Security for Hard Money Lenders

[Steve Uhlig]

Hello Investors,

I understand that hard money lenders will lend on the value of the asset as well as on the repair costs.  My question centers around the lender's security.  The lender obviously has security when they lend on the asset, but where is the lender's security when the lend on the repair costs?  Something I've been wondering about.

Steve

[Sean Blomquist]

@Steve Uhlig they typically aren't giving them the repair funds up front.  Maybe a portion, but most is held in escrow and released based on completion with inspections needed for a draw.

If the repairs aren't completed as stated, then the money may not be released.

If the borrower defaults on the loan, the lender may still have funds left to complete the rehab.

Hopefully that helps...