What questions to ask a Hard Money Lender

Question

Hey everyone,

With not much capital to put into a project, I have had to get creative with how I want to go about purchasing properties. One of the most talked about methods of getting into a property with little money is hard money lenders. I was wondering, what are some great questions to ask hard money lenders to know if you are getting a good deal with them or if they are taking you for a ride, and why?

Account Closed · Answer

I think it's often quite the opposite, @Stephanie Irto . Hard / private money lenders like myself will lend up to 90% of the acquisition price for properties, requiring the investor to only come to closing with between 10-20% cash down.

@Jared Smith , I do not lend in Massachusetts, but hard money is more expensive in the NE when compared elsewhere. The most important thing to do is collect data points from multiple lenders (i.e. "shop around") and see who can be most competitive. Depending on your experience in real estate investing (and the property's location), expect to see rates between 11-14% with 3-4 points upfront.

Things to look for - most competitive lenders offer the following terms: interest only payments, no pre-payment penalties, and no up-front fees or charges (these are often scams). You'll also need to consider how your credit score will affect the terms. Some lenders, like myself, will lend with no minimum credit score, and will underwrite the terms based primarily on the merits of the investment property itself (as opposed to the borrower's credit profile).

Feel free to reach out with any questions!

Corey Melkonian · Answer

Try to go for traditional with banking, it's less expensive and will help build your credit. Use hard money as a last resort because it takes a big chunk of your profit.

Logan Chierotti · Answer

If you're going to get hard money, hire a lawyer to review the contract. A lot of hard money guys put things that can negatively effect you in the contract. For example I have a friend that does hard money loans, in his contract he can call the money due at any time. This is good for him, but not for the borrowers. Spend the money on having a lawyer review your hard money contract. Hard money lenders aren't regulated like regular lenders.

Stephanie Medellin · Answer

Maybe I'm missing something but the hard money lenders I have seen usually want a large down payment / lots of equity and will be flexible on everything else.

What questions to ask a Hard Money Lender

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