Where to Find Brokers to Lend Out My Capital?
Member since 2023 · 26 posts · 9 votes
Where to Find Brokers to Lend Out My Capital?
Most Popular Reply
Thanks for the shout-out, @Jay Hinrichs.
Now that you advertised you have money to lend with no criteria, @Jeff Lawlor, you’ll hear from everyone and their brother, nationwide, looking to extract it from you. Most will be honest and well-meaning. Some, less so. There is a huge amount of bluster and fake-it-till-you-make-it out there. Those beating their chest claiming they are drowning in applications either have low criteria or are exaggerating. Go slow, be patient, and educate yourself first. @Rob K. gave you some great advice.
We’ve been lending our own hard-earned money toward CA flips since 2010 and couldn’t be happier. Though there’s nothing wrong with using a broker, we originate our loans locally and don’t accept investors, fractionalize, or invest in funds. Whole loans only. Here’s some advice that I hope is actionable for you:
Consider attending the California Mortgage Association’s conference this September in Newport Beach. You can do this once for $100 and don't have to be a member. The CMA is comprised mostly of smaller lenders and brokers focused in California. You'll fit right in and meet many experienced investors who do exactly what you want to get into. Lots of lending lawyers, loan servicers, and other providers attend and could be good resources for you. You'll also hear about the AAPL, of which we are also members. This organization used to be small but now attracts the billion-dollar lenders and mega-funds. It’s not for you (and I wonder about us).
As you can see above, the first thing any broker will ask you for is your criteria. Unless you have some special knowledge, I suggest focusing on 1st position purchase money loans on single or 1-4 family homes. Your other criteria should address:
- Desired interest rate – What annualized rate are you realistically looking to earn?
- Max/min loan amount -- How much money will you lend on any one loan? In CA, there is no limit on the number of brokered loans you can make, but no loan can exceed 10% of your net worth, exclusive of your home.
- Loan Seniority – Unless you can afford to be wiped out on occasion (you can’t) or have enough money to pay off a 1st (you don’t), then don’t make 2nd position loans. 1st Position Only.
- Purchase criteria – How do you define a good deal? For example, on the flips we lend, this means Purchase Price plus Rehab Cost should not exceed 75% of the After Repair Value. For buy and holds, multi-families, retail, MHPs, etc., you would use something else.
- LTV or LTC – What percent of the ARV or purchase price (cost) will you lend?
- Property Location – I suggest you lend as close to home as possible. For example, we only lend in LA, Orange, and eastern Riverside Counties. You don’t have so much money that you need a large pipeline of nationwide or even statewide deal flow. You need a handful of good-quality loans from a few reliable brokers. Consider that you are in CA. What would you do with a home you foreclosed on in Wisconsin?
- Prepayment penalty – If important to you. It’s not for us.
- Personal guarantee – We always require this.
- Credit score – Your call. We ignore.
- Source of loan docs – Super important. We use Lightning Docs. Make sure your broker’s loan docs are at least traceable to a lending attorney (not off the web, title company, broker’s brother’s jailmate, etc.). Did I say Super important?
- Loan Purpose – Business Purpose loans only. Learn what this means. Even though some brokers can make and sell consumer-purpose loans, these can be a nightmare to foreclose/collect on.
Brokers will typically keep the points. You will keep the interest payments.
This is a lot to think about and it will frequently change until you settle in. Obviously, make sure your broker is licensed, has been around for a while, and is not simply an application taker. Require references and never do business with anyone with whom you are uncomfortable.
With all due respect, BP does not vet brokers. We don’t do business with anyone we haven’t personally met face-to-face. We also look at every property we lend on. That’s the advantage of doing business locally.
45 Replies
- 2yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
What states are you open to lending in?
LuxePrivate Investments LLC 572 Reviews - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
@Jeff Lawlor
How much do you have to get out the door? Most private lenders on here are seeing plenty of inventory including ourselves
7e investments53 Reviews - Member since 2023 · 26 posts · 9 votes2y
Quote from @Erik Estrada:
What states are you open to lending in?
I live in California. I don't think I need to limit myself to the state, though. I'd entertain an excellent loan in any state.
