Hard Money/Private Money- Real or Scam?!?

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Hard Money/Private Money- Real or Scam?!?

Tadela Tedemet
Rental Property Investor · Baltimore, MD · Member since 2020 · 26 posts · 20 votes

So I am looking for some hard money/private money for brrrr investing and I have so many people asking me if I need a loan, but then I have other people telling me to watch out for scammers. I am new to this lending thing, what should I look out for as far as scammers? How can you tell the difference between the real thing, and what kind of scams do these people run?

Thank you in advance for your response. 

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
I wrote a blog on it for BP if you can find it.

but normally any up front fee other than apprasial or modest app fee to cover credit report is a red flag.

rates too good to be true  ESPECIALLY now rates jumped up a bunch

and right now first time borrowers are going to have a really hard time finding anyone to do a deal with them without 50% cash down or right about there.

bad english

approve you too quick just send 500.00 bucks..

paying points before the loan closess.

bad website  or no website.

you want to stick with the ones that are well known here is a few.

Lima one
Lendinghome
Lendingone
Renovo
Aloha
Civic
Iron Bridge

all of the above are real.



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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    I wrote a blog on it for BP if you can find it.

    but normally any up front fee other than apprasial or modest app fee to cover credit report is a red flag.

    rates too good to be true  ESPECIALLY now rates jumped up a bunch

    and right now first time borrowers are going to have a really hard time finding anyone to do a deal with them without 50% cash down or right about there.

    bad english

    approve you too quick just send 500.00 bucks..

    paying points before the loan closess.

    bad website  or no website.

    you want to stick with the ones that are well known here is a few.

    Lima one
    Lendinghome
    Lendingone
    Renovo
    Aloha
    Civic
    Iron Bridge

    all of the above are real.



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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Plus the market right now has really pulled back on refi or non owner occ non QM loans many lenders have simply stopped doing them. so you dont want to get locked into a HML with no exit
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  • Derek Dombeck
    Real Estate Consultant · Wittenberg, WI · Member since 2014 · 572 posts · 572 votes
    6y
    If they are asking you for large amounts of upfront money or fees, be suspicious. Get references from them and call them. Make sure all money goes through a title company or an attorney. That should keep you safe
    4Reply
  • Mitch Messer
    Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
    6y

    Hi @Tadela Tedemet and welcome to BiggerPockets!

    This is a great question:

    Hard money lenders (HMLs) are companies in the business of lending money. Depending on the state, they must be licensed. Reputation matters, so you should get referrals from active investors in your market before working with any HML. Also, all legitimate HMLs will openly identify as such, if asked.

    Private lenders (PLs) are individuals you might know with available funds for investment. These are nearly always people already within your extended personal network! An example would be a former work colleague who has recently retired with a sizable 401(k) and is looking to roll that money into an IRA and use some of it to fund real estate deals.

    So here's the tipoff: Most legitimate PLs are not out asking complete strangers if they need a loan! Anyone who is not an HML and who is offering you money "out of the blue" is most likely a scammer.

    As an aside, I applaud you for having a BiggerPockets profile with a photo: So many new members do not. I guarantee you'll get more responses to your questions, since no one really enjoys interacting with a blank default image!

    That said, I'd encourage you to update your profile with the city and state you plan to operate from, since often your physical location will affect the answer to your question.

    Good luck!

    3Reply
  • Tadela Tedemet
    OP
    Rental Property Investor · Baltimore, MD · Member since 2020 · 26 posts · 20 votes
    6y

    @Mitch Messer thank you so much!

    0Reply
  • Tadela Tedemet
    OP
    Rental Property Investor · Baltimore, MD · Member since 2020 · 26 posts · 20 votes
    6y

    @Jay Hinrichs thank you for that list! This person in particular was somewhat advertising in an investors Facebook group. He hasn’t asked for any money upfront but wants pictures of my Id, address verification from a utility bill, and I just want to make sure there’s not some identity theft scam I’m unaware of. Lol.

    0Reply
  • Tadela Tedemet
    OP
    Rental Property Investor · Baltimore, MD · Member since 2020 · 26 posts · 20 votes
    6y

    @Derek Dombeck thank you! I’ll make sure I do that.

    0Reply
  • Mitch Messer
    Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Tadela Tedemet:

    @Jay Hinrichs thank you for that list! This person in particular was somewhat advertising in an investors Facebook group. He hasn’t asked for any money upfront but wants pictures of my Id, address verification from a utility bill, and I just want to make sure there’s not some identity theft scam I’m unaware of. Lol.

     Whoa, I see no need to be sending anyone pictures of your ID or utility bills this early in the process. They should be asking you about the deal rather than this personal stuff.

