Best Practices in Hard Money Lending

[James McGovern]

FasterFunds Lending, a hard money lending who focuses on the Saint Louis Market has a unique take on hard money lending that I would think should be more popular.

1. No appraisal fees. They get in their cars and go see the projects for themselves

2. Funding. Will fund deals up to 100% purchase and 100% of rehab costs

3. Private Money: They encourage deals to use private money for rehab

4. Deals: All fees are transparent and declared upfront

5. Take Back: The number of houses taken back is very low. Some lenders take back more than what is reasonable

6. No hidden fees: No challenges where you learn about costs via HUD-1 forms such as the lender requesting more insurance liability directly with an insurance agent that was not declared upfront.

[John O'Leary]

1.) This has nothing to do with no fee's. Rehabbed comps, are rehabbed comps. As-Is comps are AS-IS comps. They shouldn't need to drive anywhere. BPOs for "Most" lenders have no fee's. If you have a rehab project and your lender is doing a full appraisal you're wasting time. If you plan to keep it, and your seeking long term debt the lender will require a full appraisal.

2.) No lender offers 100% for everyone so there would be major caveat to that. 100% of rehab costs are normal. If they are giving you 100% of rehab costs why do they encourage you to use private money in #3. Is the rehab dutch or non dutch?

3.) Why? In #2 they give you 100% rehab financing. 

4.) As should be with all lenders.

5.) This makes no sense at all. Lenders take back properties when the borrower doesn't pay.

6.) Insurance typically covers the loan amount and the lender will have specific guidelines. Sounds like you got the wrong policy and the correct one was more expensive. The lender isn't making money on insurance.