- Member since 2023 · 26 posts · 9 votes2y
Quote from @Chris Seveney:
@Jeff Lawlor
How much do you have to get out the door? Most private lenders on here are seeing plenty of inventory including ourselves
I want to start with $125K just to get my feet wet. This will be the first loan for me. I'll have close to $1M available in the fall.
- 12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes2y
What type of terms are you looking for ?
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
@Jeff Lawlor
We have some loans that fit that criteria
Happy to chat offline
7e investments53 Reviews - Member since 2022 · 3 posts · 2 votes2y
Quote from @Jeff Lawlor:
I'd like to enter the private/hard money market as an investor with money to lend. I don't want to find/underwrite/service the loans. I'll let a broker do that and earn a cut for their efforts. My problem is a lack of deal flow.
I reached out to private lenders in my community. Lots of deals "in the works" but nothing at the moment.
Unless find a way to get more deals in front of me, two things will happen:
* My money will sit idle while waiting for a deal, reducing my effective yield
* I may have to settle for a lower return among my few choices
How do I go about opening the deal flow floodgates?
Well, you can lend directly to me :) I'm scaling my flipping business this year. I have some private investment already. Always looking to raise more.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
are you looking for short term loans that payoff every 6 to 12 months or longer term
that will determine which direction you may want to go in.
probably not enough to do much in CA to start unless you want junior position which is highly risky for you.
I just had one of mine pay off in 78 days :) but it really spun the return dial..
- Real Estate Consultant · Wittenberg, WI · Member since 2014 · 572 posts · 572 votes2y
I owned a hard money lending company for 10 years that we built from the ground up. There's many variables to consider regardless if you lend directly or find a broker to deploy your money.
Which market to lend in, that states foreclosure and usury laws, do you have trustworthy boots on the ground there, and can you handle a default situation if and when it happens?
1st rule of lending........ never lend on something you wouldn't want to own, because someday you may have too.
I'm happy to help more offline. Contact info is in my signature. - Investor · Salt Lake City, UT · Member since 2019 · 339 posts · 126 votes2y
All we do is broker hard money nationwide. Feel free to reach out
- Member since 2023 · 26 posts · 9 votes2yThanks, Chris. As this will be my first loan, I'm looking to work with an established hard money company who can do the underwriting, servicing, etc. Good luck on scaling up, though!
- Member since 2023 · 26 posts · 9 votes2y
Quote from @Jacob Sherman:
What type of terms are you looking for ?
I'm leaning toward shorter terms, like 6 - 12 months. I will consider any strong deals, though.
- Member since 2023 · 26 posts · 9 votes2y
Quote from @Chris Seveney:
@Jeff Lawlor
We have some loans that fit that criteria
Happy to chat offline
Great! I'll reach out.
- Member since 2023 · 26 posts · 9 votes2yI like shorter term deals, particularly if I can get a up of the upfront points, raising my AAPR.
Quote from @Jay Hinrichs:
are you looking for short term loans that payoff every 6 to 12 months or longer term
that will determine which direction you may want to go in.
probably not enough to do much in CA to start unless you want junior position which is highly risky for you.
I just had one of mine pay off in 78 days :) but it really spun the return dial..
I certainly want to be higher up in the chain than junior and am not limiting myself to CA.
Redeploying my cash in 78 days sounds great! - Member since 2023 · 26 posts · 9 votes2yThanks, Derek. I've been studying the market and believe I'd be pretty decent at evaluating a loan. By working with a broker, I'd have a calm, seasoned professional guiding me should a loan start going south. I know a default situation often turns out profitable to the lender.
Quote from @Derek Dombeck:
I owned a hard money lending company for 10 years that we built from the ground up. There's many variables to consider regardless if you lend directly or find a broker to deploy your money.
Which market to lend in, that states foreclosure and usury laws, do you have trustworthy boots on the ground there, and can you handle a default situation if and when it happens?
1st rule of lending........ never lend on something you wouldn't want to own, because someday you may have too.
I'm happy to help more offline. Contact info is in my signature.I'll reach out.
