Why would someone just.. lend me money

Question

So new to this.. hopefully this is how we get things rolling.. On acquiring financing to any new real estate purchase,  I have read a lot about "find a hard money lender, find someone who will loan you money personally, etc".. Is this idea for people who have that rich generous uncle, or am I really going to find someone, after a search, that says "Here, I have an extra 500k laying around that I would like to give you".. Aside from that person having a financial gain from this loan, or an obvious reason to trust me, I am wondering if there is something I am missing about this whole idea?

Eric Loya · Answer

@Jessica White Hard money lenders are easy to find, and are willing to finance the majority of a deal you bring to them. Private Lenders are more like the "rich generous uncle." These are private individuals you may meet at real estate investor meetings.

The goal with both is to prove to them that they can earn a good return on investment and (more importantly) that their money is safe (i.e. prove to them you're not going to steal their money and run off to Mexico).

There's a lot of ways to skin the cat, but here are the important items they need to know:

1) How is their money secured when lending on your real estate project?

- deed of trust

- private note

- named loss payee on insurance policy

- title insurance

2) How do they know the project is a good investment?

- show them estimated resale value of property by providing comparable sales and average days on market to sell

- confirm estimated repairs with licensed contractor, and estimated time to complete repairs

- show estimated net profit once deal is complete

This should give you a good map to run off, and plenty more to research as you plan your next investment strategy! Best of luck in 2018!

John Thedford · Answer

You need to put money in the deal. Lenders want security that a borrower will not walk if things did not turn out well without having a lot to lose. A lender should look at the collateral your capability to repay the loan and your credit worthiness.