What exactly is a Hard Money Lender anyway?
check your credit, some will not. Some will do their own appraisals, some will not. Some will charge for an appraisal, others won’t. Some will charge an inspection fee for each draw from the repair escrow, others won’t. Some will only lend in certain areas while others will lend everywhere. Some are more numbers-driven when it comes to decision-making while others go more on their feelings about you and/or the neighborhood.
What about my credit?
With terms so favorable to the lender, most hard money providers are concerned primarily with the value of the property, placing less emphasis, if any, on the credit of the payor. They just want to know that in the event the payor defaults they will possess an asset from which they can extract their original investment and possibly more. However, this is not to say that lenders desire to go through the hassle and expense of taking back and reselling a property but merely to point out that due to the terms of the loan, private lenders are secured, and feel secure, whether a borrower pays or not.
Hard Money Lenders Are People Too
You must keep in mind that most hard money lenders are private individuals. They are not institutional investors who have a set standard of guidelines dictated by the federal reserves. They can be flexible, they can be tough. They are people just like you and I. You can talk to them. You can befriend them. You can laugh and joke with them. They can be your neighbor, your doctor, your attorney, or your bus driver. They usually don’t advertise that they lend money, but instead are found through word of mouth.
A Great Resource
Hard money lenders are a great resource for real estate investors, particularly a beginner with limited resources (e.g. cash and credit). Having a hard money lender on your team enables you to confidently make offers on properties. It enables you to purchase properties when your offers get accepted, and it provides you with the funds necessary to do the repairs if needed. In fact, I have heard of some cases where individuals have even been able to borrow holding costs, but I have never met any lenders myself who will actually do this.
What about my credit?
With terms so favorable to the lender, most hard money providers are concerned primarily with the value of the property, placing less emphasis, if any, on the credit of the payor. They just want to know that in the event the payor defaults they will possess an asset from which they can extract their original investment and possibly more. However, this is not to say that lenders desire to go through the hassle and expense of taking back and reselling a property but merely to point out that due to the terms of the loan, private lenders are secured, and feel secure, whether a borrower pays or not.
Hard Money Lenders Are People Too
You must keep in mind that most hard money lenders are private individuals. They are not institutional investors who have a set standard of guidelines dictated by the federal reserves. They can be flexible, they can be tough. They are people just like you and I. You can talk to them. You can befriend them. You can laugh and joke with them. They can be your neighbor, your doctor, your attorney, or your bus driver. They usually don’t advertise that they lend money, but instead are found through word of mouth.
A Great Resource
Hard money lenders are a great resource for real estate investors, particularly a beginner with limited resources (e.g. cash and credit). Having a hard money lender on your team enables you to confidently make offers on properties. It enables you to purchase properties when your offers get accepted, and it provides you with the funds necessary to do the repairs if needed. In fact, I have heard of some cases where individuals have even been able to borrow holding costs, but I have never met any lenders myself who will actually do this.
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Steve is right on the money, sorry for the pun, on his comments regarding hard money lending. It serves a very specific niche in the real estate market. For those that are considering hard money, a great resource is the California Mortgage Association, which is an association of California licensed hard money lenders. I have delt with many of them and it has proved to be a great group of people.