Sorry, I missed your comment.

There is no silver bullet here. Although, you should not be paying just to get on someone’s list, at least you don’t have to. You can go compile your own list. Go to craigslist.com under money to lend or finance, and look in the local paper classifieds under the same title. Start calling people from there. You can also find a good number of proclaimed lenders on biggerpockets.com. I’ve informed all of my lenders about the website and encouraged them to get on it.

Here’s all you do and the bottom line is it takes a little time and effort, no getting around that. 1) Call as many of these people as you can stand, find out there lending criteria and terms. Many of them will say they don’t want to tell you terms until you have a specific deal. They often act very snooty at first because they have so many people call them. Don’t let that bother you. Compile a list of potential lenders, real life, flesh and blood people, brokers are ok too as long as they have real money somewhere. 2) Go find a deal, a smokin deal. It’s very good if you can raise a little of your own money as well. That helps a lot. 3) Call all of those lenders back with the specifics of this smokin deal. With a deal in hand you’ll find out who the real lenders are.

Note, try to stay local. Find people who are in your area that you can meet face to face. These people will feel better about giving you a shot if they can actually see the property.

Note, be professional. Get real comparable sales for your property. Do not try to use zillow. Get a realtor to do a CMA for you. Pay them a $100 dollars if you need to. It will help a lot to seal the deal with the lender and to make sure you’re going into a profitable deal not a blood bath.

Where in our great country are you? Depending on where you are at I might be able to point you at some good people.

Highest regards,
Justin Pierce

The hud-1, deed of trust, and the note, are probably about the only documents that are required for any and all home loan. The thing with private lenders is that they can kinda make up their own rules. Its their money so they can ask for just about anything. They could ask you for a note from your mom if they wanted. You would just have to decide if you would be willing to bother mom for this money. I had a lender that always wanted my wife to sign. I did it on the first loan but then after that I told them I would not do that anymore. I was putting money into the deal and the equity spread was great so it was offensive to me to make my wife (mother of 4 small children and homemaker) come to the closing. The lender agreed.

You pay for everything. Isn’t that great? One of my lenders charges me 5 points, plus all the regular closing costs, plus $1200 for his attorney who makes sure I’m completely screwed if something goes wrong. And, I am usually getting deals at 50% current market value and then I put down 20% and pay all the fix up myself. I’m the best borrower they could hope for but they still get me. But, its still far quicker and more flexible than a bank. And, this is just the one example. Patty, for instance, whom I wrote about in the first blog of this series, is quite a bit more easy going. It just depends on your lender.

Those are great questions thanks for taking the time. Let me know if I can be of any further assistance.

Justin

The hard money business is intriguing to me, it’s truly a win-win-win. Lender makes points, investor makes a great interest rate and borrower usually has a great deal they couldn’t do otherwise!
.-= Build Bankroll´s last blog ..House #14 – Close Escrow 8/5 =-.

Those are very good questions and I’m glad you ask. I try to keep my posts under 1000 words so I really have to keep the topic narrow.

From what I’m gathering from private lenders is that the default rate has been pretty high, as an industry. That has been market driven. Patty has had a lot of defaults but David has not. David did say that many of his fellow lenders have been hurt badly recently. Patty and David agree that much of that was a market condition.

I know one example with Patty where her investor bought the home well, good equity and all that, and the investor was experience but the market dropped 15% in two months and really took his legs out. Although the investor did take way too much time to get the work done. Fortunately the market recovered this spring. Patty worked with the investor and the investor ended up doing very well.

Yes, these lenders will allow you to get cash at closing. I don’t think they like it, as a rule. But that’s the beauty about private lenders; they aren’t tied by any solid rules. If the deal makes sense then they can do it.

Thanks again. You have a very nice website.

Highest regards,
Justin Pierce

Do any of the lenders you’ve interviewed allow investors to get a check at closing in today’s market if the values are right?

65% of LTV in today’s value is truly a ton less then 3 yrs ago.
.-= Build Bankroll´s last blog ..What sets the experienced investors apart? =-.

I don’t know what you mean by questionable reputation. If you mean they charge high interest rates and foreclose on borrowers that don’t perform then you might be right. But, I don’t see that as questionable. I’ve been using hard money for years and owe my success to them in some degree. I have good credit and assets and I still choose to use hard money. It provides me with speed and flexibility. If I had to rely on banks I would be out of business. In all of my experience with Hard Money lenders I’ve only seen one case where the lender acted questionable and all I heard was the borrower’s side of the story. My later dealings with this borrower revealed him to not be exactly trust worth or competent, so who knows who was really wrong.

Now you can get some situations where the lender does not know what they are doing, a situation like the one in the link. I wouldn’t call that hard money. The people might have thought they where doing a hard money deal but really all they did was create and investment group by giving that money to an individual with free rain to invest it.

You are right, they certainly do serve a purpose, and can get stung pretty bad if you don’t keep up your end of the bargain. However, even with private lenders I’ve found that they don’t want your property. In most states it is just too costly and time consuming to foreclose and they are not in the home selling business. Even David William (subject of the above story) went into great length to tell me that he begs his borrowers to work with him if they run into trouble. I intend to cover that advice in a conclusion story in a couple of weeks.

Thanks so much for the comments.

Highest regards,
Justin Pierce

Hard money lenders tend to have a questionable reputation, but they do serve a purpose. They can be very useful in certain situations. It makes sense that they do place great emphasis on the subject property’s value and the LTV, instead of on the borrower himself.