Help Me Understand Hard Money Lenders

[Tim Crosby]

I've been hearing about 'hard money lenders' since I first started looking into real estate investing, but always steered away from looking more into the concept with the impression that this might be out of my league. Now I've begun to realize that it's not, so long as we can help each other, we can deal!

This realization has also shown me that I have no idea what a hard money lender is looking for. I understand that everyone is different and they want different things. I also understand that being new to hard money, I will have to pay my dues and earn that trust before we can do anything overly complicated or bromer any high dollar deals. That said, I need to start somewhere and I want to learn.

Any information you can provide or if you know of any resources I should look into, just let me know. I'm particularly interested in hearing from the hard money guys and gals out there directly, but everything helps!

[Shere Clark]

@Tim Crosby I'm happy to help! You would really want to set up a refi lender when you're applying for and setting up a hard money loan. That helps you avoid heartache in the form of paying a hard money loan even though you are finished with the rehab. Another good question to ask your HML is if they have any refi lenders that they can refer you to. You're 100% correct, a lot of refi lenders or banks require you to have the property for at least 12 months.

Extensions are optional but if you were to need one, we'd give you an extra 3 months for 1 additional point.  So, 3 more months costs 1 point.  

A few good questions to ask:

1. What is the cost and length of the loan/note?

2. How quick is your turn-around time to close?  

3. What information do you need for pre approval and how quickly can I get a Proof of Funds letter?

4. Is there a pre payment penalty?

5. What is your draws process for the rehab portion of the loan?  How much does each draw request cost?

6. How do you determine your loan amount? ARV or LTV?

7. Can you provide me with a cost breakdown of monthly payments and cash-to-close before I send in a deal for funding? *This is a nice thing but shouldn't be a deal breaker!

8. How many properties can you fund for me at one time?

Keep the questions coming!  Thank you!