Hard money is a type of real estate loan that is an alternative form of financing. If a traditional financial lender is unwilling to approve a loan, or a loan is needed quickly, hard money is sometimes the only option left. Hard money loans are primarily based on property value, rather than solely on the borrower’s credit worthiness. Hard money loans typically have higher LTV (loan-to-value) ratios than most bank financing allowing a borrower to leverage more of their own money, and bring less to closing.
What is a Hard Money Lender?
Hard money lenders are basically private individuals or companies who lend capital in order to finance real estate deals for business purpose. Hard money lenders fill the void that banks and traditional lenders refuse to do, by loaning on distressed properties and providing the funds necessary to rehab/renovate a property. Hard money lenders offer programs with rates, terms, and fees that you’ll need to understand before signing on the dotted line. Keep in mind that fees and rates are generally higher than traditional loans, due to the fact that there are more benefits by using a hard money lender.
How to Find Hard Money Lenders
A quick Google search using the phrase ‘local hard money lender’ will likely show a number of potential lenders you can possibly use. Your local meetup group or REI (Real Estate Investor) club is a great way for you to find a reputable hard money lender. Networking with like minded people at these meetings or events will help you find the lender, as well as other resources you may need, to have a successful deal. You can also search on www.aaplonline.com which is the American Association of Private Lenders website. Members of this national organization agree to follow a code of ethics that was developed by experienced lenders.
What to Look For in a Hard Money Lender
Here are some key traits that every reputable hard money lender should ideally have:
Any hard money lender should have expertise not only in real estate financing, but also real estate investing. There should be at least someone on the hard money team that can provide real world experience in rehabbing property, flipping property and/or renting property. You will gain tremendous value beyond just the loan by using a hard money lender with this type of experience as they can help you evaluate your deal and make sure the returns you are expecting are actually achievable.
As the availability of deals has transitioned from MLS to wholesale in many markets, the ability to close quickly is a competitive advantage. A hard money lender should have the resources in place to approve your application quickly (less than 24 hours), get your deal evaluated, and process and close in the required timeframe.
Trustworthy hard money lenders will fully disclose all of their fees, rates, and terms of the loan that they are offering you. By doing a little homework, you should be able to quickly determine if you are working with a reputable lender that you want to fund your loan. Also, a good hard money lender will treat you professionally and be very respectful of your current situation and financial goals.
Investmark will address any of your questions or concerns about hard money lending. We’re a highly respected name in Texas when it comes to hard money loans. Contact us so we can share our knowledge and expertise with you today.