One would think that finding a team of the best hard money lenders ever is one of the easiest aspects of the job. And actually it may be – unless you want someone who is honest, skilled, qualified, knows his stuff and is out to help you achieve your goals as much as he is out to help himself.
Over the years, borrowers have been pleased and scandalized with their private lenders. Experts suggest various techniques that can help you choose someone worth your money. In short: Google and research lenders. Check their profiles and see if they are certified by the National Mortgage Licensing System (NMLS). They should also carry licensing from their state regulatory agencies. Speak to them. See if they and you match. Hire an attorney to review any and all forms before you sign. Thoroughly review the lender’s processes, terms, and schedule. Know that you can also negotiate the fees.
Where to look
The BiggerPockets real estate blog recommends two ways on how to reach these potential investors:
- Investor Contact Sites: You can use websites such as BiggerPockets Marketplace, Lending Club, Prosper, Go Big Network or Lendpost to post your investment opportunity and actively contact potential third party capital investors. Note: Please ascertain that your contact is within the confines of the Securities and Exchange Commission at both the federal and state level.
- Investor Direct Mail List: You can get in touch with potential capital investors by working with a list broker such as Melissa Data and Click2Mail. These will help you find a list of potential investors who match your pre-established criteria of Median Household Income, Net Worth, Likelihood to Invest, and Responsiveness to Direct Mail.
Preparation to finding a best hard money lender
SFGate Home Guides suggests that you work out your loan type and desired amount before you approach someone for investor financing and commercial properties. Most hard money lenders will advance cash loans for homes, buildings and land. Create a business plan that wows your investor. Develop an exit plan too for reaping as soon as you can and fulfilling your obligations. SFGate Home Guides refers prospective borrowers to the C-Loans website and iBank website to locate hard money lenders. You can choose hard money products from multiple lenders by completing a short application form. Hard money lenders will contact you to discuss your loan needs.
The Borrower’s Guide to Private Money Loans has this to say: Acquaint yourself with the topic before jumping into it. Read all you can and decide whether or not you can afford the exorbitant fees and prohibitive ARV/LTV rate. Do you still want to proceed? The Borrower’s Guide recommends that you tie up all business before speaking to a lender. This includes but is not limited to: an executed contract with the seller of the property, a budget and preferably a bid for the repairs needed, comparables showing the After Repair Value (ARV) of the property, a survey (land only), and an appraisal.
Next steps are to conduct online research for your lender. The Borrower’s Guide suggests searching for a lender by browsing online directories and reviewing per the following criteria:
- Location (e.g. California or Miami),
- Loan type (e.g. rehab, apartments, hotel ), or
- Keyword (e.g. construction loan, bridge loan, rehab loan or land loan).
Finally, the Guide suggests that you interview each lender using your conditions before making your final selection.
Steve Cook of ReiClub.com has no problem in findign lendrs. Extrovert as he is, Cook suggests that others do the same as him, namely network. Says he, “I have found most of my lenders by asking for referrals from others willing to help me because I do what I can to help them.”
Cook likes to ask settlement/closing attorneys for references. They are likely, he says, to give you at least one name since they are the ones who prepare the origination fees and closing docs. Accountants are also a good source for hard money lenders since they have clients who are sitting on a lot of cash and need to do something with it.
An apparent expert in digging out just the right private lender, Cook offers original tips such as writing down the addresses of homes undergoing renovation and finding hard money lenders that way since a private lender is inevitably funding one of these houses.
Insurance agents can also point you in the right direction since they have to put a “loss payee” on all of the policies where a lender is involved.The loss payee is the lender, so the insurance agent can tell who are private lenders and which ones are not. An active agent could probably go through their records and come up with dozens of names of people who have lent money privately on policies they have written. Finally, Cook puts his hat on mortgage brokers who should almost certainly have a hard money lender in their bag. (“If they don’t, I wouldn’t consider them a good mortgage broker. “) you may have to pay some of these people, especially the mortgage broker, a fee for the referral but the fee may be worth it.
The gist of it is this.
If you want to find the best hard money lenders in your region, your best options are to:
- Look online. Many hard money lenders (both national and local) have websites and they need you as much as you need them. Search Google for Hard Money Lenders in your state to find some.
- Ask a Mortgage Broker – Some, not all, mortgage brokers can connect you with hard money lenders – for a fee.
- Ask House Flippers – Find some house flips that are on the market and find the owners or attend your local real estate investment club and ask around. Referrals are often the best way to find anybody good in business.
- Ask a Real Estate Agent. An agent that works with lots of investors should know several hard money lenders – or at least be able to get you in contact with someone who knows them.