Although there are many legitimate opportunities to invest, there are also a number of ways to get swindled.

Just this week, a Utah man was arrested for allegedly operating a “Ponzi-like” scheme that drew in investors under the guise of making high-interest hard money loans.

KUTV 2 explains:

“The SEC says Smart put some money into risky real estate and some went to pay other investors. It says the rest went into his pocket or his business…

In court documents, the SEC refers to this part of Smart’s alleged scheme as phase three. The agency says Smart recruited investors to his “hard-money” lending business, promising as much as 18% a year.”

Before dealing with any hard money lending operation, consult a qualified financial adviser and an attorney.

See Also:

Hard Money Mortgage Guide

Answers to Common Hard Money Mortgage Questions

Hard money loans are high-interest mortgages available from private investors. Desperate borrowers with poor credit scores, bankruptcies, no verifiable income, or too much debt often take out hard money loans when they are unable to qualify for traditional mortgages. Hard money becomes a last resort when borrowers cannot meet the lending standards set by banks or government sponsored enterprises such as Fannie Mae and Freddie Mac.

How Hard Money Loans Work

Private investors are willing to create hard money loans in return for charging a very high interest rate (often about 11.5% plus five points for residential home purchases). You meet a minimal set of requirements, make a monthly payment to the investor, and find a way to either sell your property or pay the balance when it becomes due. Hard money loans use the borrower’s property as collateral. They often offer interest-only payments and tend to have shorter terms (usually fifteen years or less). You can take out a hard money loan for either a home purchase or a second mortgage. Read more…