    That's a huge red flag, in my opinion! Get and check references before you deal with anyone.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Tadela Tedemet:

    @Jay Hinrichs thank you for that list! This person in particular was somewhat advertising in an investors Facebook group. He hasn’t asked for any money upfront but wants pictures of my Id, address verification from a utility bill, and I just want to make sure there’s not some identity theft scam I’m unaware of. Lol. 

    by and large lenders DO NOT Advertise on facebook and what this person asked for I can virtually guarantee you they are a scam trying to steal either your ID or money or both

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Mitch Messer:
    Originally posted by @Tadela Tedemet:

    @Jay Hinrichs thank you for that list! This person in particular was somewhat advertising in an investors Facebook group. He hasn’t asked for any money upfront but wants pictures of my Id, address verification from a utility bill, and I just want to make sure there’s not some identity theft scam I’m unaware of. Lol.

     Whoa, I see no need to be sending anyone pictures of your ID or utility bills this early in the process. They should be asking you about the deal rather than this personal stuff.

    That's a huge red flag, in my opinion! Get and check references before you deal with anyone.

    yes Mitch typical fake lender looking to steal money and ID.. nothing more nothing less.. No real lender ask for these things until your at the closing . and even then NEVER a Utility bill.. some times ID and sometimes title company requires them but lenders up front NOPE scammer all the way

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  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    6y

    I have never had a lender ask for id.  The notary will ask for it when paperwork is notarized, but never had the lender ask.

    2Reply
  • Rick Ortiz
    Rental Property Investor · Philadelphia, PA (19148) · Member since 2020 · 38 posts · 39 votes
    6y

    Well I guess there levels / definitions of being a scam.  But I guess in general you want to compare quotes from different people.  Each lender is looking to make money off of you.  Thats fine since you are making money as well.  HOWEVER you dont want them making too much money off of you.  Interest rates on short term loans are obviously much higher than traditional conventional loans.  But they shouldnt be loan shark rates.  Just shop around and compare rates.  Makes sure that the terms of the loan are clearly defined. Read the fine print. If you can stay away from them and use other funding than start with that.  Its just that there rates are so high and ultimately thats the scam.

    0Reply
  • Joseph M'Mwirichia
    Rental Property Investor · Sarasota, FL · Member since 2020 · 154 posts · 72 votes
    6y

    @Tadela Tedemet Hi, I ran into such an outfit inside one of the Facebook groups. I pressed them for more specifics about their company, and they even sent over bank statements (clearly doctored), but had a legitimate state business registration in new York.

    So still, your scenario is for sure a #hardpass

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Joseph M'Mwirichia:

    @Tadela Tedemet Hi, I ran into such an outfit inside one of the Facebook groups. I pressed them for more specifics about their company, and they even sent over bank statements (clearly doctored), but had a legitimate state business registration in new York.

    So still, your scenario is for sure a #hardpass

    business registration means nothing.. having an LLC means nothing.. LOL.. anyone can get those set up for a few hundred bucks.

    the really funny one is when they send you a picture of their ID to prove they are real  LOL.. just crooks and theives looking to take advantage of those beginning their real estate or borrowering  journeys nothing more nothing less

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  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Tadela Tedemet

    Actually, lots of those lenders on Jay's list are going to ask for your ID early in the process and may ask for a utility bill where the address matches your ID to verify occupancy.

    It happens. One of the largest types of mortgage fraud is occupancy fraud

    Best of luck

    Stephanie

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Stephanie P.:

    @Tadela Tedemet

    Actually, lots of those lenders on Jay's list are going to ask for your ID early in the process and may ask for a utility bill where the address matches your ID to verify occupancy.

    It happens. One of the largest types of mortgage fraud is occupancy fraud

    Best of luck

    Stephanie

    I have borrowed from just about everyone of those on the list and never was asked for utl bill. these are not owner occ loan products ..

    Same with ID.. I do though get title companies asking for a copy of my ID on occasion..

    But will defer to your expertise here.

    With the over lays and new pricing and ARV LTV the lenders are coming out with today.. I think its a moot point for many beginners anyway at least for a period of time

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  • Michael Belmore
    Rental Property Investor · MA · Member since 2020 · 98 posts · 77 votes
    6y

    @Tadela Tedemet

    Hi Tadela,

    I would suggest getting references and actually calling those references and inquire about their experiences. If they are willing, try and get an address to the property they purchased and look it up in the town assessment database to see if their name is on the property.

    Good luck,

    - Mike

    1Reply
  • Joseph M'Mwirichia
    Rental Property Investor · Sarasota, FL · Member since 2020 · 154 posts · 72 votes
    6y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Joseph M'Mwirichia:

    @Tadela Tedemet Hi, I ran into such an outfit inside one of the Facebook groups. I pressed them for more specifics about their company, and they even sent over bank statements (clearly doctored), but had a legitimate state business registration in new York

    So still, your scenario is for sure a #hardpass

    business registration means nothing.. having an LLC means nothing.. LOL.. anyone can get those set up for a few hundred bucks.

    the really funny one is when they send you a picture of their ID to prove they are real  LOL.. just crooks and theives looking to take advantage of those beginning their real estate or borrowering  journeys nothing more nothing less

    💯💯💯  Jay!

