How to become a hard money lender

Financing, Hard Money Lenders, Private Money
1

I am interested in taking this route with my self-directed IRA. How have any of you gotten into the hard money lending business?

2

First thing you need to do is consult with your attorney and know the laws (such as usury laws) in your State. Once you’ve done that, determine your lending criteria. For example:

  1. Type of property you’re willing to lend on?
  2. Your max LTV (loan to value ratio)?
  3. Any up-front fees and if there are what percentage?
  4. Annual interest rate?
  5. Do you care about the borrowers credit score? Experience?

If you want to be a lender, you have to act like it so that investors will not take advantage of you. This will help you avoid really risky deals.

3

:banghead
Once you figure out what you want to do as far as loaning money please contact me as I am desperately looking for someone to help me out with 100% financing on my first deal. Send me a private msg & I could tell u the specifics of my situation.

4

Talk with a self-directed IRA custodian that specializes in alternative investments.
They usually hold networking events that let you meet investors you can loan to and the custodian can walk you through the steps to make it legal and profitable.

5

Hard money lenders give money based on the value of the asset, they often will lend no more than 65 percent of the asset’s market value, commonly termed a 65 percent LTV (loan to value).

You can borrow this idea.

6

Thanks for the replies so far. I’ve done my research on the numbers associated with HML but now my issue is finding local investors to help. How did you guys do it? Just through your REI club meetings? (none are near where I am)

7

Are you a successful property investor already? If not, how will you underwrite (decide) what is a good loan and what is likely a bad loan?

Does your state allow you to directly lend without being registered with the state?

8

Why should the lender take on all the risk? What skin in the game are you able to contribute?

What sort of LTVs do you expect? If there really enough equity to protect the lender if you are injured on site?

9

The lender is getting 12% intrest and points at closing. And the required home owners insurance would cover any issues of injury while the property is in my posession. that would be like someone sueing my mortage holder if they got hurt at my home.