Becoming a private lender

[Zk Lani]

Hi there,

I’m planning on becoming a private lender to some local investors. I would appreciate any insight from people who do this routinely, any resources to share, such as agreements, etc.. I know I would need a promissory note and a deed of trust. I will be lending at 12% interest to be paid monthly. It would be great if someone would be willing to share what they’d typically have in their promissory notes, and tips on how to further prevent any potential problems. Thanks y’all!

ZK

[Jeff S.]

This is your business, @Zk Lani. Never accept loan documents from a borrower. In whose interest do you think they will be written?  Plus, you need more documents than just a note and deed of trust or mortgage. My post in this thread should give you an idea: Private-Lender---Forms-Required

Get your loan documents from a lending attorney specialized in the state you are making your loans. Note that a lending attorney is not the same as a real estate attorney. Most real estate attorneys, especially closing attorneys, are used to conventional, consumer purpose, loans. Presumably, you will be making business purpose loans to investors. It’s important you know the differences.

We find all of our borrowers at real estate clubs and I’ve detailed our lending process, step-by-step a few times here. See my post in this thread: Becoming a Private Lender. It’s still about 95% accurate for us and should give you a good start.

Also, understand that most private/hard money lenders are not lending now, until Covid-19 dust settles. Take a lesson from them. Use this time to learn, not loan. With lenders holding back, I imagine you will receive many solicitations from strangers on this board. IGNORE THEM. Lending anonymously to online strangers is a quick way to get your lunch eaten, Zk.

As noted, private lending is a business based on relationships. Real estate clubs, eye-to-eye, are the only way to find safe borrowers, in my opinion. Please read and reread @Yuechen Zhao’s post, above. It greatly reflects our philosophy.

Best of luck to you, Zk.