Hard Money business set up

[Mike Carr]

How would you structure this type of business?

Two friends of mine (Friend 1 and Friend 2) have expressed interest in real estate and Friend 1 has the money to do so. I want to open an LLC with Friend 2 in order to distribute the workload and handle day to day operations. I could handle it myself but I also flip and landlord so this is not a full time gig. I will have Friend 1 provide the financial backing. My thought process is to pay him back with 10% interest. If I put loans out at 12% and 3 points than we would keep the 3 points and 2% difference. The money would be handled on a per loan basis so we wont be paying interest on large lump sum.

Questsions:

Should all three of us come together in one llc?

Once the loan is originated do you service it yourself or hand it to a loan servicer?

Do you need a MLO to do this?

Any software to keep track of the loans and provide simple statements for us and outside investors?

Financing the entire project: Use an escrow company to handle draws at borrowers expense?

In your opinion, what is the most important part of due diligence as a hard money lender? 

How restricted is advertising what we do? 

Any major items or tips from seasoned lenders that might help?...we have already come up with loan terms/criteria/ ratios/ application process that are pretty standard in our market. We will have the borrower sign personal guaranty and a deed in lieu. Also, we will have an attorney and CPA set up the business and necessary paperwork.

Thanks for any input.

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