All Forum Posts by: Mike G.

Thanks for the reply, Mitch. This is great!

I looked over all the laws, and I did find an exclusion that might be the exemption I have seen others refer to. It only applies if a person makes a commercial loan no more than once in a 12 month period, though. This would rule out using an individual investor's funds on more than one property per year, which seems limiting.

Other than that one, I didn't see anything that would be a general exemption from the usury law that I could use. We're not real estate brokers, or pawn shops, or any of the other things that would automatically exempt us. I guess there was one other thing, which was the "shared appreciation loan", but that would mean sharing profit, which I'd rather not have to do in every case.

I guess maybe we can just limit the interest rate to 10% and not worry about the usury law, but then I'm not sure if that would be competitive with other Flippers.

I feel like I'm missing something. Or maybe everyone else is just ignoring the law because really, the Flipper is the borrower and as such, they're not going to report the person they're getting money from.

As a rehabber, I'm willing to borrow money at more than the usury-limited rate of 10% (I live in California). I have seen posts in the past indicating that private money can be loaned at higher interest rates if the borrower is a company (we have an LLC). However, I have done a bit of searching online and I have been unable to find applicable California law that would corroborate this, other than if the company already has $2million in assets and has a previous working relationship with the lender.

Does anyone know if it is true in California that a loan can have more than 10% interest as long as it is a company (LLC) borrowing the money, regardless of the company's asset value or previous relationship with the lender? If so, can you please point me to the corresponding law explaining it?

Thanks for any assistance!

Bryan, I am intrigued by your idea of using a bank to refi and get the cash out of the property to use for a new property. Is this possible for fix-and-flip properties? If so, what needs to be prepared to get a bank to do this? We have some money tied up in a property right now and it would be nice to be able to get that out so we can buy another property.

Hi, Eric.

Thanks for the response.

Yes, I know about the broker-arranged exception, too, but I doubt that would work for this case. If a private lender is aware enough of the usury law to be uncomfortable, I doubt they'd be comfortable trying to circumvent that law with such a gray-area method (especially since there are cases where that's been shot down in the courts before).

I have asked a lawyer and was told all about the usury and security laws, which is why I'm here to see if someone investing in California actually knows their stuff . I'm trying to get a pointer to some law that shows how I can make this work, before going back to the lawyer and spending more money by paying the lawyer to research this. "Ask a lawyer" can turn into hundreds of dollars very quickly. I'm hoping there is a California investor on here that has already gone through this, knows the answer, and can point me to a site that documents the law I need to be looking at.

As I say, I've seen posts saying the usury law does not apply when the borrower is a company, but I have yet to see that in my research in any way other than if the company already has $2million in assets and has a previous relationship with the lender.

Hi, Realtyman.

Yes, I have seen that exception, and it does exist in California as well.

I am trying to understand the case of a private lender (most likely, an individual as opposed to a company) loaning to a company (our LLC) to fund a flip.

Thanks for responding.

As a rehabber, I'm willing to borrow money at more than the usury-limited rate of 10% (I live in California). I have seen posts in the past indicating that private money can be loaned at higher interest rates if the borrower is a company (we have an LLC). However, I have done a bit of searching online and I have been unable to find applicable California law that would corroborate this. Does anyone know if this exception is actually true, and if so, can you please point me to the corresponding law explaining it?

Thanks for any assistance!