Hard money lending

10 Replies

How do you get approved for hard money lending everything we tried cost up front trying to set up a relationship with a hard money lender I have some cash available any body got any ideas

@Russell Collins   what type of deal do you have that you are pitching them and how are you presenting it?

@Russell Collins First off if someone is asking for upfront money, stay away from them. Though HML's are not so much based on credit, they still require other things that mitigate the risk the lenders are taking. What type of deal are you trying to get financed? What are the LTV's or ARV, etc.? What is your experience? What is the area like where the collateral is located?

Lenders are looking for "security" either in the person borrowing, a solid project, the location, something. It has to make sense. Where are you looking for HML's? Remember, you need to screen HML's the same as they need to screen you. Any loan is not a good loan, or good fit. The deal has to justify the costs.

Here's another thread on the same subject that was just posted 

Hard Money Lender wants wire

They shouldn't be asking for upfront money from you until they approve a deal or approve you as a borrower depending on if they're an asset based or a credit based lender.  Once those two things happen they may ask for you to pay for an appraisal and inspections of the property and the completion of a rehab form.  There's plenty of companies out there and getting set up with them before you contract a property is key.  You can wind up losing a lot of time and money and angering some potentially good contacts if you're not familiar with the process.

Thanks for you advise all of you it will help I am just trying to get preapproved for the HML and no one has contacted me back yet I have some assets of my own I just need more I would like to do multiple jobs I want access to 100,000 to 150,000 so I can do multiple jobs

Greetings All,

Ryan is correct.  There should never be any upfront costs except for 3rd party appraisal and credit and background check.  These fees should not be collected unless proper due diligence on the borrower and cash flow of the asset have been reviewed first. 

Being an asset based lender, we look at your rent rolls first and determine what you will qualify for in terms of loan to value(75% max) and loan amount based on the debt service of the properties(1.2). We take 25% off the top of your rents and divide this is into PITI to get the debt service ratio which should be 1.2 or greater. Assuming your credit score is 660 or greater, we'll offer a term sheet that outlines the qualifying parameters based on the information you provided using the formula above. If accepted, then fees are collected for credit, back ground check, and appraisals.

@Russell Collins everyone is right - no upfront fees. Sounds like you do have enough to bring to the table for a down payment, most all HML require some "skin in the game", typically around 20% or so. I would strongly suggest organizing your project in a well put together packet and presenting it to each lender with all details they need to see (purchase price, address, rehab, arv, money to bring to the table, experience, comps, exit strategy, etc). Since most all HML are asset based, there isn't much of a pre-qual to give, decisions are ultimately made on the asset. Hope this helps.

Well you really come across as an amateur by going round talking about a "relationship" without putting a deal on the table. it's no wonder people are trying to exploit and rip you off. A HML relationship starts when you bring them your second deal.

The best and only way to approach this business, especially if you're new to it is to put a deal together first. That means you have to find a deal that makes financial sense and there is no end of information on the forums, blogs and pod casts about that. 

Once you have a deal that makes financial sense, you then approach a HML with it, laid out in black and white for them. If you want to find out if a deal makes sense, post it here without the address, but qualify the location and there are plenty of experienced people willing to help you.

Best of luck!

I completely disagree. Almost all the hard money lenders I've used have asked for some sort of approval fee up front.   Typically, its just an application fee. They want to review your schedule of real estate, personal financial statement, tax returns, etc and approve you for a loan.

Once they do, then they'll typically just need to confirm your individual deals based on the ltv, estimated appraisals, rehab, etc.

The key is they should only be asking you for a nominal application fee (say $200 to $500).  The other key is make sure they have a significant presence. You are taking a bit of a risk on paying anything up front.

You need to find at least two other investors that were able to get loans from them. But sometimes you just need to go with your gut and take a shot if you think they're on the level.

I've been extremely lucky with the 3 hard money lenders I've found and used.

This is another example of the mis information put out by the real estate "gurus" and their marketing "experts".  They tell their seminar attendees to get pre approved with a hard money lender, establish a working relationship first, then go find the deal.

A real "pre approval" (not the print it yourself letter from their website) from a hard money lender is impossible, since the loan depends on the property being offered as collateral itself, and not primarily on the borrower's credit or capacity.  

As a hard money lender, I am continuously bombarded with inexperienced real estate investors with no understanding of real estate investing, no chance of ever doing a deal, no investment capital, and no desire to accept any information that contradicts what they learned at their recently attended seminar ("he warned me you'd say that!").  Since I lend solely on commercial property, you would think that would dissuade the inexperienced. Not at all.  Most are mesmerized by the old, incorrect and somewhat smart aleckery guru advice that "since you have no money you can just as easily buy a 100 unit apartment complex as a single family".  These people actually believe that with no capital, no knowledge, no experience, no education, etc. they will be able to obtain 100% + financing for a large commercial investment!  It is absolutely crazy.

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