Starting in private Lending

9 Replies

I am new to trust deed investing and I am also looking to branch out into Private Lending. I would like to know if there are some Mortgage brokers and Banking Lawyers that other Hard Money/Private Lenders use in the Atlanta area. 

Well George, I suggest you find what the legal definition of "private lending" is and what a "hard money or commercial lender" is to start off. HMLs coin the private lender phrase to avoid several lending issues as well as some marketing spin to describe the relationship. If you advertise to the public that you'll make a loan, you're not a private lender but are in the business of lending. You're a "private lender" when you loan to someone you have had past dealings with, or they are approaching you based on a personal relationship, you make a loan to your neighbor or cousin. 

Being in the business of lending means following applicable lending laws, register as a lender, actually the process can be rather simple, but get legal first. If you are an illegal lender, you can lose your shirt!

I suggest you get with a licensed broker, many can have "investors" fund loans. Starting out, let them do the underwriting and due diligence. That's the best way to start!

A real estate attorney is probably not a finance compliance attorney, the good ones are probably in the $1,000-1,2000 range per hour. Depending on what types of lending you are interested in, if you are starting a business, there are compliance specialists on the internet, they don't really need to be in your area. As big as Atlanta is, there could be some there, don't know. 

Finance is not real estate, it's simply the collateral to a mortgage, it is highly regulated and violations can be felony charges with stiff penalties, big bang screw ups can get you 10 years and/or $100,000 fines plus  the loss of a note and costs. Real estate violations at a state level are more like a parking tick compared to federal lending laws. Not all violations are dead serious, advertising to make loans by an unregistered lender is a violation, but that is enforced on a random basis, find someone to make an example of pretty much. 

So, my advice is to find a mortgage broker and start there. If you're wanting to buy notes, find a local broker, you can read the note forums as to the due diligence needed in finding a good broker.

Good luck :)

Well @Bill Gulley  I already invest in Notes. I have been in that space for 3 years. I am looking to start loaning money out to investors and seeing faster returns. I will stick with notes, but I also want to learn about how to Lend and make my money work more for me.  That is why I asked for recommendations from other Lenders int he ATlanta area for a good Mortgage Broker and Banking/Finance Lawyer. 

Hey George, we should have lunch sometime, I've borrowed and lent out my fair share of private money over the years and can help you get some money in play if you like.  At the very least I can discuss the ins and outs of things and share some contacts.  Always happy to help.

Lending private money is relatively simple, its just a note and security deed here in Georgia, although the lawyers will add some stuff when you close through them, which you should absolutely do.  I do my own paperwork, but I know my lenders and borrowers pretty well for the private lending I do (and my main private lender is a Harvard law grad and contract attorney, so we're in pretty good hands on the documents).  Like Bill said, though, big difference between a private loan and doing lending as a business, there are some pitfalls, especially if you get into residential owner occupied stuff.

Staying away from the owner occupied residential units will keep things very simple. 

Lending to an owner occupant for a residential purchase is what triggers much of the mayhem.  

Lending to a fix/flip or buy/hold that is for investment purposes can be very simple. This can also be done in your IRA. Know how to underwrite your deals or at least double check those who underwrite your deals. Let the collateral carry the load.

I borrow from private lenders and IRA holders. Happy to share thoughts on a PM if you are interested in any business activity.

Happy to answer more detailed questions not specific to any business in the forum.  

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@George Frye  You'll want to decide whether this is going to be a more passive or active investment for you.  For example, you can lend at 10% interest for 3 years and not worry much about the deals as you're secured by property not requiring frequent analysis.

OR, you can hard money lend at much higher rates of return ...e.g. 25% per year.  However, this requires knowing the borrower and the deal, managing the draw schedule, etc.  Risk and return go together.

You can also pool your money thru other HML. Not sure what returns they provide back. Probably more like 15% per year.

If you know some great rehabbers or a buy-and-hold investor adding to their portfolio, you can great reduce your risk.  

@Darrell Shepherd I am looking to get into private lending and have the capital to invest. Would you be interested in meeting to discuss your experiences and answer some questions?

@George Frye

@Holly Litt

I started to lending back in 2012. It is a great way to make passive income. You need to know your state laws and whether you can act as a lender without a license. You need to have some understanding of Dodd-Frank and make sure you don't violate that law. Feel free to PM me for some more info if you wish.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

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