What are some hard money lenders (recommendations)

10 Replies

I have called one hard money lender but the interest was high and so was the deposit. This would be my second investment and I understand it is risky when dealing with ppl just getting started. I don’t know where to look for hard money lenders and I want to look at all possible hard money loans out there before pulling the trigger.

All hard money has a high interest rate, hence the name "hard money" as opposed to "easy money". Typical hard money loan is 10% interest or higher and 2 to 3 points. It is expensive. As far as down payment goes, they usually base it on your experience level, but the best I have seen for a HML is 10% down on purchase and they fund 100% of rehab.

Originally posted by @Braden Smith :

All hard money has a high interest rate, hence the name "hard money" as opposed to "easy money". Typical hard money loan is 10% interest or higher and 2 to 3 points. It is expensive. As far as down payment goes, they usually base it on your experience level, but the best I have seen for a HML is 10% down on purchase and they fund 100% of rehab.

 

I was led to believe that the term "hard money" refers to fact that the loan is based on the value of "hard assets", in this case real estate, versus a borrower's creditworthiness or "soft assets" such as brand recognition.

-AF
  

Originally posted by @Courtney A Hall :

@Braden Smith

Thanks very helpful

Would know of some in the pa region

Network at the local REIA meetings and join the local REI Facebook pages. Many investors also lend money to other investors they know.

-AF 

go to lendinghome's website.. they have a great pricing matix right on line open to anyone who wants to look at it.

you can see how they price loans for experience down payment etc.. its a nice base to start with.

That is where the name comes from originally, but most hard money lenders don't operate that way these days. And some people say that the total interest is a lot to absorb which is why it is described as “hard money.”

I have applied with many and they all wanted the same info... income, credit score, bank balances, assets, liabilities, experience level, and most importantly info on the deal itself. The rates and terms vary based on those things. If you have less than stellar credit, little money in the bank and no assets, they can lend based mainly on the deal itself, but you will get the highest rates and least favorable terms. Think credit card type rates...

People are being led to believe that they don't need any money to invest in real estate, that they can get a hard money loan even with poor credit, no money in the bank and no assets. This is simply just not true. You need money to invest in anything. The term "investment" is defined as the action or process of investing money for profit or material result. The term "invest" is defined as to expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture. You need money to invest!

I think it is better for people to think of hard money, as a difficult and expensive source of funding. It should be used as a last resort only in my opinion. And yes, you typically do have to make monthly payments, and they are high, especially if you have little money down. 

The majority of hard money lenders out there DO require a down payment. They’ll take a look at your credit score, experience, and maybe a few other factors, and then calculate your down payment from there. Most often, you’ll be required to front 20% to 30% of the deal. And it makes sense why they do this:

They’re taking a risk on you. They’re assuming that you’ll be able to pull off the flip and pay back the loan with interest within the timeframe they’ve established. When you pay 20% – 30% up front, it lowers their risk.

Each company has their own underwriting criteria to determine risk on a deal. If they see that you have experience and a good credit score, you’ll be able to pay less money up front, and get a more favorable rate and terms.

See here for HMLs:  https://www.biggerpockets.com/companies/hard-money

See the following links for more info:

https://www.investopedia.com/terms/h/hard_money_loan.asp

https://retipster.com/hard-money-101-everything-need-know-getting-started-hard-money-loans/

https://www.thebalance.com/hard-money-basics-315413

https://www.biggerpockets.com/forums/49/topics/156082-how-hard-money-loans-work-in-detail

https://www.biggerpockets.com/forums/311/topics/164132-hard-money-loan-example-explanation

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you