how to become a hard money lender broker

Question

Hi, I'm wondering if anyone here knows. How do you become a broker for hard money lending?

Mike Klarman · Answer

I agree jay.  I always get back to people and in a timely manner and that's just for random calls, for clients I always answer/text/email within minutes of their contact.

Something that has also increased by volume is to help bridge the gap between good deal and investor.  Most investors need some getting in front of a good deal.  Need help choosing a market and setting up a network.

Most think that this can be done through mass marketing, cold calling, and then sitting back and waiting.  It's a much tougher grind than that.

You're looking for your 5+/10+ per year guys but they are few and far between and most times you need to steal them from their current money source by doing something outside the box, lowering your price, or coming to the rescue with emergency financing.

As a broker, you make 1% let's say.  So if a loan is 250k then that's 2500, you need like 4 of those every month at all times all year long.  There's always a min/max to the monthly as a broker.  My worst month last year was about 6k, my best was 27k.  It usually hit at around 12k - 15k.  And to do that, which is not volume by any means to the top brokers of this industry, but to have my brokerage do that volume and I am a one man show, I work 7 days per week and am in a constant A...B...C if anyone knows Glengarry Glennross.

Mike Klarman · Answer

So, most states do not require a license for HML, it is still a good to have next to your name and then you can also do conventional as well, but for HML you do not have to have an NMLS number.

How do you do it?  Well, the actual logistics is to research who the national, big box lenders are.  Call them and tell them you are a broker and want to sign up with them.  You'll have to lie a little and say you have some volume but are looking for a new out.  They'll want all your LLC info for your brokerage and all the info on you and you'll fill out a w9 form and then they will create a user/pass for their portal for your company and now you'll need to learn this portal.  It will allow you to price deals, analyze deals, upload deals, get UW feedback on deals, provide conditions lists, etc.

Now, you need to learn the products of this industry and know them better than the investors cause they can't be answering your questions, you need to be answering theres.  I'm lucky, I started at a lender as a cold caller, and then graduated to processor, and then was promoted to loan officer and by the time I got to that position I knew the loan products very well and I also knew how to sell them and who to sell to.  Lots of trial and error and also stealing what has worked for others.

Building up an active client roster is the hardest part.  Everyone dreams of having that pipeline that always has 10 loans in it throughout the year but You need 100+ active clients for that.  Most are a one a done for the year or maybe two, some try to get two done in a year, your 3+ per year guys are your stars, and if you have a 5+ guy you become his best friend and never let him go, and if you should come across the unicorn 10+ per year guy.  You just make sure you pick up his ever call, answer all his emails, there are no business hours for him.  He can call you Sunday 7am and you better answer, cause someone else will.

Rachel Weiss · Answer

Appreciate all of the responses. Can anyone point me to reputable lenders to start with? I don't want to mess up with my first clients....

Aryia Bala · Answer

Hey @Rachel Weiss - Not sure where you are located in NY but would be happy to help and give you some background - PM me. We started Malve a few years back and had similar questions. The short answer is, as of today, no licenses to broker private money for business purpose real estate is required by NY or NJ. If you want to dig into it and get technical we can recommend a law firm in the space

Mohammed Rahman · Answer

To become a hard money lending broker, you usually need to get licensed depending on your state—either a real estate or mortgage broker license. Once you're set up, you start building relationships with hard money lenders who are open to working with brokers. They’ll pay you a fee or points when you bring them deals.

You need to know how to evaluate real estate deals too—things like loan-to-value, after-repair value, and how risky the borrower is. Then it’s all about finding investors who need funding and connecting them with the right lender.

If you want help getting in touch with lenders or figuring out how to package your first few deals, I can help with that too.

Rachel Weiss · Answer

And I'm assuming the comp is typically 1 point, i.e. 1% of the loan amount?

Chris Seveney · Answer

typically no special license is needed when doing it for hard money loans that I am aware of. there may be states like california and nevada that are tricky where lenders need a license of some sort but for most part brokers i have seen are not licensed.