Private Lending

3 Replies

When lending private money is there a downside to having your own name on the recorded documents? I'm wondering if I should create a trust with me as the beneficiary to provide a level of anonymity. Although I'm not sure what I am protecting myself from. Is there a likelihood of someone trying to sue me for lending private money?

No one is going to sue you for simply lending your money privately, @Julian Buick . You're making it easy however, to do an asset search by placing your name on recorded loan docs. On the other hand, it's easy enough to determine the name of the members of an LLC or corporation and do a search for those entities. These just provide a minor bump in the road for anyone serious about checking you out or going after you.

An entity will certainly provide some asset protection, and was a recommendation to us early on by our lending attorney, but nothing he felt strongly about. Lending is generally a low risk business, unless you're doing something shady or stupid, which I know you're not. In this case, nothing will protect you.

One caveat would be to understand the lending laws in your state. (You didn't think you'd get a response not see a lawyer, did you :-) ?) Some states require you to loan under an entity if you are licensed and some require you to be licensed to originate a loan, but not all. In these cases, you can often find a broker to originate your loans for a fee and assign the documents to you or to your entity. Still, the assignment would get recorded so you'll have the same issue with privacy, but perhaps a bit of insulation over the origination.

Good luck, Julian.

Hello Julian,

Putting it in a trust could be your better bet. The allows for more of the 

anonymity. People looking for the "owner" have less chance of contacting you directly. 

A Trust Property:

Trusts are an estate planning tool used to facilitate the transfer of assets and to reduce tax liability. Some trusts can also protect assets in the event of a bankruptcy or lawsuit. Trusts help to preserve the full value of assets and ensure that those assets are distributed to their intended recipients. The trustee is required to manage the trust property in accordance with the trustor's wishes, the beneficiary's best interests and the rules of the specific type of trust that has been established.

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Make sure you do only non-owner occupied to avoid HOEPA. DFI requires a mortgage license if the purpose is someone occupying the property.

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