Hard Money Lender = Powerful Power Team...

refills Show me a real estate investor who has zero avenues for getting quick funds, and I’ll show you a real estate investor whose business is growing at a snail’s pace—if it’s growing at all.

Hey Moguls, Cody Sperber here, and I know you know that getting a loan using a mortgage lender works well for building inventory if you plan to buy & hold. But it can be a slooowwww process—and won’t work for wholesalers and rehabbers.

The quicker way is through a hard money lender.

Let’s dive in to the benefits…

Hard Money What?

Hard money lenders are those who have a sizeable cash reserve that allows them to make short-term loans to help investors snag a great deal, pay cash and close quickly. Working with a hard money lender all boils down to speed.

The term hard doesn’t mean difficult…

On the contrary, it can be quite easy to get your hands on cash if you’re in a good working relationship with a hard money lender. This person (or several of them, actually) will be a strong member of your power team.

What Are the Terms?

You need to know right up front how a particular lender operates, and then determine whether or not that fits in with your business model.

Their terms vary and will usually depend on your experience level. Their terms can also change over time as you work together. A long-standing relationship means a higher level of trust.

Typically, a hard money lender will loan 50%–75% of the after repair value of a home. The interest rate can range from 12% to 18%, and the time frame for the loan might be anywhere from a week to a few years. Some also charge origination points as a financing fee—this is paid up front.

Other variations:

Some charge interest; others amortize the loan
Some will lend repair money; others will not
Some place repair money in escrow and will pay out as the work is done; others pay out at settlement
Some will include closing costs in the loan amount; others will not

Remember, a hard money lender who’s been around awhile knows what they’re looking for in an investor. (In other words, they’re checking you out as well.)

What about Your Credit?

Because a hard money loan is based on collateral, and because it’s short-term, your credit rating is normally not an overriding issue. But, that lender still may want to know about bankruptcies, foreclosures, charge offs and collections on your record.

running It’s true that if a deal goes bad, hard money lenders can sell the property and retrieve their money, but that’s certainly not what they want to spend their time doing. For this reason, some lenders might be more concerned about your personal financial history than others.

This is yet another important reason why you need to get to know your hard money lender before their services are ever needed.

Finding a Hard Money Lender

Hard money lenders will become highly essential members of your power team. When you run across a smoking-hot deal that you do not want to pass up, that’s neither the time nor the place to start your search for a short-term, hard-money loan.

Do your research ahead of time.

Start asking around with settlement/closing attorneys. These people are often the ones who are preparing the loan docs for the hard money lenders. Most of these attorneys will provide you with a list of several names.

Others who will be a good resource are:

Accountants
Insurance agents (especially those who sell hazard insurance policies)
Mortgage brokers
Other real estate investors

Once you’ve got a hard money lender on your power team, you’ll be confident in making strong offers on the best deals that pop up. In other words, having available funds could make the difference in your business moving forward—or remaining stagnant.