“We tell people to get out of deals every month,” says Bruce Norris, CEO of the California-based Norris Group, which brokers hard-money investment loans as well as valuable information to investors. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Even though Norris’ company extends millions of dollars in hard-money loans, they are even more concerned about not lending; put another way, they are careful not to lend to those who would not benefit. They take extra precautions to save their clients a house full of heartache that may not be foreseen due to desperation or the ticking clock of a foreclosure or bankruptcy. Or if their eyes are bigger than their stomach. “These would be people who would be buying expensive properties, to where, let’s say it doesn’t sell,” Norris says. “The interest payment on a high-dollar amount, like 12 ½%, is not good for cash flow. So that’s one borrower we don’t want to see. We don’t want somebody coming in with a $600,000 hot deal because it’s just the wrong time to aggressively pursue something expensive. "Someone else who would be a bad hard-money candidate would be somebody without reserves, because things go wrong in investing. [For example,] you're in escrow and you think it's okay. You think, âI'm going to get a closing, I'm going to get a payday,' and then you don't qualify or you think twice about it, and then all of the sudden your payment continues and you didn't think it was going to. And now you have three [loans]going. So someone without reserves we really hesitate to loan to, because it always ends up being more difficult than they think." Hard money loans are not for the faint of heart, involving serious stakes and high risks. The interest rates are higher than the ordinary bank loan, and usually made by private investors in local areas. “A hard money loan is typically not conventional and it’s fairly expensive,” Norris says. “Now you are hearing of loans of 4 and 4 1/2 %, but hard money loans are probably 12 ½%, with three and a half points. It’s really just to facilitate the funding of a deal. The people who are in the buy-and-sell business, like we are, are used to having that money be expensive, but we just need it available. Availability is much more important than the cost of it. Usually we’re getting a margin. We’re buying a deal where there is going to be a profit at the end of it, [even though we are]paying high interest. “The alternative is to get partners, and partners take fifty per cent of the deal, which is almost always more expensive than hard money.” If not from a bank, then where does hard money come from? “The funding force [of a hard money loan]is somebody’s savings, usually,” Norris says. “The Norris Group acts as a middle man between the borrower and the source of funds — for instance, a family that has a hundred grand and wants to earn 12% instead of 2%. And we have a clientele who we have trained to do the business well, so we have a very good group of borrowers waiting for the funding of their next deal. That’s what goes on about 30-40 times a month inside of our operations.” The Norris Group has been making hard-money loans since 1980. They also produce award-winning educational programs and resources for real estate professionals, including a radio program and free podcast. Norris says, “In 1980, I went to work for a company that bought and sold homes. I wasn’t selling anything, I was buying, and I had the infrastructure to fund it. Inside that company they had a hard-money lending department. I was just procuring the deal. Right out of the gate, I was pretty good at that. I got paid 3% for every purchase and I was buying enough to make about $30-33,000 a month. And at the time, that was all I made. I felt like I had died and had gone to heaven. “For some reason, I was able to do it very quickly. I was on commission. I made three years worth of salary in three months. And I went out on my own after that. For about thirty years now, that is what I’ve been doing.” They also actively invest in California real estate, with good reason. The Norris Group wants to be seen as practicing what it preaches. “One of the things I really encourage,” Norris says, “is for [hard money loan seekers]to borrow money from somebody who understands the buy-sell business completely. The guy who appraises your property should have bought over one hundred properties himself. He understands through the eyes of an investor what somebody shouldn’t do. So when you have a hard money loan company that’s owned by a guy who bought and sold hundreds of properties and is an appraiser and an investor as well, that [creates]levels of protection for the borrower.” As well, Norris is confident about the state of the real estate market in California, and the role of hard money in that market. “Ours in particular is extremely busy,” he says. “California, and Riverside and San Bernardino County in particular, are hot spots for foreclosures, even though the lenders have been dragging their feet. So we’re very busy. The people who are buying and selling are not having trouble finding the next deal and not having too much trouble getting rid of the ones they bought.” For more information on The Norris Group and their additional services, go to www.TheNorrisGroup.com.