Private hard money lending

[ferco]

Does anyone do any private hard money lending for real estate investors. If you do how do you structure the deals and what is a "reasonable" return on your investment dollars?What are the best ways to protect yourself legally? I don't know if Martha has worked on these deals from the legal perspective or not.

[Arif]

Are you thinking about providing money to investors or are you looking for a hard money lender?
If you want to be a lender then you could do a search for hard money lenders in your area to see what they require (interest rates, max LTV, fees etc.). As far as the legal aspect someone else will have to chime in.

[ferco]

I'm looking to be the lender.

[Martha]

You have a bunch of issues. Some states will require you to be licensed as a mortgage broker or loan broker. It may depend on how many of these deals you do.

You may also have to watch out for securities issues as "issuing a loan" can be considered the sale of a security.

Return on investment will be all over the board, based on risk. I represent some loan brokers and right now they are getting between 8 and 8.5% fixed for up to five years, and then the loan either balloons or goes on a variable rate. These loans are not high risk. The variable rate is either tied to prime or treasury rate. The ones I worked on most recently were 3% over the 5 year treasury rate.

If your borrowers are individuals state usury law will limit your rate.

You will need to talk to a lawyer to make sure you don't run afoul of the law.

[omni550]

ferco,

Most areas of the country have real estate investment clubs (google it to find one near you).

Contact the club and ask who in your area deals in hard money loans. They often have a person or two who deals in hard money lending. You could contact them and find out what they'd pay you and how they structure the loans, risk, etc.
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omni