If you've used a HML in the past, I'm curious to know the following:
- Where do you go to find hard money lenders?
- How do you decide which lenders to pick from?
- What did you use hard money for?
- What were your other options before choosing hard money? Why did you choose hard money?
- What was the overall process like?
- What were the pros and cons?
@Ethan Bazarganfard thanks for posting. Hard Money (HML) can certainly be "hard" to find sometimes and once you do find one, how do you know if they are any good? I'll try to answer your questions one at a time here for reference:
- Where do you go to find hard money lenders? - Every hard money lender I have ever used came from a recommendation. I have never worked with a HML that I found on the internet. So how do you find people who can recommend them? Networking! Bigger Pockets has a very active California forum - try posting in there to see what some other local people have used for hard money. I bet there are even real estate groups that meet relatively close to you as well. Try here on BP or even meetup.com to see if some are in your area. Network there and ask who people have used. You can certainly find some good recommendations by networking.
- How do you decide which lenders to pick from? - The recommendation part is the strongest part of it but do "trust your gut" on these things. Work with someone that you like. If one person is $100 more than another...but you feel a lot more comfortable with that person...then maybe even ask them to match the other person's offer? Do everything you can to work with good people. Trust your instincts.
- What did you use hard money for? - I use hard money in 2 scenarios: First, when I have to close FAST. I mean REALLY fast. I have other money that I have access to that is 1/2 the rate and 1/2 the costs of hard money. As investors we will often come across a property that will be foreclosed on in 10 days. What do we do in that scenario? Use HML. That's the main purpose of that money type. Second, HML will lend on a % of the property. So if I can buy and rehab UNDER that % then I could come out of pocket with $0! Admittedly, that's pretty hard to do...but often I come out of pocket a very small amount when using HML. Just buy and rehab below (or pretty close to their %)
- What were your other options before choosing hard money? Why did you choose hard money? - As an investor you need MULTIPLE sources of money. We need options. And all the time. As mentioned above, I use in those 2 scenarios. If I don't have those scenarios then I have probably half a dozen other funding sources? Maybe more. But generally speaking, private lenders are great to have. And smaller, community banks generally have a product that is good for us as investors.
- What was the overall process like? - Despite the use of HARD in the name...its actually pretty easy to get Hard Money. The process has been pretty easy every time.
- What were the pros and cons? - The Pros - close quickly and can wrap reno costs up to a %. The cons - high fees.
Hope this helps! Thanks!