Hard Money Lenders In SF

6 Replies

Do you have a deal lined up? Unlike traditional financing (where you should get a pre-approval before shopping for deals), hard money is centered more around the property than it it around your personal finances. You need to approach lenders with numbers ready and a good understanding of how HM works. I interviewed 5 lenders before finding one that would work with me as a beginner investor, and it only worked out because I had my analysis on point, and a network of people who could support me in the process. My HM lender actually required me to have an experienced rehab coordinator to oversee my project, otherwise they wouldn't have funded me. I had that person already in my network, so I was ready to go! 

Lastly, I found that a lot of HM lenders service nationwide. Mine is in California and I invest in Michigan. Start local, call around and widen your search to national lenders. Also check the HM company list here on bigger pockets, that's where I found mine! 

@Matt Hurley thanks man I appreciate that. I know as a beginner they are going to be very skeptical of you and might require me to put some more collateral than usually. For example, this HML says that they will finance up to 90% purchase price and 100% rehab. However I am a new investor so will there maybe drop the rehab to 70% and finance less so that I have to put more down ?

@DeAndre Anderson it’s rare they’ll allow the deal to move forward in exchange for more collateral. It’s all about the property, if the numbers aren’t good they won’t move forwRd no matter how much collateral you’re willing to put down. That’s my experience at least. 

The only thing that will change as you move forward is a lower APR. For example, after I have 3 deals under my belt, my APR with my HM lender goes from 10% to 9.25%, then lower again if I've got 10 or more deals under my belt.

@Matt Hurley Got it got it. I don't know a HML personally but since you've dealt with one before, how do they go about rehab funding. I here a lot about draws but I don't really understand it. I pay for the materials and labor and the HML pays me back? How do the draws work out? If your willing to share.

@DeAndre Anderson HML charge per draw, mine is $300 per draw, so that's a cost you need to keep in mind. You generally have to set your repairs in advance of closing, so you need to be able to estimate rehab costs generally on the accurate side, and have a good idea of how much the project is going to cost.

You do have to pay your contractors in advance of your draw. My lender actually requires a lien release waver from the contractors showing that they've been paid before they distribute my draw. You generally split your draws up in major steps, for example my current property requires about $50k in repairs, of that $20k was the roof, $10k was the knob and tube replacement etc. I just completed the roof, paid my contractor, now I'm about to be dispersed my draw. 

If you haven't already, check this out. Should answer some other questions:

https://www.biggerpockets.com/blog/hard-money-loan-ultimate-guide

Good luck with the research bud! 

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