Legal Question in Real Estate Law in California

You are not 'breaking the law' but you may not be able to enforce and collect that interest if you don't structure the deal correctly. Worst case scenario is that you only get back your principle. Have a good written contract and enforceable lien rights on property. Feel free to contact me if serious about getting legal help here.

After carefully re-reading and researching cases cited to the California usury law exception for loans made or arranged by a licensed real-estate broker (Civil Code section 1916.1), I did not find any explicit statutory language or court ruling requiring that the broker's license be a California license. However, it's pretty clear that a California court would hold that someone with a Montana license was not licensed for purposes of making an otherwise-usurious loan in California, or under conditions where California law would apply to the transaction.

If Montana is where the lender is licensed, and if Montana law permits a Montana-licensed real estate broker to lend at 13%, the parties need to "do" the loan in Montana, which could be done effectively by (a) transferring the funds from lender to borrower in Montana; (b) making the note enforceable under Montana law; and (c) making all payments due in Montana.

However, a Montana lawyer would have to be consulted to determine if the proposed loan is legal there.

I agree with Mr. Nelson about the advisability of making the loan. Do get collateral. Obviously, I do not agree with him about the legality of the loan if made in California or construed under California law.