Precautionary Approaches to Fraudulent Private Money Lenders

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Precautionary Approaches to Fraudulent Private Money Lenders

Mike DeBuccio Jr.
Specialist · Tampa, FL · Member since 2018 · 96 posts · 40 votes

Hey BP World!

I have found that many of my investors have been having issues with fraudulent private money lenders down here in Florida.

With that being said, I was wondering what types of precautions can be taken when dealing with a private money lender.

Any feedback helps!

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John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
8y

Ask for references. Ask on BP. NEVER pay advance fees with the exception of an appraisal. Legitimate lenders may want points, and those should ONLY be paid at closing. 

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  • Neil Sherry
    Lender · Lake Worth · Member since 2013 · 8 posts · 2 votes
    8y

    a

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Ask for references. Ask on BP. NEVER pay advance fees with the exception of an appraisal. Legitimate lenders may want points, and those should ONLY be paid at closing. 

    4Reply
  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    Dont go online to find someone!!! Go to your local REIAs and find out who the people are that are paid sponsors. They are going to be the legit people. There will be people who have done business with them already.

    Check the deed records to find the deed of trust or mortgage with the company's name. If they have done a loan in your county, there will be a record of it in the deed records.

    1Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    8y

    @Mike DeBuccio Jr. never pay an upfront fee.  Always get the money when you are sitting at the title company actually closing the deal

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  • Mike DeBuccio Jr.
    OP
    Specialist · Tampa, FL · Member since 2018 · 96 posts · 40 votes
    8y

    @Melvin List,

    Thanks for that input, thats probably the best advice I have gotten to relay to my investors. May seem like common sense, but obviously fraudulent lenders are looking to prey on people that may not be familiar with the financing methods of investment properties (newbies), or have no other financing options. Lets connect! I'd love to hear about your involvement in lending down here in Tampa. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    biggest thing i see is too good to be true.

    first off nationwide lender NO lender other that wells or BoA type is nationwide.. 12 state require licesnes to do investor loans regardless of LLC or not if its one to 4 units licesne required.. thats the first tip.

    I even see that when i go to like the private money lenders conference in Vegas.. guys say we loan nationwide they are real companies but east coast based and don't have a clue that they need licenses say in Oregon CA NV .. WA no.

    rates too good to be true.. NO one gives investor loans at 3%  or even 5% to beginners.

    adds that say loans from 1000 to 50 million.. dont know many lenders that have capacity to do a 50 million dollar deal that are going to do loans for 1000.00 right ?

    bad or broken English...  no presence on line..

    ANYONE who advertises in a public median is NOT a private lender they are in the business and therefor a Hardmoney lender..  Private lender is as  @Rick Pozos pointed out some one you meet at a gathering has no business card is a local professional with usually a few hundred grand in their IRA and for those folks most states have a small carve out to do a few private loans legally..

    I always encourge folks to just pop on Lendinghomes website they have a great pricing matrix you can check and those are about as good of HML rates as you can get.

    now to be fair HML rates have been hammered down.. with all the free flowing money.. but those great rates as you will see in the matrix are not fico driven they are experince driven or cash into the deal driven.. FICO while nice does not pay you back if your flip goes turtle...

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  • Account Closed
    Lender · Tampa, FL · Member since 2014 · 543 posts · 168 votes
    8y

    On investment property loans, being asked to pay a Commitment Fee to a lender upon them issuing a Bona Fide Loan Commitment or paying a $400 to $500 Due Diligence fee is not an unreasonable thing for a Private Investor, Mortgage Lender or Bank to make.  Just be open minded and reasonable.

    It's to WEED OUT potential borrowers who will waste the investor's time and effort to loan them money. 

     I know Private Lenders who loan millions who will tell a borrower and their Mortgage Broker to go pound sand if they pull that ..."I'm not paying any upfront Fees"  BS.

    I've seen Private Investors pool money where their friends cash out of IRAs, 401k, Annuities, incurring penalties to fund loans for borrowers who suddenly go MIA on the day of loan funding!

    What about these Investors and their costs?    

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