How to structure a hard $ lending deal as lender?


I have this opportunity to know this Real Estate Investor which has closed more than 15 deals last year. He has his own power team and know what he is doing. (not expert, but enough to make a nice amount of $ last year.)

So he has exhaust all his capital on 3 deals that he is currently working on and he just found his 4th deal that need $ to strike.

He was going to go with HML which will charge him 12-14% with a 3 months term.

The total amount he needed is $130K.

Currently the seller asking for $150K. and it needs minimal work. Houses around that area has been selling real fast, most houses dont last 60 days. And currently no houses forsale at that area. I did a comparison on recent sold. And houses with those specs sold in $200K range within 30 days!

So its a no brainer. to lend him the $130 he needs via my HELOC. and charge 10% so the return is $13K after 3 Months.

My question is.

Is there any online contract out there which can structure this deal as a HML?

Is there things I need to look out for?

What kind of stipulation should I put on the contract if it goes over 3 Months and worst yet… What happen if he runs with my $?

Oh… The borrower is my co worker too.

Or should I just leave it to the pro.? And dont try to make this interest?

Thanks in advance!


Howdy Realstart:

You have annual rate of interest confused. The HML’s charge 13% per year so the $130,000 over a year would cost $16,900 over 12 months. Most have a minimum of 3 to 4 months interest.

You could still make a spread and a nice return but what you are proposing would be usury and subject to the debt being cancelled plus other penalties.

Get a lawyer involved and get the borrower to pay the bill. Should cost less than $300 in legal fees to protect yourself.


What kind of stipulation should I put on the contract if it goes over 3 Months and worst yet.. What happen if he runs with my $?

Understand if you are the HML for your co-worker that if he defaults you own the property for 130k even after he has dones some work to make it better. But then you get stuck with the property and you will have to sell it to get out.

The amount of money you will make on the deal is determined by the amount of money to lend based on like a 15 or 30 year note at the 10%. whatever the monthly interest is on that is what you get paid per month for each month he keeps the loan open with you.

So I don’t have exact numbers, but you will need to calculate the 15/30 year mortgage payment INTEREST for that amount at that rate, but then just discard the portion going to principal. That is the amount you are paid for the 3, 6, 12 months it takes for him to sell it.

Most HMLs I have seen do 6 and 12 months and a minimum of 3 months at 12%-15%. Also, don’t forget to throw some points at it if you are gonna be just like the big boys. Around here they throw 4 or 5 points ($4k-$5k per $100k of loan). If you did $130k at 3 points you would then calculate the payment to you based on a loan of $133,900.

If you did this deal similar to this the loan would cost him and make you $7k-$8k in 3 months time.

Does that sound right? Anyone?

Unless you have a good NOTE, DOT, and other supporting documents you should reconsider loaning money out. Not only do you have to be wporried about Usuary issues but also making sure you can foreclose and what your rights are inthe event of a default. HML is a risky biz. Unless you understnad how it works and the risks don’t do it!


Thanks Rob. He has been approved from a HML… and they have a contract… He just need to sign it… I have reviewed the contract. And its has covered all the terms that you have pointed out.

I am going to give this contract to my lawyer to review. If it looks good… I will undercut the contract by $1000 - $2000 and take on this loan and follow the exact contract that is written.


I’m a real estate attorney and work with many investor clients. I loan money to many of them. The key for me is that I know these people as friends and clients. I do their legal work. Always try to stay below 80% LTV and even lower if you are less familiar with the individual.

Hard money lending is the easiest way to get rich. The hard part is getting that first 75k to 100k nut to lend out.