Small Hard Money Loan (popping my cherry)

[Clint Worland]

Good morning Friends.-

I have a client who is in need of about $10-$15k in order to fix up a rental property that just became vacant after a long term tenant moved out. They are asking to borrower a total of $50k in order to fix the unit up and also pay off some personal debt. The LTV works out just fine but I wanted to know of any pitfalls I should be aware of since this is my first time. They are fine with a 12%, paying all the interest up front and also a 1 year loan with a 6 month prepayment penalty. After 1 year what is the most common thing to put in the promissory note if they don't pay it off? How high can the rate jump to? I know that DODD FRANK has crushed some of the hard money out there so I want to make sure this is done right. I have an attorney looking into this as well. Any suggestions or advice would be great.

[Charlie Fitzgerald]

Paying off personal debt makes this a consumer loan (versus a business purpose loan to an investor) and subjects the lender to all rules and regulations of CFPB.  This would include proper licensing and usuary limits to start.