Private VS HML??

[Edwin E.]

Jon Holdman, or anyone for that matter, I have a question for you (all). I've been reading on BP concerning HML interest rates in concern with usury loans. I understand that each state has its limit of what is considered an unscrupulous loan. In FL, where I am at, the rate is no more than 18% annualized. I am not an accountant so I am not extremely clear on how the rate can be broken up but from what I understand the total points and annualized rate cannot exceed 18%. Now when I had first begun in RE I had met some rehabbers that had a deal worked out with, what I assume now to be Private money. Where the Private source would fund the acquisition + rehab, or just one of the other, with an interest against the equity when sold, like 50% of the profits for example. Obviously that would break the predatory lending rule of an annualized 18%.

Am I missing something or is this State resolved? Are these type of loans only allowed to be established via Private money (the percentage of profits) and not HML? Would the combination of the two break the law? A lot of questions, and I trust you will give a full explanation, (I've been reading your post so I know that will be the case :) thank you very much sir and God Bless

[Ted Akers]

@Edwin E. As Joel mentioned a HML is distinctly different from a JV. If you pursue a HML strategy check your state statutes regarding licensing. States differ regarding HML licensing. I am not sure about Florida; but it has always been heavily regulated for traditional lenders, and I suspect probably requires a license for HML. In a JV you, or your entity, are part of the deal and can build in some protections in the JV Agreement such as time frames for you to take over the deal. While it cannot guaranty to eliminate legal proceedings I would prefer it, especially in Florida. As a HML with a Mortgage and Note as security your ultimate recourse is to foreclose, and Florida's foreclosure time line is very long because it is a judicial foreclosure state and the courts are backlogged.