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   HARD MONEY LOANS

Setting Up a Hard Money Lending Business


paperfree Aditi Bansal 29:14
Published on Friday, May 12, 2017

A hard money lending business is based on real estates. Setting up a hard money lending business and becoming a hard money lender involves several amounts of risks but unlocks up a whole new way of investing in the real estate industry.

tags  #Hard money loan for real estate  #Hard Money Legal structure #Business planning software

 

Real estate investors like being hard money lenders because of the advantages that it has.

While starting your company, there are several factors that you should consider including;

  • Will you use your money or seek investors?
  • Will you be making commercial hard money loans locally, nationally or internationally?
  • Will you be investing in real estate, startup companies or early stage businesses?
  • What type of firms will you be lending money to? Real estate development, technology, construction, residential or commercial.

Using your fund:

1. Begin by naming your business and acquire a corporate address and phone number.

These are important irrespective of how you structure your business with a permit; the documents will need a corporate address. To reserve your company’s name, contact the secretary of state’s office on your state's website.

2. Meet with an attorney to determine the legal structure of your hard money lending business.

A limited liability company will be the most likely structure. You need to choose an attorney that is a professional in the business and real estate. Discuss with your lawyer the appropriate state of integration, tax matters, certification and various legal issues concerning residential and commercial hard money lending. Ensure that your lawyer sets up your employer identification number with the IRS.

3. Analyze your particular investment emphasis.

You will always want to focus on what you know and learn what the markets are doing in your space. Let’s say you are investing in apartments building; you need to know the rents in the area, business environment, property values, values of similar properties nearby and other factors that affect the value of the asset and the capability of borrowers to repay.

4. Buying business planning software and draft your business plans.

Also, underwrite the criteria based on the types of commercial hard money loans you will be making. To value measures, minimum and maximum investment amounts, interest rates charged, type of property, you need to develop such items as your loans. The business plan acts as your roadmap to keep you on track.

5. Assemble your financial projections.

You need to break- even points, monthly expenses, projected monthly and annual income based on several interests charged, legal costs and other parameters irrespective of the fact that you are investing your money.

6. Secure your field name and set up your website then launch your business.

Make sure that your website is done skillfully and put an intake form on the site to pre- qualify projects online.

Using investors:

  • Complete all the above steps and determine in what states you will be seeking investors. Your lawyer should be experienced in blue sky law.
  • You will need to hire an experienced management team that knows the real estate market and banking sector to add credibility and to raise investments capital easier.
  • Draft a two-page managerial summary and 20-page investor attentive PowerPoint
  • Improve your risk management and underwriting program.
  • Begin raising money and search for projects to fund. You will have a great business deal if you have a group of real estate brokers. Projects that are going through the due diligence pre- funding process, while seeking capital, gives you a portfolio of projects which will attract investors.

You must follow the Security Act of 1992 and other regulation like Red D when raising money from investors.



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