Hard Money Lending

10 Replies

I am investigating the concept of lending money for apartment/small commercial projects in Arizona.  Does anyone have any experience with this that could share pitfalls or positives?

I already invest in apartments and small commercial projects.  It is getting tougher to find deals these days so I am looking for alternatives to place money.

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Hello Steve,

I am very interested in the business model as well.  I would check out the Pitbull Hard Money Conference and a book by Sal Buscemi call Making the Yield.

You may be disappointed in the Pitbull conference, although going anyway will certainly teach you a lot, although possibly not what you need to learn.  

I'm also not a Sal Buscemi fan, although I have not read his book.  I would certainly read it, although it may not have quite the slant you are looking for.  

I would look into the American Association of Private Lenders www.aaplonline. The annual conference is going on right now, aaplconference.com in Las Vegas.

Also be sure to find a real estate attorney who specializes in private lenders.  These attorneys do exist, although they are few.  Call the local hard money lenders and ask them for the name of their attorney.  That attorney will be skilled in advising you on state laws and requirements, as well as SAFE act and Dodd Frank considerations.

A conventional real estate attorney is not enough, because most of those represent institutional lenders, who have their own attorneys on staff to produce documents.  I can't emphasize enough how critical it is to find the right attorney.  

Good luck

@Ann Bellamy What would you suggest to read or look up for better information about the lending business aside from you have already mentioned? 

@Jay Hinrichs is an expert in the field with hundreds of years of experience:)  all gained in a short time....

There are a couple of threads here on BP about books and the lack thereof on private lending.  I don't remember the names or authors however, sorry.  You might dig for those threads, but they go back a few years, even before this one.

@Jeremy Hunter laws are state specific... there are 18 states or there abouts were making any loan on any real property that is 1 to 4 units regardless of purpose or to what entity requires NMLS registration and number and state license number... the rest of the states its permissible to make loans that are commercial in purpose ( usually to an LLC) and not have the need for state licensure. Any loans made to homeowners requires licenses.. although some will argue they would be exempt because the homeowner is not using the funds to buy the home they are using them for commercial purposes.. But I would not hang my hat on that one.. better to just skip those or be compliant.

One good way is frankly just study up and state the MLO course in your state that will teach you the laws of your state.. those courses are cheap...

At the end of the day of course its a hugely capital intensive business you either need to have a bunch of cashed up investors your going to broker their money for.. IE you make broker type fee.

Or you need your own cash and Credit facilities usually at a local commercial bank.. And or Like crowdfunders raise funds in a PPM or special purpose LLC. Both those avenues cost quite a bit are management intensive and have a tone of liability for the operator.. IE dealing in non and registered securities..

Hawaii is one of the states you can lend for commercial purposes without NMLS and state license. Simply google the larger HML in the state you will see they are not licensed and one is a former judge... So I am sure he understands the laws.

@Jay Hinrichs Thank you for the info definitely gave me some things to think about and reference. I had noticed that Hawaii was one of those states that didn't need a license, which I had wondered about. 

@Steve Babiak thanks for the link it got me to another thread that was just as informative. I am definitely looking up the book.  

This has definitely been a very informative thread! 

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