Hard Money Lending - The Line? - Posted by RSwan

Real Estate Investing Real Estate Financing
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Posted by Nate(DC) on July 16, 2002 at 12:50:36:

Ed,

I think it’s also worth noting that the rules vary for lending on commercial real estate vs. residential, in many states. For example in DC, the laws regulating the maximum interest rate do not apply to loans made on commercial real estate or for a commercial purpose (e.g. a rehab/flip).

NT

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Hard Money Lending - The Line? - Posted by RSwan

Posted by RSwan on July 16, 2002 at 24:17:46:

What is the “line” between being a private individual or corporation that makes private loans secured against real estate transactions and a corporation that is in the business of lending and regulated? Or, more specifically, can I, as an investor make private, hard money loans without being regulated as an institution that is in the business of lending money, thus not worrying about interest limits and any other regulated aspects of lending?

Thanks for any thoughts.

RSwan

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Re: Hard Money Lending - The Line? - Posted by RSwan

Posted by RSwan on July 16, 2002 at 17:28:03:

Thanks for the repy.

Here’s another step in my question. Is it possible to “invest” in a real estate transaction rather than “loan” money on the transaction?

Here’s my thoughts. I would like to invest money as a private money investor as a principal party to the transaction with a rehabber for the purpose of a real estate purchase/rehab, secure the investment with a promissory note and mortgage and set it up to pay a rate of return and points on the money. If the rehabber defaults, title is “bought out” and transfered to me for any points and interest payments made to me by the rehabber. Thus the rehabber is bought back out of the deal under some terms agreed upon between the private money investor and the rehabber. This buyout aspect of the transaction is the “stretch” that I thought may make the deal an investment rather than a loan. Is this too much of a stretch or does it sound reasonable?

If it’s too much of a stretch, what state office would I start with to find the state lending regulations.

Thanks again.

RSwan

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Re: Hard Money Lending - The Line? - Posted by Ed Garcia

Posted by Ed Garcia on July 16, 2002 at 02:33:58:

RSwan,

I feel you’ve asked a excellent question and the answer can very from state to state.

You see the key answer to your question is Real-estate. Loans pertaining to Real-estate are regulated by the laws that govern real-estate loans. So a Corp, LLC, or Private Party, are merely a source of funds. The laws would regulate private party funds the same as they would a Corp.

Ed Garcia