Hard Money Lender - How do I find one?

Question

Hey everyone,

I am interested in finding a hard money lender but I'm not sure where to look. I have a good feeling I know what I need to get started and have it as well as far as funding, plans, house in mind, exit strategy. I've watched a lot of videos, listened to podcasts, and read up on it. Now the thing I am missing is money.

I did a live-in-flip with my first house and made $100k off of it. I am now on my second but looking to keep this one as an investment (really good bones). Now there is a deal I would really like to jump at but need to find someone to work with me. I'm looking for advice because I'm excited and ready to pull the trigger.

Thank you in advance for all your advice and support.

(also, I am looking for a mentor in all types of investment)

Jay Hinrichs · Answer

I might of got a little confused now that I read @Nicholas Horsburgh his reply he did not say PPM he said offering memorandum .. many would take that as a PPM  ( private placement memorandum) but maybe he meant like a detailed description in writing of what your trying to accomplish.

Generally there are no real contracts for loans there are loan documents though

Note  mortgage settlement statement and depending on the lender a whole host of other various and sundry documents usually disclosures so you can't sue the lender. :)

Jonathan Bolano · Answer

@Dustin Verley First, thank you for your response.

My follow on question is how do I protect myself with the lender so I don't get screwed? Are contracts fairly easy to understand? How do I make the agreement and what should I expect? Are there any examples on BP that I can easily find so I can get a general knowledge of it?

Here is what I know so far:

- Hard Money lenders are short term, 12-18months

- Rates can be 12%-15% in my area because they want to create immediacy behind them getting paid back

- I'm not familiar with other fee's and expenses with a lender that you mentioned

- Have multiple exit-strategies if things don't work out. I believe I have 3 solid exit strategies (thank you Josh and Brandon from BP).

(Ironically, right to the right of my post it is telling me to use this button to contact a local lender)

Dustin Verley · Answer

A couple of different ways. BP actually has a section that enabled you to seek out hard money lenders based on your geographic location. You also Google for hard money lenders, or even utilize Connected Investor to find hard money lenders. Or you could always utilize private money.

The biggest point to take home is to ensure you do your due-diligence, ensure that the numbers work with utilizing a hard money lender as they typically or more-so for short-term purposes because of their higher interests, short-term loans, and other fees/expenses.

Good luck

Jonathan Bolano · Answer

@Tae C. Great response! This is the type of information I need.

@Steven Gesis Thank you!

@Elbert Dockery Cool. I'm trying to do all the research I can but I felt like I am missing something else and I feel you and Tae have hit it on the nose. Nothing I have researched or heard, has discussed any of what you mentioned. This is the reason I joined bigger pockets. I am currently a Realtor in my area and am coming across some great places. I have used a lot of the tools provided by other BP members, the BP formulas, and other things I found online. I feel confident in my numbers around a good purchase but uncomfortable with how to find a lender. I'm hungry to start but not so hungry to rush into something blind. I appreciate every's help on here. This is really helping push me in the right direction I feel.

Elbert D. · Answer

@Jonathan Bolano not exactly. Literally anyone can be a PML lol. That’s if they have the funds. What I’m saying is find someone(or group of people) who knows what they are doing that’s local to you and ask for good lenders for newbies. Let’s say I had 400k liquid right now. Well I can become a lender for you. Let’s say you want to buy a house for 100k at 80% ARV I’ll give you a loan for 80k and you put down 20k but you also have other fees such as realtor cost, closing and holding cost. Then my fees of interest and points. You should read up on Hard money lenders and private money lenders. Being new in real estate you HAVE to dot your i and cross your t there are many people who will try to take advantage of you.

Tae C. · Answer

Most lenders will only lend up to a certain percentage of the ARV, typically 65-70%. So they are protected in the sense that if you default on your payments, then they can just take back the property from you and still in theory have plenty of equity in it.  At that point, they could finish it and sell it themselves for the same profit you would’ve made, or I imagine they could shop it around to other investors that might want to finish it out.

As far as them screwing you over, just have to be aware of some of the language they use in their disclosures, promissory notes, loan docs etc.  Make sure you are recepient of full proceeds, there’s no pre payment penalty, read through their definitions and consequences of default, etc. like other said, look out for random unnecessary fees.

Elbert D. · Answer

before careful of certain HMLs some of them have hidden fees and charge you extra during the closing statements. You might want to get a PML first and only get it from Someone whom you trust and by referral.  A good lender is hard to find just like a contractor when your new. Best of luck to you.

Jay Hinrichs · Answer

@Nicholas Horsburgh  Realty shares sold their under 1 million business to lima one .. just FYI

I would think one rental house would not require a PPM.

@Jonathan Bolano  just make sure your not sending any money to any lender other than appraisals..

lots of fake lenders on Facebook linkdin and even on BP.. so be cautious.. the fake lenders on BP will normally PM you.. they won't respond on the thread itself..

Nicholas Horsburgh · Answer

Hey Jonathan,

So I've been a hard money lender and also am consultant and real estate agent for two VC's and one PE firm that lend in this way. You first have to have a good BP, maybe approved architect plans, and ideally an offering memorandum. If you don't know what these are (or how to make one), let me know.

Also I've structured deals that have a time horizon well over 12-18 months if the projects are great with basically assured yields above expectations, and/or an annual coupon is assured.

There's plenty more I could help with if you'd like. Just reach out.

Also, lesser known but AWESOME sight: Realtyshares.com

Steven Gesis · Answer

You found the place,  just simply go to the BP marketplace or call your local REIA they will be able to give you a name or two of someone who is at the event every month pushing hard money on folks :)

Hard Money Lender - How do I find one?

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