Hi BP community,
I have interest in hard money lending, however I am new to it. I have the following questions: 1) how much money do you need to have in order to become hard money lender 2) how do you find your clients 3) what is the term for the loan 4) what are the drawbacks of being a hard money lender . Any input is welcome. Thank you.
Tony great questions.
here is my take on it. if is your own capital then 5 million in my mind is about the amount you need to start... at a 14 to 15k apr your making 600k a year.. which is average income for a HML or maybe a little low.
If you can leverage up then 20 to 50 million is a nice business you will make about 1 to 2 million a year if you won the company.
it sounds like you have zero experience so HML is probably far to risky .
what I would do if I was you if you have a million or two .. use an established HML to place loans for you in their network and shadow it learn what they know and how they vette then after a few years go on your own.
HML at the 100 to 200k range as an example is a waste of time not enough money in it at least for a business to eat off of.
I agree with @Jay Hinrichs- and I am a HML lending my own funds. There is about a two year school of hard knocks to go through as well starting out so be prepared for some scammers to take your potential profits for awhile until you figure out how to do it right.
Maybe you would be more happy with a 12% return as a performing note holder rather than a lender yourself. If so, connect with me and I'll explain my history and opportunity.
@Tony Kogan Risks are simple as Darren eluded to.. you don't know what you don't know.. NOw if your a lawyer ,,, lender or RE broker you have some experience if you have none of that then you will go through a learning curve.... or you will be so cautious that it will be hard for you to pull the trigger... the risk are to many to mention.