Finding quality hard money

[Dan Miklosz]

Hey everyone,

Thought I’d put a post out regarding how to find good hard money lenders. How do you vet them? What makes a good lender compared to a bad lender? Would you recommend a newbie use hard money on their first deal?

[Joel Thompson]

@Dan Miklosz instead of using hard money to fund the first deal, you might consider finding another experienced investor to work the project with. There may be someone in your network that would consider it if you found a deal and put it in front of them.

If that's not your preference, hard money is definitely a viable option, you just want to make sure that you build holding costs in to your estimate and over estimate. It's likely that the first project will take longer than you expect.

During your vetting process, you'll probably want to find a locally based lender that knows your market and can provide a second set of eyes on the deal. That's really valuable because they look at deals all day long and can provide a valuable perspective. Also, find out if they require origination paid upfront, ask more questions. There are some horror stories I've heard from investors that pay upfront and then the lender goes dark. You'll want to know how their draw process works if you're planning to have the lender fund your rehab, and the max percentage to ARV they will lend.

Also, ask others in your market how the lender is perceived and if they've worked with them before. Often that is the best insight you'll get.