Looking for advice and direction on getting this business. For starters I will be lending my own money and over time will took to invest with others.
Thanks for any support or direction.
@John McLaughlin for clarification Hard money lending or Private lending?
@Don Harris I guess I have not differentiated the two. Lending secured on Real Estate in CA. I don't know what would make the loan one or the other other than perhaps the interest rate and terms.
@John McLaughlin do a search on BP for birth of those terms and you "may" get clarity. Seems as if they are used interchangeably a lot of times. My understanding is that a HML Is in the businessiness of lending , usually a mortgage broker. A PL is an individual that is putting up thier personal funds to either Lend or JV or any type of transaction.
Get a great attorney, Learn the laws about lending and usury and have your bs detector on high.
Advertising yourself as a lender as I have done seems to bring every scammer out of the woodwork using every fraud imaginable. If you don't know all the ways you can get taken, you will quickly learn them. Hopefully not the hard way.
I found it pretty exhausting as an individual trying to vet deals myself. It is sort of like being the dept of homeland security. You have to stop every single terror threat because if you only stop 95% you are out of business.
there are exemptions for loaning your own money pretty much in each state and that is usually 2 to 4 transactions a year and not more than 5 to 7 mortgages in your portfolio at anyone time.. if your going over that amount .. you need one of two things in CA.
1. you need a CA brokers license and then do the requite disclosures.
or 2. a NMLS license and follow those procedures.
Now many properties are exempt as well. this generally pertains to 1 to 4 units.
Usury on the West coast triggers at 20 to 50k so that won't be an issue with you as I doubt you will do many loans that small.
Just couching yourself as a private lender is a misnomer your either lending and regulated or your not... So look to the state for what the exemption is.. And or what properties are exempt then go from there. if you need a broker to run the paper work that is not the end of the day either.. 1 out of 10 people in CA are brokers or agents.
- Find and speak to other HML lenders and ask how they got set up
- At first just lend in the major 5 counties of so cal so that you can actually see the home
- Find a really good appraiser that you trust and run all your appraisals through him/her
- Find or advertise to Loan officers ( Every loan officer has a deal that needs HML or Private money )
- Don't rush into this and do your homework
- Get a Real Estate lawyer to at least consult you.
This should be a good start and from there I'm sure you'll find your way and keep us posted Sir.
Good luck :)
I founded Source Capital Funding, Inc. (www.source-capital.com) in 2007 and can provide great insight into this. It is a wonderful business if done properly and you have the right support team (attorney, compliance officer, staff, etc.). Underwriting is not rocket science but there is a right and wrong way to properly run and operate a hard money/private lending business. Please feel free to contact me directly and I will be more than happy to share my thoughts.
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