Hard Money
As for the requirements you are asking about; I suspect you really just want to know how you can get paid without breaking the law.
I would strongly recommend that you try to work out an arrangement (in writing) with your "investor" so they will give you a percentage of his/her profit. This way he will see all of the deals, and you don;t take on the responsibility of recomending an investment.
I know of a few deals where a hard money lender could reasonably expect to receive 12-14% return for a 4-5 month loan; and I suspect that by additional replies to your message that you will have more deals than your friend has money V ERY soon!
The investor I referred to is not yet a lender. I was asking about the requirements to be lender. Are there any specific involved? Sorry, I should have worded the question better.
hi arbolis!
If I need advice about 'how to build a house', I'll ask someone who builds houses, not someone who buys/sells houses. lending $$ is a completely different business.
I'm still not sure why YOU are asking this question. If he is interested in becoming a hard money lender, HE needs to ask the questions, not you....only he knows his true financial situation, businessess, and personal & professional goals. He needs to determine how involved he wants to get in the process of setting himself up in business as a lender....He needs to communicate with other HM & PM & conventional lenders to determine how he wants his money to work for him. He may need one entity for PM, one for HM, one for equity & holdings, etc. He needs to consult with his accountant & attorney about setting himself up without violating banking/lending practices or co-mingling his lending $$ accross different types of investment genres.
You currently use him as an investor, and you are currently not responsible for his lending practices...that's HIS business. If you decide to take it upon yourself to find the answers for him before you know what the rules are for your involvement, you may be setting youself up for MAJOR legal problems down the road.
Maintain your good relationship with this investor. If you give him unsound advice in one business sector, he may cut you out of all of his business investments.
If this sounds harsh, please believe me that I'm really only looking after both of your interests.
Most Sincerely,
keymtn
The interest rate that you can charge is based on the usary laws of that state if you are dealing with a regular consumer. It is different if you are lending to a corporation that buys property. In that case the states usually assume the copr knows what they are doing so you can charge more.
For example in NYI believe it is 14.99% per year for a 1st position.. The trick is if you charge points up front that you do not intend to charge higher than 14.99% cummualtive for the lifetime of the loan. So if it is a 30yr note and you charge 14% yearly and 3 points up front you can do that. 3%/30year + 14%
However if you charge 3 points up front and 14% on a loan of a 1 year term you will be breaking the usary law. 14% + 3%/1 year = 17 % total.
What is a point and why do lenders charge them?
A point is 1% of the totoal money borrowed.
So if you borrow 150K
1 point would be $1500. The point is money that is paid at the beginning of the loan. It is charged so people can get paid who brought the deal together. It can cover costs of the lender etc...