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Updated over 10 years ago on . Most recent reply

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48
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Kirsten Walstedt
  • Scottsdale, AZ
12
Votes |
48
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PRIVATE LENDING QUESTIONS

Kirsten Walstedt
  • Scottsdale, AZ
Posted

Does anyone know whether there is already an article somewhere on BP about how to become a private lender? I have some cash that I want to put to work, but I do not know how to start out as a private lender, what to ask for, how to protect myself, what to look for in a partner, etc. I own one rental property but do not have any experience with flips. I just met someone who is an experienced rehabber and he will help me evaluate deals. I asked him if I could be a private lender for him, but he said he has all of his lenders already in place. Thanks to anyone in advance!

Most Popular Reply

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3,269
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2,367
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Ann Bellamy
  • Lender
  • Tyngsboro, MA
2,367
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3,269
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Ann Bellamy
  • Lender
  • Tyngsboro, MA
Replied

I agree with @Jeff S. , they should always be business purpose mortgages/ DOT's. That's why, Kirsten, should you decide you want to do this, it is critical to find the right attorney so they can make sure to instruct you properly, so that all the loans you do are not subject to Safe Act and Dodd Frank, are business purpose loans, and don't run afowl of any state nuances.

For example, in NH, if you own a gas station free and clear, (clearly a commercial property) and take out a loan against the property and use the proceeds to pay your kid's tuition, it is a household purpose loan, and is therefore residential. It must then comply with the SAFE act, local licensing regulations, etc. I don't think they meant this to be the case when they passed the NH Safe Act, but there it is and they haven't amended it. You gotta love unintended consequences.

I'm saying this only to emphasize how important it is to have the right attorney.

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