Private Lending Terms

4 Replies

How does one go about being a private money lender?

Is there a standard contract available?

What are the standard interest rates?

Does one charge points?

How long is a private money loan typically offered for?

What is the standard percentage of loan to ARV?

Aside from fix and flips, do private money lenders loan on rental properties?

Anyone know the name of a good guide or book on this?

@Carl Gryska , lots of questions but the answer to most of them is that the deal is completely flexible and can be just about anything a willing lender and borrower agree to with the caveats that there are some State specific usery laws and that, because of Dodd-Frank, the borrower is not an owner/occupant.  

Is there a standard contract available?           no.  

What are the standard interest rates?  There are none. Many States have usery limits but they may not apply if the borrower is an LLC. I am fairly certain that the laws in California will be unique to that State.

Does one charge points?     if one wants to.

How long is a private money loan typically offered for?  As long as you'd like.  My shortest deal was 1 day.  I write for years occasionally.

What is the standard percentage of loan to ARV? There is none. I love 40% LTV deals but I have funded 100% (including rehab funds) rarely. These were interesting deals and experienced borrowers.

Aside from fix and flips, do private money lenders loan on rental properties? yes.

Anyone know the name of a good guide or book on this?  I don't but the topic comes up frequently here.  I suspect @Steve Babiak 's links are good places to start.

@Ann Bellamy  posted the only related book title I'm aware of in one of my earlier links, so look there.

Thanks for the shout out, @Steve Babiak .  Carl, one of the biggest issues with new lenders is compliance with SAFE act considerations and Dodd Frank.  Find an attorney who has done lots of private lending in the state you want to lend in.  Not a real estate attorney who has closed conventional deals for institutions.  You need someone well versed in local lending laws.  Institutional lenders are licensed and have attorneys on staff who do nothing but compliance.  You don't.  To find one of these attorneys, call the hard money lenders in your area and ask who they use.

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