Florida Mortgage License Requirements

Licensing and state regulation are critical for capital investors looking to become private lenders in Florida.  Let’s examine the laws and regulations concerning lending, lenders' licenses, and making private loans.  Let’s start by defining what activity requires a permit.  FL Statute 494 Parts I through III detail what is and is not allowed, who and who is not regulated, and all aspects of the statutes regulating mortgage originators, brokers, and lenders. You can find the full regulation here: FLORIDA LICENSE REQUIREMENT

The overarching theme in this document is its constant and repeated reference to “Mortgages.”  So, what is a mortgage loan?  494.001.25.a-c defines a Mortgage Loan as a “Residential loan primarily for personal, family, or household use.”  So, the number one key metric is if you want to stay on the safe side of lending in Florida, then do not make loans secured to a personal residence or even a second residence.  This means lending to investment properties only.  Number two is if “the borrower is an individual.”  Therefore, do not make loans where an individual is on the property title you are collateralizing or securing.  Now, there are always exceptions, and we want to know what the law allows as far as exemptions to regulation and licensing oversight.  Statute 494.00115.3.d clearly states that an individual is EXEMPT from licensing requirements if “A person who makes only nonresidential mortgage loans and sells loans only to institutional investors.”  Remember the definition of a mortgage loan? Thats right, it's a personal or secondary residence, with title to an individual.  Properties being bought or owned by an entity and with clearly stated business purposes fall outside of a mortgage loan definition.  There is even a cut-out for individuals who want to make loans secured to personal residences as long as certain requirements are met, see 494.00115.3.e-f.  So there you have it; in the state of Florida, there are no requirements, as of 2023, for you to need a license to be a private lender so long as #1: You make loans to entities and not individuals, #2: You secure that loan to assets that are not the borrowers primary or secondary household use.

How to become a private lender earning huge returns

Can private lenders make huge returns?  Can you become wildly wealthy from private lending?  While many gurus will sell you a course on how to supposedly create high levels of wealth solely through private lending, this is not likely the case, unless you manage other people's wealth, and build a business.  There are creative strategies concerning finance such as arbitrage, and hypothecation, among other institutional grade strategies not open to the private individual, where large sums of wealth can be generated from the activities of private lending.  Let's not even talk about the time commitment to learn about private mortgage investing, lending business structures, or federal and state regulations for managing other people's wealth to make loans.  All of this boils down to time.  Many investors, maybe like yourself, have considered private mortgage investing due to its supposed “passive” nature.  While this is true, it's also true that this method of investing can quickly become an all-time-consuming new career, and defeat the whole purpose of venturing into private loans.  If not properly planned for, with the right systems in place, private lending can quickly turn into the same time suck as owning and managing multiple SFR properties.  

So can private lending generate huge returns?  Let's define HUGE.  By huge returns, are you thinking of double-digit returns, with a goal of doubling your investment?  Well yes, but within what time frame and what sacrifice to your freedom of time?  You can generate double-digit returns, and double your investment in as little as 6 - 8yrs, earning 10 - 15% return on your money annually.  However, that 6 - 8 yr time frame might not be at all what you had in mind, maybe 3 years or even 1 year?  If this is your expectation I can confidently say no, this is not the case. If you ever come across someone telling you that you can double your investment through private mortgage investing, in that type of time frame, they are a liar and scam artist.  Stay clear.  So what is left?  Well, you can build a private lending business and gain access to a whole world of creative financing structures.  This business is often called a hard money lending business. Or you can identify a company that has systems and processes in place to manage all of the commitments that would otherwise consume all of your time, and possibly resources. The choice is up to you.

How to become a hard money lender

One way that you can become a private lender earning huge returns is by building a hard money lending business.  Creating the structure, process, and systems to help you make risk mitigated, and safer loans.  Understanding and developing underwriting guidelines and requirements.  Building a network of borrowers, brokers, originators, and raising capital.  Unless you have millions just sitting in the bank, you will need to raise capital from other investors, like yourself, to then have the “dry powder” to go out and make those loans, to then later sell those loans to the secondary market or other whole note investors.  You will have to become familiarized with the lending industry, how it is structured, the terms, and calculations.  There are, needless to say, countless items you will need to know, build, check off, and refine to build a successful hard money lending business.  But this is not a passive venture, this is very much active work.  You are building a business, and you must commit time, energy, education, and dollars to the business to see it become successful.  Is there a better way?  I believe there is.

Private mortgage investing

Blue Bay Fund offers passive investors the opportunity to invest in private mortgages through our non-registered securities offering on file with the SEC under Regulation D Rule 506(c).  For investors who have capital that they are looking to invest in private mortgages secured to real estate, Blue Bay Fund is your solution.  Not only are my partner investors able to invest with a relatively small initial investment amount, but they can personally allocate their investment into $1,000 slices of different loans secured to real estate.  Because it’s very common for borrowers of real estate loans to pay every month, my partners get monthly distributions.  Even more importantly they can choose to withdraw earned distributions whenever they want, or they can roll those investment dollars back into other loans, thus earning a return on their returns.  They can diversify their investment in an asset type that typically does not allow for wide diversification. 

Imagine that you have $1,00,000 you want to allocate towards private mortgage investing.  The average affordable home price in Florida is $225- $250K. In that case, you may be able to make four loans with your one million-dollar investment.  This is a substantial portion of your investment dollars now in only a few investments.  If one of those investments does not perform, your monthly income can be cut in half if not more. 

When my partners invest in Blue Bay Fund, they can spread their risks across many different loans. With a fractional slice of any loan being as little as $1,000, this allows my partner investors to take advantage of diversification as well as participate in some really beautiful projects.  In the case above, assuming you had $1,000,000 to invest, you could easily invest $10,000 across 100 different loans, all in a matter of a few minutes. Now you are truly utilizing leverage, leveraging our Time, Knowledge and Experience, to reduce your risk, diversify your investment, and maximize your freedom of time.

My partner investors also have the added benefit of outperforming the historical average of the S&P 500 annualized return of 7.5%.  Blue Bay Fund investors earn an average of 7.5 - 10% on their investments, and these are the nominal 1st position, low loan to value (ie low-low risk loans).  We also have higher-risk lending opportunities where the annualized return can be upwards of 12 - 15%+.  With those types of returns, you could see a doubling of your investment capital in less than 7 years.  So maybe I have found a way for you to become a private lender earning huge returns?

If private mortgage investing, through Blue Bay Fund I’s offering, piques your interest, reach out below, and let's schedule a presentation of my fund and how I am helping everyday investors invest in private mortgages, while staying completely passive.