Private lender

[Christopher Blake]

Hello BP. How does one become a hard money lender? What pros and cons are there for the lender. Also what amount of money is a substantial amount to be considered a private lender. Any information would be great. Thanks guys!!!!

[Jay Hinrichs]

@Drew McLaren  there is some exponential component on larger loans as you state however

here is how I looked at it over the 30 years of loaning hard money.

IF your in a foreclosure situation.. the value of your collateral is generally not what it was when you started the loan.. ERGO you are in foreclosure in the first place.

GFC meltdown saw values drop 20 to over 60% in certain markets .. your 70% LTV loan was underwater right out of the gate.

So to answer your questions.

In General... you have a foreclsoure

your value is 10% less than it was when you made the loan.. reason flipper butchered the job ... 

and again depending on state it could take 1 to 3 years to actually foreclose and of course your not getting any payments.. so your interest is wiped out. 

your cost of doing the foreclosure again state specific.. and I have never met a defaulted borrower that paid the property tax's  ( and again state specific how bad this will be).. 

you have selling costs usually 8% and you normally have to spend money getting the home marketable I have never met a defaulted borrower who left a home in perfect shape.

So you add 10% market devaluation  8% for sales costs.. 3% for foreclosure costs.. 2% for back tax

force placed insurance and utls.. and depending on the condition of the home 5 to 10% for rehab .. you can see how this eats into your 30%  .. 

then take states Like were i live and properly filed mechanics liens are super liens they jump ahead of your mortgage.. this can be thousands up to 100 thousands if your flipper totally screwed the subs. 

I have seen all these scenarios play out in real time.

And there are certain states I simply would not loan at all.. NY  PA  for instance

other states you like to loan in because foreclosure process is super quick and the above is mitigated a bunch... GA MS TX  and middle road West coasts states.