Flipper/Rehabber · Reno, NV · Member since 2016 · 235 posts · 35 votes
Hey there,
I am interested in becoming a Hard Money Lender because I just don't have time to manage rentals and all that. Does anyone on here know of some reputable contacts which could get me good rates on my money if I put it up for hard money loans? How does this process work? I have roughly 300-500k to lend, I'd prefer 10 years notes, with monthly payments.
Great topic that I love to talk about. The process of becoming a private money lender can be extensive, but here are a few things off the top that come to mind.
Few ways to go about this.
1. You could simply invest your money into a performing fund and receive your dividend yield per quarter/month or year. By rolling in $100k, earning 9% per quarter, thats $2,250 every 3 months, plus you learn the industry as you go.
2. You can pool investor capital together and create a fund. This fund depending on the type of offering can be used either for lending purposes or your own fix and flips or whatever your investing in.
To create a fund you must have a strong foundation. That means hiring a top notch attorney to create the private placement memorandum, operating agreement, and subscription agreement. Depending on the size of fund, you can setup a fund that attracts only accredited investors or non accredited.
To minimize risk, first thing is the foundational docs, second is to be an absolute machine in underwriting. Look for reasons why this deal wont work. Underwrite the borrower, as well as the property via a BPO. Make sure you the sufficient hazard insurance in place, and the entire loan process is well explained to your borrower. Know the foreclosure laws in your state whether they are Judicial or non judicial so you have your exit strategy clear if things go south. Which is why your numbers should be spot on. If you do not want to eventually own the property, do not loan on it.
This isnt the summary of the business...just a couple thoughts
My best thought on that is to find people who want to invest. After that get a contract of the loan/s and go from there. If you would like I could invest a portion for you.
Best Wishes!
@Sam Stout there's plenty of good HML and certainly some bad apples too. I've been HML for several years now and can tell you it's been a fruitful venture.
If you're going to invest you should at minimum receive a first mortgage as your collateral. Unless you're willing to do a riskier deal and take a junior lien position. I double-secure my investors to really lock up a deal.
Typically HML are short-term flip type deals. If you're interested in 10 years with monthly payments then that's more likely a private money deal. Both have their pros and cons but it's a great business. Feel free to reach out if you have any additional questions.
@Sam Stout there's plenty of good HML and certainly some bad apples too. I've been HML for several years now and can tell you it's been a fruitful venture.
If you're going to invest you should at minimum receive a first mortgage as your collateral. Unless you're willing to do a riskier deal and take a junior lien position. I double-secure my investors to really lock up a deal.
Typically HML are short-term flip type deals. If you're interested in 10 years with monthly payments then that's more likely a private money deal. Both have their pros and cons but it's a great business. Feel free to reach out if you have any additional questions.
What is the best way to protect your money? I've read about getting first lien on the mortgage but is that effective enough in itself or should there be more precautionary measures taken?
@Brian Garrett That is a main concern for me too. Should I seek out an investment group that specializes in HML or should I analyze the property I am loaning on and work directly with the borrower?
@Brian Garrett I typically take some extra precautionary measures. But not every loan is the conventional, so sometimes you have to make square pegs fit into round holes. If you'd like to hear about how to take these extra measures please PM me.
@Casey Mericle Just sent you a colleague request. I'd appreciate it if you can PM me further information as this is something I'm seriously considering. Thank you Casey!
@Sam Stout I think you'd be wise to seek out people who have done this in the past. Learn from the mistakes of others. Take note of what they do, how they do it, and what documentation and due diligence they require. It's much less costly to learn from others mistakes than learn from your own. Once you have the template down then go out and conquer for yourself.
Great topic that I love to talk about. The process of becoming a private money lender can be extensive, but here are a few things off the top that come to mind.
Few ways to go about this.
1. You could simply invest your money into a performing fund and receive your dividend yield per quarter/month or year. By rolling in $100k, earning 9% per quarter, thats $2,250 every 3 months, plus you learn the industry as you go.
2. You can pool investor capital together and create a fund. This fund depending on the type of offering can be used either for lending purposes or your own fix and flips or whatever your investing in.
To create a fund you must have a strong foundation. That means hiring a top notch attorney to create the private placement memorandum, operating agreement, and subscription agreement. Depending on the size of fund, you can setup a fund that attracts only accredited investors or non accredited.
To minimize risk, first thing is the foundational docs, second is to be an absolute machine in underwriting. Look for reasons why this deal wont work. Underwrite the borrower, as well as the property via a BPO. Make sure you the sufficient hazard insurance in place, and the entire loan process is well explained to your borrower. Know the foreclosure laws in your state whether they are Judicial or non judicial so you have your exit strategy clear if things go south. Which is why your numbers should be spot on. If you do not want to eventually own the property, do not loan on it.
This isnt the summary of the business...just a couple thoughts
Great topic that I love to talk about. The process of becoming a private money lender can be extensive, but here are a few things off the top that come to mind.
Few ways to go about this.
1. You could simply invest your money into a performing fund and receive your dividend yield per quarter/month or year. By rolling in $100k, earning 9% per quarter, thats $2,250 every 3 months, plus you learn the industry as you go.
2. You can pool investor capital together and create a fund. This fund depending on the type of offering can be used either for lending purposes or your own fix and flips or whatever your investing in.
To create a fund you must have a strong foundation. That means hiring a top notch attorney to create the private placement memorandum, operating agreement, and subscription agreement. Depending on the size of fund, you can setup a fund that attracts only accredited investors or non accredited.
To minimize risk, first thing is the foundational docs, second is to be an absolute machine in underwriting. Look for reasons why this deal wont work. Underwrite the borrower, as well as the property via a BPO. Make sure you the sufficient hazard insurance in place, and the entire loan process is well explained to your borrower. Know the foreclosure laws in your state whether they are Judicial or non judicial so you have your exit strategy clear if things go south. Which is why your numbers should be spot on. If you do not want to eventually own the property, do not loan on it.
This isnt the summary of the business...just a couple thoughts