Structuring a Deal with a Hard Money Lender

[Lauren N Sellers]

Hello all. Novice looking for guidance here. I need some basic advice on structuring a deal with a hard money lender. Is it better to have your investment parameters in place before going to hard money lender or seeing what their parameters are and working within them? Which comes first? Finding a deal or finding the lender? Thanks in advance.

[Curt Davis]

@Lauren N Sellers

Finding the private lender and making sure they will lend to you is the first thing.  Once you are approved by them then all you have to do is find a deal that works based on their lending criteria.  Dont go find the deal and then scramble for a lender. 

Good luck

[Crystal Smith]

@Lauren N Sellers I once attended a real estate investor guru session & he gave the absolute worse advice I've ever heard- "Find a deal- Then find the money".   For every hour you spend looking for a deal you should be spending 2 to 3 hours getting to understand the underwriting requirements of the lenders that may be able to fund your deal.  Once you understand the underwriting requirements you'll know which lenders you can take a deal to & get it approved.  You'll also know the lenders terms up front.  You'll need those terms to run your financials on a deal.  

[Mark Lopez]

Lauren,

Absolutely meet with hard  money lender FIRST! Understand the costs  involved to properly calculate your offer criteria.

[Andy Mirza]

I think you need to do a little of both. Talk to some HML's to get an idea of what they're willing to lend on, rates, points, terms, your credit profile. There's only so much you can talk about without having an actual deal. You should also have an idea before hand where your down payment is coming from and how much you'll be able to keep in reserve.

Then, get the deal. The HML's will be a lot more interested in talking to you once you have a deal in hand. This will be crunch time for you as you'll have to get everything together to make the deal happen.

[Lauren N Sellers]

Thanks for your feedback everyone. It sounds like researching out some HMLs and getting some questions answered is a good place to start! I really appreciate the feedback!

[Stanley Okazaki]

@Lauren N Sellers 

Yes, yes & yes...find the HML first & get qualified with them before hand so you can move fast when you find a property.

Questions to ask:

Terms & rates?

LTV amount?

What the LTV amount is based on- ARV or current appraised value?

How fast can they close?

Minimum -Max loan amount?

Pre-payment penalty?

Min Length of loan?

Up front points?

[Lauren N Sellers]

@Stanley Okazaki Thank you very much!