advice for new private lender

[Account Closed]

I am thinking of acting as a private lender and wanted some advice.  From what I've seen, it seems like I will be acting as the second deed of trust.  What should I be doing?  Do I consult a lawyer?  What kind of background check do you do?  Most of the borrowers come from the bigger pocket community.  Is there a place that I can check up on who as a bad or good reputation?  What returns should I be expecting?

[Jeff S.]

The easiest and safest way to do this, @Account Closed, is to loan locally. Here, you'll have an opportunity to meet your borrowers, assess both their character and experience, and form the ever-important relationship with them -- mandatory in our view. If you do this locally, you will also know the area and can look at every property you loan on. This is our bare minimum lending criteria.

The good news/bad news for you (mostly good news) is that Nevada is easily the most restrictive state in the union to make a hard money loan. Only appropriately licensed brokers who are also registered on the NMLS can do an origination; even for a business purpose flip. This forces you to use someone with experience, and they are not hard to find.

I suggest you attend some local real estate clubs in Las Vegas and meet a few brokers and potential borrowers. Brokers who arrange loans will do most of the work with their own borrowers and sell/assign the loans to you. Some will originate loans to borrowers that you find. Either way, since they are local, you'll have the opportunity to fully vet these individuals (brokers & borrowers) and the properties. This is not something you can do easily or safely when loaning out of state to online strangers.

First position, purchase money only. No rehab loans until you know what you're doing. Spend an hour with an experienced lending attorney in your state to understand the basics. A lending attorney is not the same as a real estate attorney. Ask some local HML's for a recommendation. Good luck, Rita.