also you can spread the risk by making small loans to a lot of people!
Susan what states do you lend in?
Kris,
The first step in lending is knowing the value of properties. I would recommend working with in the real estate profession that allows you to accurately value property before you get too involved in putting your own money on the line.
I know this is an old post, but I would like to get more information.
Like the OP I have a lump sum and access to very low interest monies. I am looking for better returns than savings accounts and having more control than if I put it in the stock market.
It would also serve as a backup career if I lose my job....which appears likely in the next 1-3 years.
Like the OP I have a lump sum and access to very low interest monies. I am looking for better returns than savings accounts and having more control than if I put it in the stock market.
It would also serve as a backup career if I lose my job....which appears likely in the next 1-3 years.
Hard money lending is mainly unregulated (in almost all states) if you deal with commercial deals. With residential, you have to structure it properly.
You can either work with brokers or look for loan requests yourself (through RE investment clubs etc.) or work with an existing hard money lender that will pocket the points but you will have the interest.
Thanks for the compliment, Jon. :D
Back in the day (1999 - 2004) we loaned to 80% ARV but the max we will do is 70% and that appears to be serving us well. Our program is very specific - for rehabbers only and it is a private loan not a hard money loan. Meaning I underwrite it exactly as a conventional underwriter would in terms of income, assets, DTI and the borrower's credit. In addition, we are very careful with values. I work with one appraiser and one appraiser only. No exceptions.
I am proud to say that I've been brokering and personally underwriting this program in CO since 2002 and we have never had a foreclosure. We have had 3 deeds in lieu that we turned for a small profit and have had several note extensions but so far no foreclosure so I think we make good decisions.
We charge 4 points and 15% interest only and that seems to price us a tad out of the market here but it is on purpose since we have limited capacity.
I have a friend that runs a rehab fund in CA and he gets 6 points and 10% interest. My borrowers would laugh me out of town if I charged 6 points and my lenders would laugh me out of town if I only charged 10%, so every market is truly unique.
I could loan at 70% as-is all day long but that would put me in the foreclosure bail out business and I have NO interest in that business. I like investors and I love being able to provide the strong ones with maximum leverage with our 100% loan to cost (LTC) loan.
@Susan Lassiter Lyons, I'm also in Colorado and interested in learning more about becoming a hard money lender. I know a guy here in Woodland Park who has been lending at 12% to a developer or investor of some kind who operates in Colorado Springs (who hasn't responded to my inquiry to get in touch yet).
I'm looking to lend money at a 12-15% annual rate, paid monthly. As an example: I would lend out $50,000 and within 1 month begin to receive passive income ($500/month @ 12%; $625/month @ 15%), with the option to get my money back within one year, at which point I could either: 1) cash out, 2) continue to just "let it ride", or 3) add to/subtract from the principle amount to change the monthly cashflow I'd be receiving at the same rate of return/interest (or negotiate a change in interest rate after the first year).
Obviously, I'd need to know that that the borrower is strong; both in terms of their current finances/ability to pay the interest and then the principle back; as well as their business operations/prospects to sustainably keep things going for the foreseeable future. If you (or anyone else reading this) can help or want to talk more, feel free to respond here or in a private message.