Hard Money Lending Practice

[Garrett Gunn]

Hello all,

I had a few questions for someone who owns a hard money lending practice. I know there's a few folks on here that have HML practices that may be able to chime in:

Is it possible to use a business loan that you get for 3% APR and lend that money to Real Estate Investors for 12% and points or whatever terms are agreed upon?

How would one scale the business if you can't use a business loan to loan out more cash? Can you get private investors that you know or find and use their money and handle all the legwork and split the profit?

I have some of my own capital to loan but I don't want to put all my eggs in one basket and would like to eventually scale which would require more money as well as reinvesting the profits back into the business.

Thanks in advance!

[Jay Hinrichs]

Originally posted by @Chris Mason:

Originally posted by @Garrett Gunn:

Hello all,

I had a few questions for someone who owns a hard money lending practice. I know there's a few folks on here that have HML practices that may be able to chime in:

(1) Is it possible to use a business loan that you get for 3% APR and lend that money to Real Estate Investors for 12% and points or whatever terms are agreed upon?

(2) How would one scale the business if you can't use a business loan to loan out more cash? Can you get private investors that you know or find and use their money and handle all the legwork and split the profit?

(3) I have some of my own capital to loan but I don't want to put all my eggs in one basket and would like to eventually scale which would require more money as well as reinvesting the profits back into the business.

Thanks in advance!

(1) Yup, people totally do that. Others do it with HELOCs, too.... draw on the HELOC at 5%, re-lend at 12% and 3 points.

(2) Yup, that's pretty much what people do.

(3) When you have a proven business & model, assuming of course the year isn't 2009, raising capital is rarely an issue. "We have accomplished..." opens up a lot more doors than all the people saying "we intend to accomplish..." since 90% of business fail within a few years. When you're just getting started and have zero track record and a 90% chance of failure, expect it to tie up some of your personal capital, but it might not be as bad as you think. That's the nature of starting a business. @Jay Hinrichs got an anecdote for us? 

HML get money in basically 5 ways.

1.  family office is loaded with cash  lend it out

2. broker private investors money make broker fee's  very common.

3. LOC with bank.. need minimum of 5 mil to make any decent money and decent at this is 350 to 500k a year minimum NET

4. LOC with hedgefund/wall street.. need uber experience to land those..

5. YOur own cash