As few as two years ago the term Hard Money was looked down upon by the lending industry as the mafia of mortgage.  It was/is a niche area of lending reserved for only the most desperate of borrowers and the most greedy of brokers and lenders.  How tides change.  With the recent demise of the sub-prime secondary market we have seen an industry adjustment that can only be likened to the extinction of the assumable loan programs in the late 80's and early 90's.  Now, hard money is no longer this errant, dark, blood-dripping niche of lending - it has become a respectable, distinct and important resource for the capitalization of real estate funding worldwide, and is rising in both recognition and importance.

As a result of this new found significance, more and more brokers are seeking both a greater understanding of hard money and a greater portfolio of sources for the same.  As a result, I've noticed a sudden and acceptable influx of hard money training programs, books, seminars and webinars aimed at capitalizing on the value of hard money in the midst of mortgage turmoil and ever decreasing commission checks.

What's interesting, is that over a year ago (prior to this sudden influx of hard-money trainers), I actually began the process of opening a full-fledged hard money and commercial mortgage training school called Quest Financial Institute.  What stopped me was two primary issues:  1) I realized that I wasn't truly qualified to train others in such an intricate and potentially dangerous area of the mortgage industry (at least not without an entire team of specialists surrounding me - and I couldn't find enough genuinely knowledgable professionals to build that necessary team.); and 2)  I didn't want the responsibility or liability of offering training for a discipline that is in constant flux due to changing regulations on both federal and state levels. 

I've learned through personal experience that if you do not stay regularly abreast of both federal and state lending statutes related to all types of lending, you can easily misstep and draw others into error with you.  I foresaw my organization being inundated with calls and emails from students who were too lazy to do their own investigative work, and would therefore call us to be their legal and regulatory counselors - which we were not licensed or postured to be.  Even now, I list access to every state's lending statutes on my website, and still I receive regular emails and phone calls regarding lending statutues in regions that I don't operate in - I direct them to my site, and invite them to do their own homework.  If you're going to be a professional, please take the necessary steps to actually be one.

With this said, I must make a turn in the tone of this article and make the statement that I whole-heartedly believe this market is offering more than ever the opportunity for qualified hard-money professionals to rise up and prove the value and integrity of the "exotic" funding industry.  Will this uprising of integrity and quality really happen?  Doubtfully.  It's usually the few who are aggressive, ignorant and/or even misguided in their intentions who drive the attention, attitude and reputation of a given wave.  But, I still have hope that in spite of many who are choosing to become hard-money professionals through one day seminars or five-hour video training programs (which give little or no attention to the regulatory issues that will make or break your business) there will be a solidification of those of us who are genuinely interested in becoming excellent resources for our chosen discipline.

As I write this, I recall something that a chemistry professor once told me, "If you allow your mistakes to kill you, you'll never get the chance to enjoy your successes."

What do I mean by this?  Well, first of all, we're all going to make mistakes as we grow in our professions, marriages, and lives in general.  Sometimes these mistakes are large enough to cause us to re-evaluate our entire path, while other times they are simply mistakes that must be taken into account, learned from and embraced as we become better at what we do. If you make a mistake in the process of learning the hard-money business, it could literally cost you your entire career in this industry.  However, there are enough of us out there who have made significant mistakes and who are willing to talk about them that you should (with proper investigation, study and humility) be able to minimize your mistakes so that you don't sabotage your life, or the lives of others (yes, this can happen in the hard-money business).

How does all of this relate to becoming a hard-money broker?  If you can't get how this relates, then I strongly suggest that you DON'T become one.  If you are a fledgling broker, or someone who feels strongly that you would like to genuinely learn the art and science of hard-money lending, then I suggest six steps:

1)   Find a tenured (experienced) mentor who is willing to impart more than just a day's worth of information.
2)   Align yourself with the necessary licensing and accountability systems required by your state.  I even suggest to go as far as meeting with your state regulatory agency face-to-face to ask how to be the most effective private-money specialist possible.
3)   Don't assume that you know everything about hard money just because you've read your state statutes, or you've even had a couple of successful transactions.  This industry requires constant education on local, state and federal levels.
4)   Don't depend on others (such as attorneys and escrow officers) to do your job, or know what is necessary for a legal hard-money transaction.  If you are leading the transaction, you should know as much as, or more than they do.
5)   Be reasonable.  Greed, impatience, panic, hero-ism, these are all harbingers of destruction for the hard-money pro.  You must be level-headed and reasonable even if there is an opportunity to "really stick-it to them", make a decision to be fair - you'll sleep better at night.
6)   Attempt to find your own direct-money sources.  Broker chains create legal and processing nightmares.

I wish I could offer an article entitled:  "10 steps to hard money success", but honestly there are so many factors involved in this industry that it can't be done responsibly.  If you are pursuing a change of practice and beginning the trek of becoming a hard-money specialist, please, please, please for your sake, your borrower's sakes, your investor's sakes and your family's sake - do it right.


Until next time.

Brandon Thienes
www.TheEquityExperts.com