Finding and trusting lenders?

Question

Hi All,I'm trying to find some creative financing ways to fund my investment projects as they come up. Looking for hard money lenders, private lenders etc. is quite difficult it seems and even harder to trust when you connect with them. I've had a bunch of inquiries for lending money but they come from sketchy websites and what not sometimes. My question is...how to you find lenders who are willing to do short term loans on high interest payments and what are some qualities or features you look for in terms of trusting them to pull through?Thanks!David

Jeff S. · Answer

I know many believe they can find everything they need online anonymously, @David Zheng, but borrowing is a relationship-based business, and these are best formed face-to-face. Turn your computer off. With the growing number of lenders floating around now, you can toss a stone into any real estate meeting and hit several. This is where I recommend you begin.Here's a Meetup link to some real estate clubs near St. Louis, MO.Meeting potential lenders eye-to-eye, perhaps in their office, and with references from other borrowers, is at least one assurance they are not scammers. Checking licensing, looking their loans up, and maybe calling past borrowers listed on these documents, is another.There have been many threads here on vetting private lenders, if you do a search. Here's one that includes an initial list of questions you could ask: How to Vet a Private LenderGood luck, David.

Ivan Barratt · Answer

@David Zheng keep studying creative finance and keep having conversations. Ask local investors for referrals. Remember; for every one good private lender there are 99 loan sharks. The math is simple. Talk to 100 lenders and you'll find one great relationship.Happy Hunting!

David Zheng · Answer

@Jeff S. Thanks a lot Jeff!!

David Zheng · Answer

@Charles Highsmith It wasn't one cash investment of 250k that got me 12k. The story was I got an HML for the purchase of a 230k building. I got 100% of the rehab per the loan and put in around 135k. fast forward a year and I did a cashout refi at an appraised 680k. the building is also grossing 8240/m currently. I used the proceeds from that cashout to buy 2 other multis. one for 475k grossing 6200 and a 260k duplex grossing 4200.

Charles Highsmith · Answer

Saw a different post where you responded to a football player and curious to know how you reached 12k passive income a month from $250k cash investment I myself just put $300k into an apartment building in Las Vegas my cost with fees $1,175,000 I’m holding a note for $862k at 4.75 pay insurance 600 a month management $400 a month taxes $400 a month this is a 20 unit at 550 a door 18 units currently leased I figure this only nets me $5k this doesn’t even consider misc maintenance

James McAlister · Answer

Hey @David Zheng,That's a great question and one that doesn't get asked enough. There are a few key factors that should definitely be taken in to consideration including: Not responding in a timely manner.If they can't respond to a simple phone call or email within a reasonable time frame, how can you trust them to close in time without wrecking your deal?Pre-Payment penalties.It is imperative to ask how soon you can pay off your loan without a pre-payment penalty. Knowing in advance what the penalty will be if you were to pay off the loan early, can help you figure out a realistic time frame.Outrageous rates.If they are above 6 Points and/or 18% … do yourself a favor and shop around. For less qualified Borrowers those rates are not unheard of, but shopping around will always be worth it.Actually, I wrote a blog post on this exact topic (which is where the bullet points came from) entitled:6 Red Flags To Look For With Hard Money LendersI hope this was helpful, and if you have any more questions feel free to contact me directly.Thanks,James

David Zheng · Answer

Thank you guys!!!! I love the reading material!!! I will definitely do a little more digging but I definitely walked about from the guy. Just in case it comes into handy when someone searches it...do not deal with intercontinental private loan company

Mindy Jensen · Answer

Hey @David Zheng. You are so right in walking away if you get a bad feeling from someone. BiggerPockets does not have the resources to vet anyone on the site - so you must do it yourself. We have some really great lenders on our site - and we have some less-than-awesome people who are portraying themselves as lenders. Read this article - particularly the first part about lending scams - for some things to keep an eye out for.