I would like to become a private lender/Hard money lender. I have the money of course, researching for lawyers now..... Any other suggestions?
@Chris Grooms I’ve been listening to the private lender podcast for this same reason. It has been informative. Might be worth a listen. We’ve built our business with private lenders and want to do some lending as well. Best of luck!
@Chris Grooms and
Private lenders need to analyze the deals to insure they are investing wisely. You are investing in the individual as much as the property. Investing with someone who has a track record is important as well. I have been on both sides.
I use a private lender for my BRRRR projects. The private lenders fund the acquisition and rehab. I conduct the repairs and rent the unit out and refinance the property and repay my private lender back. Then I can repeat the process. I have my attorney prepare a note and mortgage or deed of trust, depends on your state and the private lender then has time to review the documents (have their attorney review the docs) and request any changes. Funds are wired directly to title company the day of the closing. Never send funds to the investor direct. During the closing, the mortgage is recorded as the first lien holder to protect the investors funds. In the event the investor does not perform you could foreclose. I have one lender who provides the documents directly to the title company just like a bank would do.
I have lent money out as a lender as well and this is the process I follow.
If you need more specific details you can pm me.
@Kenneth Garrett thanks so much I’ll definitely pm you! We’re both in Illinois as well awesome!!
@Will Pritchett thanks so much I will do that.
You’ll need a lending attorney (sometimes called a lending and securities attorney), @Chris Grooms . He or she will be able to discuss lending law in your state, including usury, licensing requirements, etc., and also provide you with a complete set of loan docs. Real estate attorneys, who might do loans today, leases tomorrow, and evictions the next might not be specialized enough. Similarly, closing attorneys are generally experienced at conventional loans but few will have a broad background in private lending.
To protect yourself, a proper loan package consists of many more documents than a note and deed of trust or mortgage. These are state specific, and you don’t get them from a borrower.
Just like doctors, CPA’s, and most other professionals, the best way to find an appropriate attorney is to ask others that need the same service. Talk to other hard money lenders and ask who they use. Lending lawyers can be as rare as hens teeth so you’ll likely hear the same few names. These are who you’ll want to call.
Several of us posted our processes in detail in the thread below. It’s a bit old but still 95% applicable in our case.
This should give you a good start at becoming a private lender. It's written from the perspective of finding and qualifying your buyers and their properties. Alternately, as a start, you could just invest thru a local HML, many of whom take on investors and/or sell their notes.
Good luck, Chris.
Jeff S. – Private Lender in Los Angeles
I'm also in IL at the moment. Where are you located?
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