- Member since 2023 · 26 posts · 9 votes2y
Quote from @Ryan Davies:
All we do is broker hard money nationwide. Feel free to reach out
Thanks, Ryan. I'll reach out.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff Lawlor:
I like shorter term deals, particularly if I can get a up of the upfront points, raising my AAPR.Quote from @Jay Hinrichs:
are you looking for short term loans that payoff every 6 to 12 months or longer term
that will determine which direction you may want to go in.
probably not enough to do much in CA to start unless you want junior position which is highly risky for you.
I just had one of mine pay off in 78 days :) but it really spun the return dial..
I certainly want to be higher up in the chain than junior and am not limiting myself to CA.
Redeploying my cash in 78 days sounds great!
well then Ping me and I will show what we do for my investors. - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff Lawlor:
Thanks, Derek. I've been studying the market and believe I'd be pretty decent at evaluating a loan. By working with a broker, I'd have a calm, seasoned professional guiding me should a loan start going south. I know a default situation often turns out profitable to the lender.Quote from @Derek Dombeck:
I owned a hard money lending company for 10 years that we built from the ground up. There's many variables to consider regardless if you lend directly or find a broker to deploy your money.
Which market to lend in, that states foreclosure and usury laws, do you have trustworthy boots on the ground there, and can you handle a default situation if and when it happens?
1st rule of lending........ never lend on something you wouldn't want to own, because someday you may have too.
I'm happy to help more offline. Contact info is in my signature.I'll reach out.
Keep in mind to be competitive in most markets today with HML when your up against Lima one or Kiavi a default is generally not going to make you money its going to cost you money. I started in HML in the late 80s and this has been true in each decade with the exception of 2008 to 20011 were loss's could be staggering. And many HML went BK because of it. - 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ned J.:
Just the post I was looking for....
I'm in a similar state as Jeff....got some capital that I want to deploy but have no experience in the HML sector
if you want to stay in CA. you might want to ping @Jeff S. he is a very experienced CA lender not sure if he takes on others but he knows the bizz for sure.
Quote from @Jeff Lawlor:
I'd like to enter the private/hard money market as an investor with money to lend. I don't want to find/underwrite/service the loans. I'll let a broker do that and earn a cut for their efforts. My problem is a lack of deal flow.
I reached out to private lenders in my community. Lots of deals "in the works" but nothing at the moment.
Unless find a way to get more deals in front of me, two things will happen:
* My money will sit idle while waiting for a deal, reducing my effective yield
* I may have to settle for a lower return among my few choices
How do I go about opening the deal flow floodgates?
I have been sourcing hard money loans in California as an investor through loan brokers for the last 30 years. There are many brokers who work with investors and they tend to have different approaches and terms from one another. Once you have a deal, do quick due diligence and let the broker know quickly whether or not you want the deal they have. Be ready to give them specific criteria on what you are looking for. Communicate well and perform when you say you will and they will reach back out to you for additional deals. It is common for a deal to be in the works, and for deals that look good to not happen. You just have to keep at it and remind the brokers you contact you are in the hunt for loans.
For the amount of money you are starting with, you might want to indicate you are willing to fractionalize to get into a deal. Be aware though that fractional deals can be a logistics and control problem if the loan defaults and there is a need to foreclose.
Having money idle is an issue with hard money lending. One way to try to minimize this is to eventually ladder your capital into several deals so that when payoffs come, sometimes unexpectedly, not all your capital is idle. I utilize a brokerage account with wiring capabilities for my idle hard money capital with idle cash placed in short term t-bills currently yielding around 5.3-5.4 %. If I have a deal, the t-bills can be sold and cash is available for funding the next business day.
Although I am selective, I am almost always on the hunt for new loans.
Can you really do much with $125k HML? I mean everything I've seen or talked to we're doing at minimum in the $400-$600k ish range, but maybe I am talking to the wrong people. I've done a few, think lowest I lended was $300k, highest was like $770k.
Being a HML is incredibly complicated, and time consuming. I like the idea of the it, I love the yield and asset-backed nature but **** this is the hardest thing I've done in some time.
- 2yScott TrenchPro MemberRental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
Look up the hard money lenders here on BP. Call them up and ask them for two things:
1) To review their funds. Many of these lenders have private debt funds, which achieves your objective. Be wary, each fund has risks (some are "levered debt funds", some lend in second position or at higher LTV than you will like, some may lend in regions that make it difficult to foreclose, some may charge high fees or offer low returns).
