Becoming a Hard Money Lender

Being a private hard money lender can be exciting and rewarding. Making a large return on your investment can be enticing. In order to become a hard money lender, you will need to do the following:

Access to Money

The first thing that you will need in order to become a hard money lender is money. You will need substantial amounts of money in order to get started in this business. It is best if you have the money yourself. However, you could also create a business relationship with investing partners in order to raise the money that you will need. Regardless of whose money it is, you need to have access to it.

High Risk and High Reward

Besides having money to lend, you need to have the right attitude. You have to have a desire to make a higher-than-average return on your investment. The returns that you can gain from hard money lending are much larger than any traditional form of investment.

As a hard money lender, you will be dealing with distressed properties and distressed borrowers on a daily basis. This means that there is a high risk of default. Therefore, you have to prepare for this possibility and know exactly what you will do if it occurs.

Establish a Business

Once you have determined that you have enough money to get started and the proper appetite for risk, you are ready to begin. The first thing that you need to do is establish a business entity. This can be done with the help of an accountant or lawyer. You will need to set up some type of entity so that you can limit your liability. A corporation or an LLC are two of the most popular choices.

Once you do this, you will also need to get the proper business licenses and certifications for your area. Each state has different rules, so you will have to be certified in the states that you want to do business in. Many hard money lenders stick to one geographic area so that they can limit this problem.

Get the Word Out

Once you are officially in business, you need to get the word out that you are a hard money lender. You can do this in a number of different ways. One of the best ways to do this is to set up a referral system with local lenders. Pay mortgage and loan officers a referral fee for sending you customers. When they do not have a program that fits with a particular client, they can send them to you. In many cases, you will be able to service their needs and make some money along the way. Also, you can advertise online or in local business sections of the paper.

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