Texas Hard Money Lenders Investor Guide: Part 2

Have you decided that becoming a hard money lender is right for you? Do you have enough money in the bank to get started? And have you done the research to find out if this is a viable investment option for you in Texas? If so, you may still have many questions, especially when it comes to the next steps you should take. Hard money lending isn’t for everyone, but if you think it is for you, then you’re in the right place. In the following guide, we outline how to become a hard money lender in Texas step-by-step. Read on to learn more.

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Be Sure You Have Sufficient Funding

The first step to becoming a hard money lender is to make sure you have enough money to lend. Borrowers, especially those in the real estate market whose intention is to flip houses, are looking to borrow a significant amount of money that you need to have available up-front. This is typically tens or hundreds of thousands of dollars. If you do have this type of cash on hand, that’s great, but if you don’t, you may want to partner with other investors to raise the sum the borrower needs. This is a great way to get started in the hard money lending business. When you receive your profit from your first loan, you may have the necessary amount to solely supply the next loan or you may choose to continue to work with investment partners to minimize risk in your hard money loan investments.

Create a Business Entity

Now that the money issue is taken care of, you need to establish yourself as a business. When doing this, be sure you protect yourself from individual liability. The options to think about when creating a business is to incorporate it or create a limited liability company (LLC). Although creating either entity is straight-forward, you’ll want to use the expertise of an experienced attorney and/or accountant to make sure all the details are handled properly, leaving minimal, if any, risk to you as the business owner of hard money loans. Considering there may be bumps along the road to becoming a hard money lender in Texas, the use of a experienced professionals in this area will outweigh the upfront and/or retainer costs of securing an attorney and accountant who knows this business inside out and who can protect you along the way.

Get Prepared to Offer Hard Money Loans in Texas

The high reward that hard money lending offers comes with some risks. Therefore, you should carefully plan your strategy before giving out your first hard money loan in Texas. Take into consideration all the best and worst case scenarios, along with any associated risks you can think of. In Texas, most hard money borrowers are in the real estate market. Their intention is to buy a home, renovate it, and re-sell it at a profit. This is where the risk comes in. Many of these properties are distressed and if something goes wrong in the flipping process, the borrower could default on the loan. To protect yourself from a loan default, be sure to get a large upfront deposit, 20 percent or more, from the borrower and choose who you lend to very carefully. Also, be sure to utilize the help of professionals in the business, such as current hard money lenders, attorneys, and accountants, before issuing your first hard money loan.

Market Your Hard Money Loan Business

As soon as you establish yourself as a business entity, you are ready to staring lending hard money loans in Texas. From here, you will need to market your service so borrowers can find you. Marketing a hard money loan business can be done in many ways. An easy way to do this is to network with local mortgage officers and pay them a referral fee for borrowers who they recommend and who secure a hard money loan with you. Also, you can choose to advertise online and in print form, detailing your services as a hard money lender in Texas. Using an experienced marketing firm to establish yourself and get your first client is a good approach to take. While you will need some money upfront to cover advertising and finder fees, the investment will be well worth it after securing and profiting off your first hard money loan in Texas.

Whether you are retired, still working full-time, or are simply looking for a way to make your money work for you, hard money lending in Texas may be the option you are looking for. There are many companies available to help you do this by taking care of all the details of the loan, such as collecting payments, taking care of taxes, mailing out statements and more. You simply do the due diligence of choosing the right borrower to lend to and watch your bank account grow larger and larger as payments are deposited into your bank account. Once you complete your first hard money loan successfully, you’ll find that the next loan process may be easier. As with anything new, especially investment opportunities, there is always a learning curve. However, when it comes to lending hard money loans, there is little room for mistakes. This is because you are lending a significant amount of money upon which you expect a high rate of return. This is possible for each and every hard money loan you extend, as long as you follow the above guidelines when lending hard money loans in Texas.