Hard Money Lending - Newbie

[Trevor Dominique]

Hi BP, 

I am interested in learning more about getting into the hard money business. Let me explain my current situation and any comments or feedback would be much appreciated. 

Currently I own 8 rental units in Northwest Ohio and in Greenville South Carolina. I feel I am really starting to build a good team around me and I want to start doing more flips & BRRRRs, and potentially hard money lending as I mentioned. 

I have a family member who is a high net worth individual who made me an awesome business starting offer. Basically, through his financial advisor, he can set up a private $1.5 million line of credit at about 2% (LIBOR), and he said said we could set up a structure where I could have access to this credit line for a 5% markup interest rate. So if LIBOR stays at 2%, I would pay him 7% annually on the amount I have drawn. This seems like an awesome structure for flips and BRRRs since 7% is much more favorable (I think) then what I would get from a hard money lender myself. 

So then that got me thinking: would this give me any potential to give hard money loans? If I could do it at 12% or higher, I would make the 5% spread plus the points. For example, if an investor needed $300k for 6 months for a project and I could finance that at 12%, I would essentially make 5% interest, or about $7,500 plus points for what would be pretty passive on my end. 

I know if I were to entertain this I would have to spend some time sitting down with my attorney to set things up....so I am not asking for legal advice. Just looking for general advice on what I may be missing here. Thanks for anyone who would take the time to offer me some feedback. Always open to honestly if someone thinks this would not be a smart move.