Hard money lending is a niche in the real estate finance world that allows real estate investors to borrow money quickly for short-term real estate projects. These types of loans are called hard money loans as well as bridge loans or private money loans. The loans are secured by either real property the investor is purchasing or by property the investor already owns and wishes to use as collateral. The service that hard money lenders provide to real estate investors is invaluable, as other lending institutions will not consider these types of loans. First time hard money borrowers may feel uneasy when considering a hard money loan but working with a professional hard money lender should be an easy and simple process. How should one go about finding a hard money lender?
Google Search to Find Hard Money Lenders
An easy way to find local hard money lenders is to do a Google search for [your area] + “hard money lenders”. This should provide a good starting point to start evaluating different local hard money lenders. Working with a hard money lender near your location is best, and be sure that they lend in the state where the subject property exists.
Find Hard Money Lenders at Real Estate Investor Meetings and Through Referrals
Another way to find hard money lenders is to attend a local real estate investor club meeting. They exist in most cities and are generally well-attended by lenders looking to make hard money loans. If hard money lenders are not present, ask fellow real estate investors at the meeting if they have ever used a hard money lender and if they can recommend anyone. Real estate agents, traditional mortgage brokers, appraisers and other people in the real estate business should be able to provide referrals for hard money lenders. Reach out to your network.
Once a list of at least a few lenders has been compiled, it’s time to start contacting them andfinding the most suitable one to work with on your next deal.
Finding a Hard Money Lender to Fund Your Next Deal
When contacting hard money lenders make sure they are licensed in the state where the subject property exists. The Real Estate Broker must also have a NMLS (National Mortgage Licensing System) endorsement on their license. The hard money lender will ask some standard qualification questions as well as information about the property and your plan to improve the property.
The Details of a Hard Money Loan
Even within the niche of hard money lending there is further specialization. Some lenders specialize in rehab loans or construction loans while others focus on land loans or purchase loans. Occasionally there will be a hard money lender who will do any type of bridge loan. Some hard money lenders will do only do 1sts while others will do 1stsand 2nds.Some will lend based on the current value of the property while others will lend based on the estimated after repair value (ARV) of the property. Make sure you discuss all of these important details about the potential loan upfront.
Keep in mind that different lenders have different risk propensities. If the hard money lender you are speaking to isn’t able to approve or fund your loan they may be able to refer you to another hard money lender they know of who is more comfortable with the type of loan you are requesting.