Making a loan secured by real property without a broker (I have the money to lend)

[Lupe Santiago]

Hello - I was looking through Craigslist and came across a Borrower who needed to borrow about 2/3rd the purchase price for a property, which is in Las Vegas, Nevada. I like the property and the loan to value... the question I have is fairly simple:

Can I fund this loan as a non-licensed, private individual? There's no brokers involved or anything like that. Just two people trying to make a deal work. I've bought a few trust deeds this year in California, but that's it.

Thanks for your responses!

[Ann Bellamy]

I don't believe that SEC regulations actually apply to one person or entity lending to a person or entity. They usually relate to selling securities (which can include pooled funds for the purpose of lending) or advertising for "investors". The borrower would be more at risk than you in this case, since he was advertising. No legal advice intended, I'm not an attorney, just my understanding.

What is very important, however, is that you protect yourself against those requirements that involve lender licensing, usury, and the SAFE act. The SAFE act regulates consumer loans, not business borrowing, but if the loan goes to foreclosure, and the borrower claims it was a consumer loan, not a business loan, you will be int he position of proving to the contrary.

Therefore, I strongly recommend the following:

Lend to an entity only, not a person
Get the borrower to sign a declaration stating the loan is for business purposes, and the proceeds will be used only for business purposes.
Get a Nevada attorney who has worked on private lending closings to generate your documents and advise you on any Nevada llaws and requirements. The borrower should pay all the closing costs.

I also agree with Justin Hughes about cringing when I hear Craigslist. It's full of scammers, so I would not do the loan without boots on the ground in Nevada to make sure the property in question is actually there with a house on it. Make sure the property you see matches the property you are lending on, and have your attorney look for liens. Also have him look for federal IRS tax liens in the county in question. IRS liens attach to all properties owned by the borrower in the county in which they are filed, if I understand them properly.

I would also question as to why a borrower couldn't find a local private lender. So the answer would typically be
1. He is brand new and doesn't know how to find them
2. He has burned all his private lender bridges in Nevada, so that even hard money lenders won't lend to him.

The second one is worse than the first.

Sorry if this is more information than you asked for, just wanted to be sure I pointed out some things to consider.