Private Lending & Conventional Mortgage Advice

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Becoming a Hard Money Lender without a License in TX?

Posted Jun 15 2022, 14:24

I am looking to get into Hard Money Lending but don't really know where to start. From what I understand, it is not required to be licensed in TX to do Hard Money? If that is true, how can you legally claim the 1st lien position on the property if the borrower defaults? That's really the only thing that worries me - placing an invalid lien on the property or having the lien undone somehow. Is it really as simple as just "filing a promissory note" like every attorney I've talked to claims? There has to be more to it than that, right? 

Also, does anyone know any Hard Money lending attorneys in the Houston area that specifically deal with Hard Money loans? Any help would be appreciated. Thanks!

Houston, Texas

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Bob Reinhard
  • Lender
  • Patterson, NY
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Bob Reinhard
  • Lender
  • Patterson, NY
Replied Jun 15 2022, 15:04
A lien is a lien is a lien; as to the first part of your question only.
What would be invalid about it, other than your speculation?
If you use an attorney, and have asked "every attorney," I am uncertain how it helps to substitute your second-guess.
Much success!
Bob

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Rick Pozos
  • Wholesaler, Rehabber and Landlord
  • San Antonio, TX
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Rick Pozos
  • Wholesaler, Rehabber and Landlord
  • San Antonio, TX
Replied Jun 15 2022, 16:24

Hey @Mark Andrews I have lent several friends and family money. I have borrowed a number of times from friends and family also. First of all, you do not file the promissory note, you file the deed of trust and the deed. You keep the note with the original signature. You keep that for the attorney if you have to foreclose.

BUT the great thing is that the title company can handle all of that for you. You let the title company know what your terms are and they can get an attorney to draw it all up for you. OR get your own attorney to draw up your deed of trust and note.

The county clerk records the deeds and deeds of trust. They record the documents so that the world can see who owns and owes on a property.

YES it is that simple. The hard part is trusting the people that you are lending to. Making sure that the deal that they have is going to come out ok for them and more importantly, for you.

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Caroline Gerardo
  • Lender
  • Laguna Niguel, CA
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Caroline Gerardo
  • Lender
  • Laguna Niguel, CA
Replied Jun 16 2022, 14:30

You have two million dollars sitting in a checking account? You need: business license, errors and omission insurance, a relationship with a title officer, an attorney to sent up structure, attorney to write the disclosures and documents, professional website, clients, a business plan, what type loans you will do rules ins and outs, CPA to set up procedures, bookkeeper to do payoffs/ annual state and federal reporting/ process payments/verify taxes and insurance are current, you cannot talk to ANY owner occupants or you get fines and jail time, without an office address or history you won't appear genuine, you need to answer the phone 10 hours a day, have construction costing deep knowledge, able to pull comparables and AVM's in seconds, able to pull a tri merged credit report, have vendors linked to your cloud based loan processing system just to name a few. I suggest you go work for Tidal or Sterling and get some of the nuts and bolts together before you spend $250000 to set up shop.

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Nancy Truong
  • Attorney
  • Houston
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Nancy Truong
  • Attorney
  • Houston
Replied Jun 17 2022, 16:37

Mark,

1. You asked, "How can you legally claim the 1st lien position on the property if the borrower defaults?"

If you want to be the first lien holder, I suggest getting an abstract title on the property for knowledge of any other lien on the property. In Texas, government liens have superiority over every other liens. To be 1st lien position, you'll have to pay off all superior liens. 

2. Your statement: Only thing that worries you is placing an invalid lien on the property or having the lien undone somehow. 

You'll need a promissory note signed and notarized by the borrower. Then secure the note with a security instrument, such as deed of trust. The Deed of Trust is your collateral on the property which you should record in the real property records in the county where the property is located. The Deed of Trust should also be executed and notarized. There are certain terms that must be in the Deed of Trust to protect you. If you are very worried about your lien, you should not use a boil plate template. It'll save you money now but cost you lots if things go sour.

3. You asked, "Is it really as simple as just "filing a promissory note" like every attorney I've talked to claims?

Not sure who those attorneys are or if you misunderstood, but that's wrong. You do not file the promissory note. Keep the original promissory note with you. This is not for public record. The Deed of Trust is the instrument to file. The Deed of Trust must refer to the promissory note. 

4. Does anyone known any Hard Money Lending Attorneys in Houston Area?

I am a Real Estate Attorney. Feel free to private message me. I can provide you a link to our firm's calendar to schedule a consultation with one of our Texas Real Estate Attorneys.

-Nancy Truong, Texas Attorney