Rehabbing properties for a profit is exciting and beneficial. As a real estate investor, you understand the importance of having a trusted lender you can rely on for your real estate investing needs.
Discovering the best hard money lenders can sometimes seem like a daunting task. Thankfully, it isn’t that difficult if you know what to look for in your search. Hard money loans from most hard money lenders offer flexible interest rates and credit history requirements.
Finding a lender may be the perfect solution for your funding needs. We have put together this guide to help you know what to look for in a lender so that you will be prepared for the search.
Definition of Hard Money Lenders and Hard Money Loans
Before getting too deep into this topic, you need to understand what a hard money lender is and how hard money loans work compared to a traditional mortgage.
Do these loans require the borrower’s credit score to be above average? Is the interest rate fixed? How do these loans differ from traditional loans, mortgage loans, or conventional loans?
A hard money loan is a short-term loan based on the collateral of the investment property or rental property. Hard money loans are funded based on the property’s current value or potential value, which helps the private lending company calculate the loan-to-value ratio.
Hard money lenders are typically private lenders or companies that explicitly work with real estate business loans, and they do not work the same way as traditional lenders. When learning about finding a hard money lender, you need to realize the lender you choose could make a huge difference in your experience.
Investors may use a lender to fund various projects, including land for new construction, single-family homes, apartment buildings, and condos. Lenders profit by collecting fees, interest, and points for their loan services.
What Are the Benefits of Working With Hard Money Lenders?
If you’ve never sought a hard money loan and only worked with traditional lenders or a traditional financial institution, you need to know about the benefits of working with this type of lender. Learning how to find hard money lenders will allow you to experience the following benefits.
- They offer quick qualifications and funding times.
- They provide you with clear terms in their loan documents that outline down payment requirements, interest rates, closing costs, lender fees, origination fee, etc.
- They offer a minimal underwriting process.
- They move fast and can fund projects as quickly as the investor needs.
- They understand the real estate market and offer valuable partnerships.
This type of lender does not require a lot of paperwork like you would with a bank loan from a local bank. Minimum credit scores are not usually required because the investment property value is the collateral and the foundation on which the loan is funded.
Typically, investors can have their money in less than ten days. When you compare that timeframe to a traditional bank, which can take up to 30, you can see why so many real estate investors make the smart move to work with a hard money lender.
EXAMPLE LOAN SCENARIOS
Why Should You Consider a Hard Money Loan?
Nothing is more stressful than finding the perfect rental property and having another bidder snatch it up from under your nose because you don’t have enough personal finance for a traditional loan. When competing against other bidders, you need funding fast. This is where hard money lenders shine.
You will not have to deal with stress when pursuing this kind of loan. Lenders don’t make you jump through hoops only to embarrass you by denying the loan for future rental properties.
How to Find a Hard Money Lender
Discovering how to find hard money lenders for real estate is essential. You need a lender you can rely on, who will be transparent, and offer you the best terms.
Google and Social Media Are Your Friends
You have a lot of choices when it comes to lending options. Choosing the right lender is paramount for a stress-free process. You should start by researching to learn about your options.
As a word of caution, you should never go with the first name or two you come across. You will need to research each name you gather. Read customer reviews as much as possible to learn about the level of service offered by the lender.
Social media also offers an excellent way for investors to find experienced hard money lenders. Many real estate professionals engage with their audience on social media platforms.
Gaining information from social media will give investors a sound starting point for finding the right lender to meet their needs.
Attend Real Estate Investment Club Meetings
Real estate investment club meetings are an excellent way to gain information about hard money lenders. Often, lender representatives attend these meetings.
If you attend these meetings, make sure you focus on building positive and enriching relationships with potential lending companies. Get to know them and tell them about your business deals. You never know if one might be willing to loan you money.
Network With Other Real Estate Investors
Networking is one of the most beneficial ways of finding a lender. Networking with real estate professionals will allow you to create beneficial relationships that forward your real estate investment goals.
Real estate professionals can be a good source of information on hard money lenders. These professionals often have working relationships with lending companies and can help guide investors in their searches.
MORE EXAMPLE LOAN SCENARIOS
What to Look For in the Best Lender
In addition to using the strategies above, you also need to know what to look for in a lender.
What factors should you consider? How can you know you’ve found a lender you can truly trust? Consider the following.
1. Check the Reputation of the Lender
If you’ve spent any time with other real estate investors, you know they are often quick to share their experiences, whether good or bad. Before choosing one, you must read reviews on hard money and private money lenders to verify their track record.
The reputation of the lender is extremely important. If there are a lot of bad reviews, steer clear.
Investors are quick to tell others when they have had a bad experience. Do not ignore these red flags.
2. Check the Speed and Flexibility of the Lender
The right hard money lender should offer a high level of speed. The lender should not require a complicated application process.
The lender should be able to fund your loan extremely quickly. Find out about the application and approval process before you start.
Flexibility is one of the most important factors to consider when choosing a hard money lender. Many hard money lenders are willing to work closely with you and customize your options for the best results.
3. Check the Loan Rates and Terms
Another thing you must consider when choosing a lender is the rates and terms. Loan terms and rates have a tremendous impact on your success. Make sure the numbers work for you before agreeing to work with a lender.
Unlike credit unions, mortgage lenders, small private investors, mortgage brokers, and other traditional financing options, the best hard money lender will offer secured loans with flexible interest rates that meet your needs.
Make sure you understand the loan amount and loan term variables, including the purchase price, down payment options, minimum credit score requirements, interest rate percentages, etc.
Get Started Today for Lightning Fast Approval
If you are new to hard money loans or are simply looking for a lender you can rely on, you have come to the right place. The private lending companies we recommend are dedicated to your satisfaction and lending money to those who need it most.
Get started with your pre-qualification today. The process is simple and straightforward, which is just what you need in a fast-paced real estate market. We are here to answer your questions and help you understand your options.
A hard money loan may be the perfect funding option to help you succeed in your real estate investment endeavors. We will be here to help you every step of the way.