Asked to give hard money loan

[Wendy Black]

What advice can you give to rental property owners who may give a small hard money loan ($25k?) to a fix & flipper?  It would be our first.

We met him at an REI. He's got excellent reviews online. He's done a number of fix & flips and remodeling jobs and has references. We would want to see his portfolio and follow up on recommendations, but we have no idea where to go from there. We would like to learn more about flipping and hard money lending from those who've been successful at it, but we're not sure it's for us.

Thank you.

[Jon Holdman]

Lend only in first position.

Limit yourselves to 70% of ARV using an appraisal done by an appraiser of your choice, paid for by the borrower.

Secure the loan with a mortgage or deed of trust, whichever is used in your state.

Have an attorney prepare the documents.  Be sure you're compliant with all laws, including usury laws.

Be sure any work done that needs permits is permitted.

Borrowers money goes into deal first.

Get monthly payments.

Get a full credit application (1003) from borrower.  Verify it.