How can I make money as a hard money lender (aka equity-based lender)?

I'm not asking about the legal or securities implications. My concern is with the economics of the transactions, where to find deals, how to avoid getting screwed, etc. Ideally, the answer will point me to a comprehensive reference on the subject. I am having a hard time sorting the wheat from the chaff, as most of my online searches seem to turn up advertisements and companies who are wanting to lend money. That is not very helpful because there is no way to tell which of those companies is trustworthy and which ones just want to take a person's money.





I would also be interested in knowing about limited partnerships that engage in these activities.

How can I make money as a hard money lender (aka equity-based lender)?
I am not sure what level of investing you plan or want to do. Do you want to find the deals as well as fund the deals, you will need some type of license in the state in which you reside no matter which you decide to do.





Once you have a license simply advertise that you are now in the business of doing loans in your local paper. That will get you many inquiries of which you have to qualify them under your guidelines.





You will be required to complete the loan package, draw credit reports, secure appraisals, do all the escrow work and other necessary things to be a lender, issue approvals or disapprovals according to federal and state laws. You will also be required to prepare a set of loan docs. (There are many companies that will gladly do this for you for a small fee and a little information about the loan.)





The other way is have someone do the hard work for you and bring you the deals for your approval. This way the appraisal, credit report, escrow and other items are already in the loan package. You will have a complete loan package in your possession.





You will have to contact mortgage brokers listed in your telephone book tell them of your services. You can do this by fax, mail or telephone. I normally call, get their fax number and fax the information to them.





You can lend on 1st and 2nd mortgages or one or both. That they should send a complete package for your approval, what you are seeking in a loan package, the Loan-to-value you will lend on as well as the loan amount highest and lowest. If you charge points and other fees. You will again be required to prepare the loan docs.





If you need additional information by all means contact me.





I hope this has been of some use to you, good luck.





"FIGHT ON"
Reply:What level are you talking about?





Are you talking about an investor in an LP structure or Hedge fund that makes hard money loans or are you talking about bieng a hard money lender and doing the grit work yourself.





There is alot of things to look into. First if you are doing it yourself you want to find a niche'.





There are tons of hard money lenders out there in real estate and it is very easy to become familiar with, but how about those who make loans to small businesses or medical or dental recievables?





There aren't too many.





Also look at the risks of the industry. It isn't easy but if you find a niche' practice you will have less competition and more chance of a specialty. The only problem is that your business lives and dies with the industry you chose too.





I would consult an attorney in the state you are looking to begin. You can go federal but I would reccomend first knowing what is going on near you, it is easier to become familiar with.





You want to look up cost of money too. I would imagine you are not putting up your own, so you would want connections to get investors or borrow the money and find out what they want on thier return and you need to charge more. And find out what costs you would have with administration of this (accounting, auditing thier billing, actually billing for them, etc.)





Also look up the state usury rates. Most states have both criminal and civil penalties for violating these.





Check out what you would secure? Equipment, property, Inventory, recievables? and how to go about it (are there ways better than a U.C.C. lein?). Can you lock up thier recievables with a lock box (if you have a third party payor- Ie: insurance company you can do this).





Sounds like you need to consult an attorney near you. I only do work in a few states on the east coast so I would check your own state as the nature of a business in one state can be very different in another.