Hard Money Lenders. What to avoid.

[Jonathan Chan]

I've been using my own funds to finance all of my real estate up until now. However, I've recently decided to look into hard money/private lenders to begin funding all my deals. I'm extremely surprised at the response. It's like the minute type "har..." I get an email in my box begging me to borrow their cash. Is this normal? It really rivals the whole car warranty extension calls and letters that I get.

[Will Barnard]

Jeminy Crickets, I didn't realize they had already deposited the money into your account. Lol.

You assume too much, my friend. They become very picky when it gets down to specific properties and loans. Most hard money loans that start out don't get funded. It's a numbers game. Get as many applications in as possible, collect some fees from everybody and fund 5% to 10% of the loans. 

Submit your application and see where it goes and how much they want "up front". Not all is as it seems.

This does not sound like the operations of legit hard money lenders. That said, never pay upfront for anything until they have pre-approved you, pre-approved your property and are ready to do the appraisal process.

Jeff gave some great advice above, check into the lenders to make sure they are legit and get references.

My question to you is, if you have been able to fund all your previous deals with your own capital, why the switch to HML? Is it to scale (which would make sense) and if so, do you have your teams in place to perform multiple projects at once? This is a very important step before you scale.