I Want to be a Hard Money Lender When I Grow Up

by | BiggerPockets.com

I got the strobe light at Radio Shack the summer of 8th grade.  The mirror ball was a Christmas present.  I bought more than 200 singles from Music City Records that year – artists like The Breakfast Club, The Jets and Cameo.  I would spin those 45 RPM one-hit-wonders with an old Pioneer turntable.  My 10 x 10 bedroom was transformed into a disco club on a nightly basis, much to my parent’s chagrin.

That’s right folks.  I wanted to be a disc jockey when I grew up.

The preparation was intense.  My Mom signed me up for radio broadcasting classes at the local community college as a freshman in high school.  I got my FCC license at 15.  I worked nights as an assistant to a party DJ in town.   I’d help him set up lights, amps and speakers.  We played high school dances, weddings and private parties. 

My favorite gig was the local Marine base.  The enlisted men guzzled beer while we played it loud.  The top request was Hank Williams Junior’s Family Tradition.  The Marine’s added their own lyrics to the song and shouted them out.  That is, until the commanding officer grabbed the microphone and ordered the drunk GIs to stumble back to the barracks.

Yes, it was fun for a while.  But it didn’t take me long to discover that being a DJ wasn’t as glamorous as I thought.  Working weekends and nights seriously cramped my social life.  And the pay sucked.  The dream died not long after I graduated from high school.

Back in the glory days of 2004-2006 I owned 65 houses, most of them lease/options.  I also made money wholesaling, fixing and flipping and buying and holding.  Then the crash came.  Like most investors I fell hard.  Fortunately, I was able to put the pieces back together again in 2009.  My firm has flipped about 45 houses since then. 

Through all of these ups and downs I’ve decided that I want to be a hard money lender when I grow up.

Now don’t get me wrong.  I love our hard money lender, RLS Capital, Inc.  Just last week they funded a deal we bought at the courthouse steps.  I sent the information on the property to them at 3:30p, right after we won the bid.  One hour later my rep called to say they would fund the loan.  I signed loan docs at their office the following morning.  They took the checks to the trustee’s office for me and recorded the deed of trust.

Sure, they charge a $900 loan origination fee and 18% interest.  A down payment of 25-30% is required.   And the loan is based on the acquisition price, not the retail value.  This may seem expensive, but I just consider it a cost of doing business.

Last year, RLS Capital, Inc. did 30 loans for us.  That’s $27,000 in loan origination fees, which increases their return on investment to nearly 20%.  Best of all, they get a secure position (1st) in the event we default.  The business model is sound and the return is great.  So why don’t I grow up and do this now?

mirror ball and hard money lendingThe reason is simple – it takes gobs and gobs of cash to be a hard money lender.  The first time a client calls for a loan and you don’t have any money to lend will be the last time the client calls.  I don’t have the capital it takes to get into the game, yet.

Until that day comes I’ll keep using hard money to fix and flip.  Maybe I’ll even dust off the mirror ball and book a gig for some extra cash.  I hear 80’s music is making a comeback.

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.


  1. Marty get your butt down to the local bank. Show then your 2009, 2010 and 2011 YTD bal. sheet, P&Ls and tax returns. They will float you a line of credit (not much @50K but this is how you start). 18% is insane.

    • Dennis, I have yet to meet a banker that doesn’t require a credit check and personal guarantee from the company manager for a LOC. And my butt, or any other part of my anatomy for that matter, is not credit worthy enough to qualify. Nor do I want to have my butt on the line for said line of credit. 18% may seem insane to you, I get that. We are buying these houses at the auction. Our hard money lender is taking a huge risk by underwriting the loan in one day without obtaining a lender’s coverage policy or full title report. Even with paying such a high rate we’re still averaging a 40% return on each deal.

  2. I agree that 18% is a bit much. I’m a hard money lender living in the Phoenix area, but my partner handles most of the details and he is in California, so I loan almost exclusively there. We charge no origination fee and 12%. We’ll go to 75% LTV based on after repaired value. Shop around. I think you can find a better deal.

    • Shaun, if you and your partner can underwrite a loan for houses we buy at the courthouse steps in 24 hours then let’s talk. We can certainly do some business together, at least 3-4 deals a month. I’ve found hard money lenders that are willing to lend for much less, around 12%. That is, until they find out we need the money so quickly AND they get no lender’s coverage policy because the deal can not be closed through escrow.

  3. Marty,

    I really enjoyed the article. As a hard money lender it is great to see when an investor sees hard money for what it truly is, a tool. HML’s allow individuals to do more with less, overall profit potentially lower with points, fees and high interest rates, but cash on cash investment and the volume of deals that can be completed is where the value can be found. Great read and I look forward to more.

    Travis Sperr

  4. I was only trying to help, imagine paying 5-7%. With the returns your getting you should really start to think about building a banking relationship it will start small and grow. I was turned away but I asked what changes I needed to make and I came back one year later.

  5. Vin Morgan on

    Hi Marty, you would not need your own money. You would be lending other people’s money like a bank. You would need a network of “well to do” people with money. You would offer them say 10% – 15%, you would load the rate with your interest rate margin and then charge a sepearate origination fee for your services. With your expertise, you could be a Hard Money lender today.

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