Hard money loans are often used as a last resort for borrowers who need money quickly and cannot get financed through traditional means. While this type of lending can be risky, it can provide large returns for investors who wish to pursue this type of lending. If you want to become a hard money lender, you will need access to relatively large amounts of money and be willing to lend it to people in distressed situations.
Instructions
1. Set up a business entity for your hard money lending business. For example, you may want to set up a limited liability company or a corporation for this process. This way, you can limit your personal liability in case a customer sues you. You can set up either one of these entities by filling out some paperwork and paying the filing fee with your state.
2. Obtain a license to lend in your state. Most states require hard money lender to have some type of lending license. This license is usually required if you will be lending money in the form of mortgages that are secured by real estate.
3. Advertise and promote your hard money lending business in your area. You could do this by putting an ad in the phone book, billboards, television, newspapers or radio. Many hard money lenders also create websites that provide more information for their customers. By creating a website, you can make it easier for people to apply for hard money loans and to find out more information about you.
4. Develop relationships with traditional mortgage lenders in your area. Many hard money lenders set up referral programs with these traditional lenders. By doing this, you can pay a flat fee for a referral for an individual that did not qualify through traditional lending standards. Many mortgage brokers and lenders would be willing to give you referrals for these types of customers.
5. Accept applications and make lending decisions. When potential borrowers submit applications to you, you will have to look at the borrower's ability to repay and the value of the property. Most hard money loans are based on the value of the property and use low loan-to-value ratios to help protect the lender.
