Posted by SolidReturns on November 24, 2009 at 20:06:59:
If you want to be a HML, you need to have your ducks in a row with regards to personnel (attorney, title person) and forms.
“Entrenched outfits” for your SD-IRA funds = sounds like you want to be an investor whose funds are used to fund HM loans.
As a HML, rates are 12-15% with 2-5 points on top of that.
As an investor, rates paid to you are typically 8% plus 1 to 2 points. The HML makes the difference.
Self Directed IRA HML - Posted by Howard
Posted by Howard on November 24, 2009 at 13:28:16:
Does anyone have insight into how to become a Hard Money lender? Or are there reputable entrenched outfits out there for someone to bring their self directed IRA funds to?
I’d also appreciate any info on the typical ROI.
Thanks.
H
Re: Self Directed IRA HML - Posted by Bud
Posted by Bud on December 07, 2009 at 14:16:43:
While someone may have the insight to become a hard money lender they should have the wisdom not to do so until they understand all the risks. It is easy to utilize a custodian that will allow self directed investments. A mortgage broker is likely to give you 9% on your money then lend it out at the HML rate of 15% and multiple points. That might be okay if they protected you. A good hard money lender will not lend money if there is not sufficient equity to protect the funds. The problem is too many people want to overpay for the project, understate the costs to complete the work, misjudge the sales price, underestimate the time it takes to sell, or hire the wrong contractor.
A good hard money lender will have the project inspected before each advance and will not advance the funds so that you or the contractor get ahead. With this approach a HML may also be unscrupulous and be more interested in taking the deal away from you.
Local real estate clubs have investors and hard money lenders. Attending those and getting to know the people is a good defense from getting taken.
The best way I have found to lend is not to do a mortgage or deed of trust. By putting title into a reputable third party trustee you will save a lot of pain should something happen such as a bankruptcy. A beneficiary agreement can work well for the lender and the borrower. So can you do a UCC filing as the trust is now personal property.
You may be your own best investment advisor but you need to know the rules of the game.
HML always in demand - Posted by John Merchant
Posted by John Merchant on November 29, 2009 at 22:44:10:
Since $$$ is always needed and fewer banks are ante-ing up these days, your timing is right.
A little ad on Craigs List that you have HM available should get you some calls.
Any of the SDIRA Custodians…Entrust, Pensco, Viking Bank of Seattle, etc. would be capable of helping you set up your SDIRA account with them and make the loans.
Typical ROI is whatever the local market dictates…I’ve seen HMLs go from 8-21% plus origination points of 1-10%, depending on how motivated the borrower is, how long he wants the money, his borrowing power, the solidity of the deal.
One rule of this market: if the loan’s so good you kinda hope you get to foreclose, there’s little chance of that happening.
So I’d get your ad going, get details of what B wants, what he’s willing to pay, how good his security is, and start looking at deals. And don’t be afraid to turn some down as there’ll be more.
Also of course get your SDIRA open and your IRA funds there so you’ll be ready to make loan when you see a good one.
Definitely a good idea to have your lawyer look them over with you, help you with checking out the borrower, title to the security property, prep of the note and deed of trust, etc. Between the two of you you’ll likely make better deals.
Later on you probably won’t need the lawyer but do start out with one by your side.
“Reputable entrenched outfits to bring your IRA funds to?”…I’d stay far away from any such claims as they’ll use your money, at YOUR risk, not theirs, and take a healthy piece of the fees and interest that ought to belong to you.
I learned this the hard way years ago when a well advertised “Lender” on E Coast told me IT was the lender, lending its own money but then I learned it had used Metropolitan Mtg of WA and that “lender” was just a broker. Last chance they got on my deals.
As long as you run the deals by your lawyer you & he’ll do just as well and won’t lose part of your profits to such “established” lenders.
I’m getting lots of calls these days for HML for fixers but few sound good.
The usual spiel is “I’ll pay you back WHEN house sells”…when what they really mean is IF it sells and in this weird market, nothing is certain.
So I make the borrower produce proof that somebody else or some fin institution is standing by to make the long term loan when work is done and house is fixed up, etc.