Where to find hard money lenders

You may have heard of hard money lending. In this article, get a better understanding of how hard money loans work with insight from a direct lender.

Buying a non-owner occupied property as an investment is completely different in terms of financing. This is when I discovered hard money. If you signed up for BiggerPockets via Facebook, you can log in with just one click!

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All All. Menu Menu. Recommended Vendors. Real Estate Books. Featured Book. Get the Magazine. Search Nova. Log In Sign up. Interested in featuring your company? Contact us! Strategies Using Hard Money There are different instances when a real estate investor will be more likely to use a hard money loan versus a traditional loan. One of the most important things to understand when considering hard money is that each lender considers things differently than the next lender. The following could also be considered when looking at a hard money loan: Independent appraisers AVR In-house AVR Percentage of total costs Percentage of the purchase price of the property All lenders are different so be prepared for the hard money lender to consider any combination of the above before settling on the loan.

If you are a real estate investor looking to execute the BRRRR strategy then the first thing you are going to want to do is secure a lender. One of the biggest mistakes that real estate investors make in the BRRRR strategy is only looking for a lender right when they need one.

The best thing that you can do for yourself is to begin searching for, vetting and building a relationship with a lender as early in the process as possible. Unlike banks who look at your credit score and income, hard money lenders are focused on your equity in the property used as collateral and the potential return on investment.

In case you default on the loan, they will resell the property to recoup the money. Moreover, you can receive the full amount without being obliged to pay a down payment for rental property. Therefore, approvals and closings can be completed quickly, typically in less than a week. This makes hard money loans great investment loans if you need to close fast. A bank loan will typically take a month or more to get funded. Using hard money lenders has some drawbacks too. Since they are willing to fund risky investments, they will charge higher rates and offer shorter terms.

As such, they are best used for short-term loans. However, if you need to close fast, you can use hard money loans for rental property and refinance after a short period with a long-term loan. Here are some of the top tips on how to find hard money lenders for real estate :. The internet has been a pivotal tool in the Information Age. Therefore, if you are wondering how to find hard money lenders , the internet would be a good place to start.

This simple exercise can provide you with a good number of hard money lenders to consider. You can then contact and evaluate them to find the right lender for you. Attending local real estate investor club meetings is another great way to find hard money lenders near you. You are likely to meet a number of hard money lenders looking to network with prospective borrowers. When you meet them, focus on building good relationships with them. Hard money loans have terms based mainly on the value of the property being used as collateral , not on the creditworthiness of the borrower.

Since traditional lenders, such as banks, do not make hard money loans, hard money lenders are often private individuals or companies that see value in this type of potentially risky venture. Hard money loans may be sought by property flippers who plan to renovate and resell the real estate that is used as collateral for the financing—often within one year, if not sooner. The higher cost of a hard money loan is offset by the fact that the borrower intends to pay off the loan relatively quickly—most hard money loans are for one to three years—and some of the other advantages they offer.

Hard money lending can be viewed as an investment. There are many who have used this as a business model and actively practice it. The cost of a hard money loan to the borrower is typically higher than financing available through banks or government lending programs, reflecting the higher risk that the lender is taking by offering the financing.

However, the increased expense is a tradeoff for faster access to capital , a less stringent approval process, and potential flexibility in the repayment schedule. Hard money loans may be used in turnaround situations, short-term financing, and by borrowers with poor credit but substantial equity in their property. Since it can be issued quickly, a hard money loan can be used as a way to stave off foreclosure. There are pros and cons to hard money loans related to the approval process, loan-to-value LTV ratios, and interest rates.

One advantage to a hard money loan is the approval process, which tends to be much quicker than applying for a mortgage or other traditional loan through a bank. The private investors who back the hard money loan can make decisions faster because the lender is focused on collateral rather than an applicant's financial position.

Lenders spend less time combing through a loan application verifying income and reviewing financial documents, for example. If the borrower has an existing relationship with the lender, the process will be even smoother. Hard loan investors aren't as concerned with receiving repayment because there may be an even greater value and opportunity for them to resell the property themselves if the borrower defaults. Also, the interest rates tend to be high.

For hard money loans, the rates can be even higher than those of subprime loans. As of , the average interest rate for a hard money loan is Another drawback is that hard loan lenders might elect to not provide financing for an owner-occupied residence because of regulatory oversight and compliance rules. Real Estate Investing. Home Equity. Loan Basics.