Hard Money / Private Money

6 Replies

When it comes to private/harf money lending, how do you know you have went with the right lender? What are some things you look for when you are interviewing a lender? Is the goal to keep the same lender after a successful deal or should you always look for a new lender for better rates? Thank you.

Hi Tyler, I recommend after a successful deal with a lender, and If you had a great experience with that lender then I suggest you use them again; because once you build that relationship with a Hard Money Lender, that trust is established. The reason you want to build trust with a lender before you go to other lenders is because you want to know that when you get a deal under contract you can call them up and let them know you have a deal; and they will close faster, and give you better rates. They won't have to check your credit again,  ask for bank statements, or ask you to pay certain fees like you had to when you first did business with them. Once that trust is built, they become a great asset to your power team.

In addition to the statement made previously, when you use multiple lenders you have to keep trying to get used to how they do business. For example, down payment, inspection draws, closing costs, and etc. You want to really have that consistency, and stability with one lender so you can just operate quicker, and faster.

The questions you should always ask a lender is are they a direct lender,How fast can they close,  Do they lend based on the Asset or based on the borrowers financial history, minimum downpayment, minimum credit score, do they require experience, are there pre-payment penalties, and is there closing costs.

If you have any questions feel free to reach out to me, and please connect with me. Thanks!

The things I ask are;

Is there a pre-payment penalty, many have 2 year pre-payment penalty which if you're just looking to flip would be a waste

How many points? 

Loan to value they need based on your credit score

Then finally you'll need to find out if they can actually close loans. Many will say they can do it just to get the loan in and then 60 days later it gets turned down for a reason that should have been flagged in the first conversation such as is it a rural property, pride of ownership clause which if it's a fixer upper is of course a no and so forth so just be very straight up with the deal. Citadel, though a pain in the but is the best hard lender I've used lately and they close loans.

Originally posted by @Rick Momsen :

The things I ask are;

Is there a pre-payment penalty, many have 2 year pre-payment penalty which if you're just looking to flip would be a waste

How many points? 

Loan to value they need based on your credit score

Then finally you'll need to find out if they can actually close loans. Many will say they can do it just to get the loan in and then 60 days later it gets turned down for a reason that should have been flagged in the first conversation such as is it a rural property, pride of ownership clause which if it's a fixer upper is of course a no and so forth so just be very straight up with the deal. Citadel, though a pain in the but is the best hard lender I've used lately and they close loans.

on a fix and flip loan I have never heard of a 2 year pre pay ???  what product has that ? 

@Tyler Chenault  

We're coming to the end of a market cycle, and hard money lenders are really getting competitive ... pushing really low rates and points and high leverage..... 

Hard Money and Private Money 1st TD Debt is a commodity.

Most Investors just shop rates to see who gives the best terms...

But beware... some lenders give low rates, and really bad service.
You could be waiting 2-3 weeks for a rehab draw to be reimbursed...

Check out the lenders listed on Scotsman Guide and Private Lender Link...
 Those are the top two resources for Borrowers and Lenders

https://www.scotsmanguide.com/Residential/LenderSe...

https://privatelenderlink.com/

And meet with other investors in your area...

Ask them which Lenders they are using.

Don't just use the Lenders who have Sponsor Booths/Tables at your Local REIA...

There is a Plethora of Great  Debt & Equity Lenders Out There.

Some Local Lenders are Lowkey, and sometimes better than Nationwide Lenders...

And Vice Versa ☺

Aside from what has been mentioned above, look out for if they offer 

a) fixed rate terms regardless of how many deals you do through them... 

OR

b) a sliding scale based on how many deals you do with them

the latter is obviously an incentive to come back and use them again

Tyler

At Lima One Capital, the more deals you do with us the better rates you get. Plus once you establish yourself as a high end flipper, we can approve you for a line of credit from $1M - $10M. That way you only have to submit the property for approval. Speeds up the process tremendously.