Hard Money Questions

[Timothy Johnson]

Ok BP, so I wanna reach out to a few hard money lenders to have my money in place once I start getting properties. But want to make sure I was asking the right questions when vetting the HML. So far here are the questions I have come up with.

1. What are your requirements

2. How much do they lend (full ARV or a %)

3. What are your interest rates and do you have any points

4. If I go over the rehab timeline, how much additional would that be

5. Once approved, when would funds be available and would it be full agreed amt.

If I'm missing any additional questions (which I'm sure I am) PLEASE let me know!

Thanks!

[Kyle Altenau]

First thing to ask. "Are you a direct lender?" A lot of people say they are hard money lenders, but they're really just brokering your loan. 

I'd also ask how they are capitalized. This can vary greatly. Some are lending just their own money. This allows them the most freedom to make loan decisions, but they are also the most likely to run out of funds. Other lenders are backed by high net worth individuals or different funds. These lenders have more money than they are able to lend, but lose control and freedom over making lending decisions. 

You may want to ask about how their interest is calculated. Some charge interest on the entire loan amount, even amounts that you haven't drawn out yet for construction. Some charge only on the funds you've drawn out. On a bigger construction project that can make a huge difference. On a smaller budget, it won't make a huge difference. 

I'd also network with as many people locally as you can to see who they're borrowing from and what their experience has been. 

If the lender is asking for large upfront application fees or something, they are probably trying to scam you.