How do I get a hard money loan and where from

17 Replies

Im looking to get my first property off of a friends father. its a 2 bed 1 bath single family home in a good location fully remodeled and rent ready he wants 45k for it but would probably take 40. I'm wondering where I could get info on a hard money loan and if you guys think its a good idea

I went to birchwoodloans.com  - not sure if they lend in in PA but you could try them. Birchwoodloans loans without brokers so it was much cheaper for me than working thru a broker. If you need to close quick of the sfr I would give them a bell.

@Tyler Hardy first off, get all your ducks in a row so that you get a loan that works for you. Know your credit score. Search for lenders in your area, call them and ask what their credit criteria is, LTV, etc. What is the actual value? What will it rent for? How much will you need to put into it to get max rent?

Also, there's the link on BP for lenders, check it out. Aside from that look at Association of Private Money Lender. Finally look on Scotsmanguide.

I agree with @Karen Margrave - you have to be fully organized prior to finding a lender.  BP has a great resource for finding lenders.  You can also ask around to fellow investors in the area - that way you find the more local, private lenders (as opposed to the more institutional type lenders).  

Best of luck with your purchase

@Tyler Hardy Have you tried asking whether the dad would be willing to let you make principal and interest payments to him while you rehab and prepare to sell? He’d earn interest, and you’d have a much easier time than lining up hard money. You and the dad would work out the terms together.

Sorry... just reread your post and saw it’s already rehabbed. Still try owner financing if the dad would consider it.

@Tyler Hardy To answer your question - no I don't think HML is a good idea because it's expensive, short term, and the place is already fully remodeled.

For a loan that size working with a local bank or credit union would probably be your best bet.  Or owner financing as others have posted.  Be sure for a rental you have funds set aside to "manage the business".  I keep about $5k-10k in reserves per rental property.

Good luck!

- Tom

@Odie Ayaga thanks for the reply, but I wonder if something is missing from this sentence (??). “Institutionalized private money from individuals...”.  Or maybe it has to do with the word “institutionalized”?  But both seem to be private money from individuals. What am I missing?

Sorry it's missing a comma (sounds different in your head than on the page). "Hard money is institutionalized, private money comes from individuals". For instance, private money lenders don't typically have the licensing and funds behind them that hard money lenders do.

Hard money may or may not be institutionalized. Hard money vs private money is really more of a professional vs amateur thing. 

Hard money lenders are pro's. We do it for a living. Most use institutional funds for their loans. Some of us also help place money for private people. 

Private lenders are typically people who lend money, but it's not a full time gig for them. They are also not as educated. Most don't truly understand the legalities of things and many new lenders don't know how to secure their funds properly.

Both can be good sources of capital. It just depends on what you need and whether or not you know enough to take care of your private lender properly. If you use Hard Money, the broker/lender will take care of everything. If you are borrowing private money, it becomes your responsibility to make sure that you hook them up with a good attorney who can draft their paperwork properly. NEVER DO THEIR PAPERWORK FOR THEM. if you do the paperwork for them, you can get into a lot of trouble for practicing law without a license. You could get away with it for a while, but if a deal ever goes sideways and they hire an attorney to help fix the problem, it won't go well for you.

I have quite a few borrowers who have found private money, but they referred them to me for help. If you don't have an attorney who understands lending, it is a lot safer for you to send them to someone who can help them properly. In my area, there are few attorneys who really understand what we're doing and how to protect their clients properly.

Good luck!