When you are getting started in the real estate investment business there are a lot of things that you must be aware of. In each state there are different regulations that you must abide by. The same goes for California hard money lenders. If you are not careful you could end up with a lot of people upset or with a mountain of debt. Here are some laws that you should make sure to keep an eye out for if you want to become a hard money lender.
As we all know, California is one of the best places to start your career in the commercial real estate business. You have a variety of regions that can be flipped as long as you have the right market and business plan. There are the beautiful snowcapped mountains to the North and of course that beautiful white beaches along the coast.
California is one of the best places to make your fortune in the commercial real estate market. If you want to make it as a California hard money lender you must make sure that you have a full understanding of the laws in your new town. For example one of the most important laws that you have to worry about is usury. This is the act of overcharging the interest on your client’s loan. Yes, as a hard money lender you do have room to play with the when it comes to the types of loans you have. You have the power to choose who you want to lend to, and how much you want to lend. Usually you will have to deal with a usury law if the amount of interest that is being charged exceed 10%.
So what does usury mean for a California hard money lender?
Quite simply it means that you have to make sure you thoroughly vet all you potential clients. Say the real estate market is going through a lull period, and your client as little to no credit. The collateral that they have may not be sufficient to cover the loan that they are asking for. Now depending on the loan you may not see a large part of your money back from your investment.
For a California hard money lender now if the loan that is issued is found to be usurious you may have to deal with a variety of issues before you can resolve the issue. For example, if awarded damages the person that took out the loan can ask for more than the amount paid on the initial loan. The borrower can also ask that any future interest be cancelled from the loan, as well.
What can a California hard money lender do to make sure there are no hiccups?
Well, with these laws passed and the Dodd-Frank Act making it is much harder for lenders to operate their business smoothly. Hitches in a situation are inevitable, how to circumvent those obstacles will help you make it in the real estate business. There are some exemptions that will work in your favor.
For example, if the loan was used to repair or buy real property with the loan you may be exempt from the usury laws in California. Or if the loan is used for a business that has $2 million in assets may also be exempt, as well.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.
Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.