Hard Money Lending - Becoming an Investor

[Marimar Hernandez]

Hello,
I am new to investing and have the opportunity to start investing on a hard money lending transaction for a short sale purchase and flip transaction.

According to the company servicing the loan:
The loan is a 1 year interest only. The note rate will be 11% with an investor a rate of 10%. The buyer is a seasoned property flipper (they have done 5 loans for him over the past 2 years).

The LTV is 65%.

How would you decide if this is a good investment?
What advice do you have for hard money investors?

Thanks!

[Dion DePaoli]

The broker is brokering you the loan. You still need to do a bit of due diligence on your own. That is how investors decide when and in what to invest. Assuming even the broker has the best intentions in the world you still have a duty to yourself to learn how to do some due diligence.

You sound like a very green investor and I would suggest likely too green. (well that and you said you were new) Perhaps spend some time with the broker on a deal or two and learn a bit more about the industry and read through BP to get a better understanding of your role and your rights and responsibilities when you invest in a loan.

I would tell you pass on the deal. To be honest, the fact that you came here to ask if you should make the loan means you should not. You need to learn a bit more, IMO, no offense. Spend some time with the broker to understand how he underwrites the deal (if at all). Speak with other investors and use BP to come back and ask questions when as needed.

There is one thing I can tell you, this is not the only deal out there now or into the future you have time to approach this with a better set of tools and knowledge than you have today.

Capital is hard to come by most of the time, you hold all the cards, the broker right now and the buyer need you more than you need them.