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
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
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.