Seeking a private lender partner for flip in Indianapolis...Make impressive return

Bumping to see if anyone else may be interested. Thanks guys!

4 points and 12% on $150k is a lot less than $35k, less the headaches of dealing with private money.

I never got the email for the specifics on the deal.

Tammy I will send them now.

Thomas,

You're right but what I'm finding is that private lenders are easier to deal with and more willing to provide larger ltv's. I'm looking to cultivate an ongoing relationship and make it a win win for both parties. In this case, an extra $9000 would be with creating that relationship. Thanks for the advice though

^worth

Lenee, are you familiar with the 4 pronged Howey test?

What is the 4 pronged Howey test???

If you are not a broker and your lender is not licensed to lend, you enter into a different playing field. A lot of deals are done without SEC compliance every day for one of the two reasons. Either the people don't know or they don't care. One way you can exempt your offering from the definition of a security is with Rule 506 Section D. But 506D prohibits advertising or general solicitation which Lenee did with her initial post. After going to a seminar on private lending, I then understood why hard money lenders got 4 points and 12%. If you are from the don't care camp, it's probably not a big deal until a deal blows up.

From Bigger Pockets...
"The Supreme Court ruled that Howey was offering an "investment contract" as defined by the Securities Act of 1933. As a part of this ruling, the Supreme Court developed a test to see whether an opportunity constitutes an "investment contract." This test was called the "Howey Test."

An investment contract under the Howey Test was defined as follows:

1. an investment of money due to
2. an expectation of profits arising from
3. a common enterprise
4. which depends solely on the efforts of a promoter or third party

What this meant for J. Howey, and for all real estate investors in the future, was that anytime you're searching for investors, no matter if the investor goes on the deed or has a mortgage, if the investor is relying on you to make their profits you are considered to be selling a security. The Howey Test set the standard for securities laws in raising money for real estate investments."

Since you're selling a security when you raise private money, you must comply with the securities laws."

Email from an attorney...

"Hi Thomas,

Thank you for this link. It was very informative. As I suspected, 1) This 2011 article pre-dates the new CA SB 978, which only came into effect as of January 1, 2013, and 2) it is an interpretation of federal securities laws and not the laws of any state (i.e., California); 3) further, even the author believes you are selling securities that must be handled as in any other securities offering (as I discussed in class), when you are in the business of borrowing money to make a profit on the money by using it to further your business objectives and the only reason the lender is lending is to make a profit on its money. See the sentence in his article under "Seller's Motivation".

Sorry, there are not shortcuts, and any exceptions for single investor loans in CA that previously existed have been successfully wiped out by the CA state legislators with the passage of SB 978. If you are going to do this one or two per year and borrow only from family and close friends, you may need to do nothing, but if you are going to start a business based on using private loans to fund your real estate acquisitions, then you will need to figure out which securities laws apply and how to comply with them.

In the meantime, you can simply borrow from hard money lenders or real estate brokers who broker private loans, as this shifts the securities and licensing compliance burdens to them, so you will only have to worry about finding and managing great deals! Another option is to do a regulation D, Rule 506 Offering that would allow you to borrow the money from private lenders and would supersede the state securities law requirements; and unless you are loaning the money to others, you wouldn't need to worry about broker licensing requirements as you would be the only borrower."

AS you can see, this email is specific to California. Every state is different.

I thought she was asking for a referral for private lenders, not asking to borrow money from just anyone on the site. Maybe there is not a difference???

Thanks... Not sure where you were going with this one Thomas as you originally mentioned hard money and jumped to SEC.

SEC compliance is the headaches of private lending I was referring to. When real estate investing is sold as no need for cash or credit and using other people's money, people need to realize there is more to using other people's money than saying Let's Make a Deal. Tammy Reoch will attest to that as I am sure she is well versed in SEC compliance judging from some of her past posts and recent success in using private money. I am not saying don't use private money, I'm just trying to let people know what's involved and maybe save someone some headaches down the road. After I took the private money seminar, I realized that 4 points and 12% wasn't such a bad deal after all since the HML shouldered all the SEC compliance and licensing responsibilities. If the deal goes south, it's not my problem with a hard money lender. If a deal goes south with a private lender and I am not SEC compliant, I have a big problem. That being said, there are deals that call for private money over hard money and vice versa. As one investor once told me regarding private money, "When you lose someone else's money, you have taken a part of their life."