Possible Hard Money Deal - Need Advice

3 Replies

Hello BP,

A friend of mine approached me about being a possible hard money lender on a property. I've never been a lender so I literally have no clue what documents or steps are needed.

Here's what I know.

- Owner owns the property free and clear

- Wants a short term (3-4 months)

- First lien position

- Asking for $110k. Property value $360k~

- Property owner is self employed, can't get a loan from a bank

- Primary residence for owner

How would you underwrite this deal (property and owner), negotiate terms, ect?

What documents/disclosures are needed?

Exit strategy...what if the owner doesn't pay monthly payments or doesn't pay off at the end of the term? Foreclosure?

Any advice is greatly appreciated.

Thank you!

If a friend approached me with first position at 30% LTV I would most likely help them out. Realize the rules change for lending on someone's owner occupied property, but on a one-off deal like this, I'm sure your state will allow a personal loan for such a small amount without many stipulations. You can go to a company like DocMagic and have them create a set of docs. for your state for under $50 and have the necessary disclosures you'll need them to sign. Good luck. I hope this loan doesn't change your friendship . . . that's definitely happened to me before.

@Darren Eady

 I'll check out DocMagic, thanks for the suggestion. What rules change for owner occupied over non-owner occupied?

Protections for the home owner / occupant.  I'm not a real estate attorney to run through them with you, but the protection goes to the tenant of the home more than the lender and the disclosures and documents change.  I only lend on non-owner occupied for that reason.

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