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Many people have heard about the possibility of double digit investment returns in private money lending but have no idea how to get started. licensed money lender It’s not very complex, the main thing you will need in order to become a private money lender is access to money.
One misconception about becoming a private money lender is that you need to have Warren Buffet sized pockets. If you want to strike out on your own; you can get started with as little as $25,000 and start pyramiding your profits immediately.
In my opinion, to enjoy the freedom that comes with this business it is better if you have the money yourself or you can act as a broker until you build reserves. However don’t be discouraged you can also create a partnership with other investors to raise the money that you will need to get started. A mutually beneficial partnership can be a great stepping stone- the way I see it 50% of something is better than 100% of nothing.
While private money lending can be utilized for any agreed-upon financing need, it is most commonly used to fund short-term real estate investment deals such and rehab and resell. In these situations because you are loaning money to investors, not homeowners, you don’t even need to be licensed as a mortgage broker since these types of transactions are generally to considered a commercial loan transaction. But you should consult with a real estate attorney to make sure of the rules in your state.
Also you should be very familiar with the geographical area in which you will operate or at least have someone very trustworthy on your team…Since many of the loans you will be issuing as a private money lender will be rehab loans, you will need the ability to reasonably ascertain the cost associated to get the house to completed market value.
In other words, once the rehabber has completed all the repairs and at what price can they reasonably expect the property to sell for? This is important because to protect your interests you don’t want to lend more than 65% of the end vale to protect yourself and the investor you can’t lend $75,000 on a property in a neighborhood where the houses are selling for $85,000.
These are just a few of the basic things you will need to get started in private money lending. I encourage you to attend an online course or conduct other research regarding best practices; it can save you time and money while helping you realize the double-digit returns you can realize and what is so attractive about this business.