2) To ask them if they have any notes for sale - Be warned, lenders may try to offload the loans that they don't want to keep on their balance sheets. You need to do your homework on each loan, property, and borrower.
There's no free lunch, but becoming skilled at evaluating and purchasing notes or evaluating and investing in credit funds can be a great way to drive passive income. I personally have bought notes from two different HMLs on BP, and have had all interest paid, and all capital returned on loans that have reached maturity so far. Thanks for the shout-out, @Jay Hinrichs.
Now that you advertised you have money to lend with no criteria, @Jeff Lawlor, you’ll hear from everyone and their brother, nationwide, looking to extract it from you. Most will be honest and well-meaning. Some, less so. There is a huge amount of bluster and fake-it-till-you-make-it out there. Those beating their chest claiming they are drowning in applications either have low criteria or are exaggerating. Go slow, be patient, and educate yourself first. @Rob K. gave you some great advice.
We’ve been lending our own hard-earned money toward CA flips since 2010 and couldn’t be happier. Though there’s nothing wrong with using a broker, we originate our loans locally and don’t accept investors, fractionalize, or invest in funds. Whole loans only. Here’s some advice that I hope is actionable for you:
Consider attending the California Mortgage Association’s conference this September in Newport Beach. You can do this once for $100 and don't have to be a member. The CMA is comprised mostly of smaller lenders and brokers focused in California. You'll fit right in and meet many experienced investors who do exactly what you want to get into. Lots of lending lawyers, loan servicers, and other providers attend and could be good resources for you. You'll also hear about the AAPL, of which we are also members. This organization used to be small but now attracts the billion-dollar lenders and mega-funds. It’s not for you (and I wonder about us).
As you can see above, the first thing any broker will ask you for is your criteria. Unless you have some special knowledge, I suggest focusing on 1st position purchase money loans on single or 1-4 family homes. Your other criteria should address:
- Desired interest rate – What annualized rate are you realistically looking to earn?
- Max/min loan amount -- How much money will you lend on any one loan? In CA, there is no limit on the number of brokered loans you can make, but no loan can exceed 10% of your net worth, exclusive of your home.
- Loan Seniority – Unless you can afford to be wiped out on occasion (you can’t) or have enough money to pay off a 1st (you don’t), then don’t make 2nd position loans. 1st Position Only.
- Purchase criteria – How do you define a good deal? For example, on the flips we lend, this means Purchase Price plus Rehab Cost should not exceed 75% of the After Repair Value. For buy and holds, multi-families, retail, MHPs, etc., you would use something else.
- LTV or LTC – What percent of the ARV or purchase price (cost) will you lend?
- Property Location – I suggest you lend as close to home as possible. For example, we only lend in LA, Orange, and eastern Riverside Counties. You don’t have so much money that you need a large pipeline of nationwide or even statewide deal flow. You need a handful of good-quality loans from a few reliable brokers. Consider that you are in CA. What would you do with a home you foreclosed on in Wisconsin?
- Prepayment penalty – If important to you. It’s not for us.
- Personal guarantee – We always require this.
- Credit score – Your call. We ignore.
- Source of loan docs – Super important. We use Lightning Docs. Make sure your broker’s loan docs are at least traceable to a lending attorney (not off the web, title company, broker’s brother’s jailmate, etc.). Did I say Super important?
- Loan Purpose – Business Purpose loans only. Learn what this means. Even though some brokers can make and sell consumer-purpose loans, these can be a nightmare to foreclose/collect on.
Brokers will typically keep the points. You will keep the interest payments.
This is a lot to think about and it will frequently change until you settle in. Obviously, make sure your broker is licensed, has been around for a while, and is not simply an application taker. Require references and never do business with anyone with whom you are uncomfortable.
With all due respect, BP does not vet brokers. We don’t do business with anyone we haven’t personally met face-to-face. We also look at every property we lend on. That’s the advantage of doing business locally.
- Member since 2023 · 8 posts · 21 votes2y
Are you looking to lend bridge loans or longer term debt? We may have some secured options on SFR flips in the $200K range! We are used to paying 12 points.
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