What do you look for in a hard money lender?

Question

Hi BiggerPockets Community,

I’m a lender exploring opportunities in hard money lending and would love to hear from those with experience. What have been your biggest challenges and successes with hard money loans?

Chris Seveney · Answer

@Donna Rundo

Challenges

1. Truthful borrower packages

2. Confirming ARV

3. Understanding borrower experience

Rewards - being in first position you are in control of property in case of default. I would not recommend doing anything outside of a first position

Stuart Udis · Answer

Most investors  who pursue alternative lenders aren't able secure bank financing because they  lack the creditworthiness, experience or the deal doesn't pencil. This is not to say there aren't bankable borrowers with good projects. In some cases the bankable borrowers conscientiously choose to fund their projects with alternative lender because they  can achieve better leverage, won't have to maintain a set depository relationship with a bank, or they need to settle quickly. These are just a few examples but there are many motivating factors that lead  a bankable borrower to work with an alternative lender.

Next you have to ask yourself why would those borrowers want to borrow from you over all of the other alternative lenders.  Sure terms matter, but I would imagine if you took a poll of bankable borrowers and asked why they work with particular alternative lenders they will all say the lender is knowledgeable which leads to practical underwriting and practical loan administration. There are instances where I use alternative lenders and have tried my hand at a few. Some I repeatedly go back to even with slightly higher rates and fees than others who are staffed by incompetent people who can't articulate the reason for their policies. That's the category of lender you want to avoid falling into.

This is a roundabout way of saying if you can show real value to your borrowers by understanding their business you will attract the best quality borrowers with the best collateral and can charge a premium for your services because they are the borrowers who understand what's most important in a lending relationship and its not solely the rate or origination fees.

Jacqueline Wright · Answer

When choosing a hard money lender, investors typically prioritize a few key factors. First, **reliability and speed** are crucial—hard money loans are often used for time-sensitive deals, so you want a lender who can fund quickly. Second, **flexible terms** and clear communication about rates, fees, and loan-to-value (LTV) ratios are essential to avoid surprises. Investors also look for lenders with **experience in the specific market** or property type, as this ensures a smoother process. Finally, **transparency and trust** are vital; a lender who is upfront about all costs and willing to work through challenges builds long-term relationships with investors.

Owen Dashner · Answer

I started a hard money business in 2020 with some partners.  We started with $1MM of our own capital, and have since grown to about $25MM through raising private money and utilizing bank lines of credit. Our continued challenges are always balancing the need to keep capital deployed into good projects, while simultaneously trying to not run out of lendable capital and having to say no to potential borrowers. It sounds weird, but you have to be careful how much you advertise so that you don't get a reputation for being "out of money", while at the same time networking with wealthy individuals/family offices/private equity.It's a little different if your approach is going to be only loaning your own capital. Then I would say that the main challenge for you will be finding trustworthy, experienced operators who are going to give you repeat business and who have a track record of successful project executions. As Chris said above, you really need to understand values on properties regardless, so starting small in your backyard is always a safer option than going nationwide right away.It is a great business though - congrats on getting started!

Bob Schulte · Answer

Hey Donna!

While I’m not a hard money lender myself, I’ve worked with several clients in the space. From what I’ve seen, borrowers value clear and transparent terms, speed of funding, and flexibility. Hard money deals often need to close quickly, so being upfront about fees and offering tailored loan structures can really set a lender apart.

On the lender side, the biggest challenge seems to be managing the risks. My clients often stress the importance of thoroughly assessing property values and having a solid plan in place for handling potential defaults. That said, they also tell me that the rewards are worth it, with high returns and strong relationships with repeat borrowers being common outcomes.

So, if you're exploring hard money lending, I think focusing on transparency, speed, and offering flexible loan terms will go a long way. Just be sure to have a strong risk management strategy in place!

Luis De la Puente · Answer

Choosing the right hard money lender is a game changer! Here’s what I look for:

Speed – Time kills deals! Fast closings keep the momentum going.

Flexibility – No two deals are the same, so I need a lender who gets creative with loan options.

Transparency – Clear terms, no surprises. Trust is everything.

Experience – I want a lender who's been around the block and knows how to navigate challenges.

Reliable Funding – A lender who consistently delivers—even on the big deals—is key.

The right lender isn't just financing—they're a partner in success!

What’s your non-negotiable when it comes to lenders?

Anderson S. · Answer

For us our largest challenge is finding a steady stream of high quality leads.

What do you look for in a hard money lender?

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