I'd like to become a private lender- Los Angeles mentors welcome!

[Account Closed]

Hi BP!

I recently purchased my first residential property, no financing. I purchased this as a rental property, and I am aiming to have it rent for $4000-$5000 a month. It should be ready in about a week for photos to be posted on rental sites through the property management company. 

I live out of the country 50% of my time, which makes it increasingly difficult to have a normal job in the states. My goal is to keep up my traveling   while having my money work for me- and not just sit in a bank. A nice cash flow.

I will be back in CA soon, and wanted to inquire about becoming a private lender for real estate investors in my area. I have $200,000.00 that I am working with. 

Is this a good idea ? Are there better ideas for someone like me? Are you a seasoned private lender? How much money do private lenders start with? Is it wiser to split up the money into multiple investors ? How quickly are these private loans paid back- and at what rate usually? What happens when the buyer can't pay/ doesn't pay within the time? How do you find responsible investors who need private lenders? 

All comments , advice , opinions , questions welcome! 

[Jeff S.]

First, @Account Closed), and originate your own loans with your own money only, at any interest rate and points, to your heart's content. CFL's also get the usury exemption. We hold that license.

$200k is (barely) enough to do a 1st position loan in the Antelope Valley, which is close to you. It will also work in the Inland Empire, though I would avoid that because of the distance. With a relatively small amount of money, don't get sucked into rehab or other second position loans since these are very dangerous. At 10% APR interest for 1st position purchase money only, you'll have experienced flippers beating a path to your door and you'll sleep like a baby at night (and no, that doesn't mean waking up screaming every two hours). With $200k, you only need a few of these borrowers anyway.

Some asides:

There is no way to do a transactional loan, which is typically a one day loan, and keep the annualized interest rate less 10% to avoid needing a broker. These mostly involve deals with wholesalers, which we've learned to avoid like the plague. The very few wholesale deals we funded were supposed to be brain-dead simple transactions and all turned into nightmares.

All crowdfunding I'm aware of uses an SEC registration. SB978 won't apply here.

The 10% usury restriction is for any loan in CA, secured by real estate or not, David C. If the loan is secured by real estate then, as you know, usury won't apply so long as the origination was done by a licensed CA real estate brokers or a CFL. Many entities get exemptions for their specific type of loans. Credit Card companies and pawnbrokers come to mind.