Help On Starting Private Lending
Happy New Year!
I’m considering lending money to homeowners in need.
What’s the maximum amount of interest and points can I legally charge as a private investor?
What law should I read up on?
Is there any good starter article on the Internet?
Thank you for your time in advance.
[ Edited by whyK-CA on Date 01/02/2005 ][ Edited by whyK-CA on Date 01/02/2005 ]
From the conventional lending perspective in Minnesota, the most you can legally charge is 5% in fees but I can't tell you about the max interest you can charge.
I am guessing the private money is different than conventional since I've seen some hard money lenders charging upto 8 points.
I can tell you from my experience, which is; that I have been lending for a long time now. I always use a broker. They know all of the documentation to use so that no one gets into a jam. The borrower pays for all costs and they give me 12% Int. only . By using a licensed person, I am not userious. Hope that helps, Dude
Lending to homeowners in need will quickly get you in trouble if you are not following all the rules. CA has a number of rules.
Using a broker might be a good solution. That said, you need to understand if you are still responsible for discloser mistakes, etc that a broker might make. Check to see if they carry E&O insurance.
John
[addsig]
One other question/comment.
Are you trying to make money and generate an income or are you really trying to help people in need?
If it is more the second then there could be better ways to do it without the legal implications.
John
[addsig]
Thank you, folks for your replies.
Active_re_investor,
I’m trying to lend the homeowners in default who are looking for a short term loan and have good reason for it, so that in case they decided to sell later, I might have good chance hearing from them first. But since my cash supply is very limited, I need to make as much as I can legally do in the process.
Thank you for your time in advance.
In Colorado the Colorado Uniform Consumer Credit Code covers most of the rules. We also have the Colorado Division of Securities which licenses those that solicit $$ for private lending so they would definitely point you in the right direction for the rules and regs.
I broker private money and typically charge 2 pts origination and 10-15% interest only depending on the LTV of the property.
I also made a short term loan on a 2nd deed of trust and charged 0 pts and 10% MONTHLY interest so there you have it.
If it is your own money, in most states your legalities are few, providing you cater to investors (not primary residences), which is what I would recommend. Or allow a broker to handle everything.
[addsig]
The best you could hope for, I am assuming you are in California, if you are not lending your own money and you do not have a license, is getting a refferal fee from a broker, which depending on a broker could range from $100 to 25% of their commission. And I've seen brokers charge 8% - 10% of loan amount.
Quote:
On 2005-01-04 14:07, whyK-CA wrote:
Thank you, folks for your replies.
Active_re_investor,
I’m trying to lend the homeowners in default who are looking for a short term loan and have good reason for it, so that in case they decided to sell later, I might have good chance hearing from them first. But since my cash supply is very limited, I need to make as much as I can legally do in the process.
Thank you for your time in advance.