I got a coworker who is resigning from his job to go into the hard money broker business. They are looking for investors and I wonder if it could be a good investment vehicle.
Compared to other hard-money lenders, they have shorter experience cycle (only in business since 2010) and seem to offer slightly lower interest rate to borrowers but gets back-end points when the borrowers make money. And they use 65% LTV of ARV as the major risk mitigation vehicle, among others. So the annual ROI could be easily above 10% for 6-9 months loan.
He says currently most of loan are for constructions/Re-hab as it is now hard to find good foreclosure opportunities.
I have given up the idea of buying rental properties in the next 1-3 years because of the appreciation here in SoCal and stock market is also over-valued as Rich constantly points out, so I am wondering anyone has experience of hard-money lending can share some insights about what to look for? I know SDR has made some investments on these before, but I don’t know if he still visits here.
By the way, I think this is an opportunity because I believe the stupid Dodd-Frank rules are making it hard for RE investors with low real financial risks to qualify for loans. And they only lend to people with experiences in RE and typically has other assets as well.
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