    Even had a phone call with the dude, the FB profile was of an Indian dude, consistent with being a Mauritius based company, but accent was clearly west African. I know I have added advantage and can tell this being of African descent myself. Phone call would disconnect about every 5mins. They provided FB references for closed deals. You can already guess they were hacked profiles when digging into the FB ids.

     Not once did he attempt to ask about the specifics of the deal, what made it a strong opportunity, exit strategies, what excited me about it, etc. Also to note, they didn't ask for money upfront...just a little something more valuable, your identity.

    I guess I ought to go on record and say that I didn't provide any of that either and proceeded to also flag the FB account as fraudulent.

    1Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    6y

    @Tadela Tedemet going to a local REIA meet-up and asking around is going to be a decent way to go, and if your local REIA has a website it will have HML's listed and possibly advertised there.

    As a general rule both are going to want to know a lot about your qualifiers, as in a track record, and the prospective deal's quality, as those, are the true securing factors for their capital investment. So for a person with little to no track record, expect to get grilled and a lot of no's, or getting focused direction as to the "skin" you have to bring into it and so on, they will not be quick to tell you how "easy" it can be because it won't be. 

    Personally I have never used anyone that I didn't have some reference for, a person or several who had worked with that lender in the past and had closed completed deals, and I would never use anyone blindly. 

    3Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Stephanie P.:

    @Tadela Tedemet

    Actually, lots of those lenders on Jay's list are going to ask for your ID early in the process and may ask for a utility bill where the address matches your ID to verify occupancy.

    It happens. One of the largest types of mortgage fraud is occupancy fraud

    Best of luck

    Stephanie

    I have borrowed from just about everyone of those on the list and never was asked for utl bill. these are not owner occ loan products ..

    Same with ID.. I do though get title companies asking for a copy of my ID on occasion..

    But will defer to your expertise here.

    With the over lays and new pricing and ARV LTV the lenders are coming out with today.. I think its a moot point for many beginners anyway at least for a period of time

    if there is a question of occupancy or for new borrowers, we ask up front with for ID's with the LLC docs and bank statements. If there are any inconsistencies, we deal with it in the beginning rather than the end.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Stephanie P.:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Stephanie P.:

    @Tadela Tedemet

    Actually, lots of those lenders on Jay's list are going to ask for your ID early in the process and may ask for a utility bill where the address matches your ID to verify occupancy.

    It happens. One of the largest types of mortgage fraud is occupancy fraud

    Best of luck

    Stephanie

    I have borrowed from just about everyone of those on the list and never was asked for utl bill. these are not owner occ loan products ..

    Same with ID.. I do though get title companies asking for a copy of my ID on occasion..

    But will defer to your expertise here.

    With the over lays and new pricing and ARV LTV the lenders are coming out with today.. I think its a moot point for many beginners anyway at least for a period of time

    if there is a question of occupancy or for new borrowers, we ask up front with for ID's with the LLC docs and bank statements. If there are any inconsistencies, we deal with it in the beginning rather than the end.

    my normal routine when I get a HML and I don't do many maybe 4 or 5 year for overflow when I am at my limit with my commercial banks

    its bank statements and list of closed projects .. LLC docs go to title not often the lender asks for them..

    but I get it these lenders know me and or volume.. so they are not looking for a fraudulent borrower.

    When I was lending I had an Accurint mortgage fraud product just pop in name rank serial number and it spit out a go no go look further type of report.

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  • Tom Murphy
    Rental Property Investor · Salisbury, NC (Charlotte area) · Member since 2019 · 39 posts · 5 votes
    6y

    Good info all.

    0Reply
  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    6y

    The lenders I've worked with/for also asked for LLC docs and ID but after the term sheet was signed.

    0Reply
  • Tom Murphy
    Rental Property Investor · Salisbury, NC (Charlotte area) · Member since 2019 · 39 posts · 5 votes
    6y

    We were within two days from closing on a portfolio of stable rental homes in WVA with ShareStates when they stopped lending two weeks ago.  We had the appraisal, the underwriting, etc.  Now, we're trying to find anyone who's still lending for a stable portfolio of rentals.  Any ideas?

    0Reply
  • Carla Marie
    Investor · NYC · Member since 2019 · 12 posts · 5 votes
    6y

    Hi @Tadela Tedemet - welcome in! I'm also new to investing and have actually been speaking with different hard money lenders over the past few days to fund a flip. I echo what everyone said above re: vetting the lenders through references, etc. Bigger Pockets has a search feature specifically for hard money lenders which I initially used as a starting point to build out a list. As I began to speak with other investors, I was able to get references from them, which has been very helpful! 

    I will say though, given the current economic downturn and uncertainty, looks like the majority of lenders' numbers have gone up a lot in terms of interest rate and points, and their funding percentages have gone down. I've found it hard for the numbers to work unless it's an absolutely amazing deal, at least for flips. Just a little heads up! Definitely worth still looking into - things will hopefully be stabilizing fairly soon.

    All best!

    1Reply
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