Real estate investors looking to fund their next fix and flip or BRRRR project are likely to consider borrowing money from a hard money lender.
However, to first time users, the hard money lending world can appear intimidating and murky.
Investors can choose between using a large nationwide lender or a smaller local lender.
While large national lenders are able to offer competitive rates in a multitude of markets across the country, they might not be the best financing option.
Local lenders have expertise in knowing the area and local real estate market.
These local lenders can better assist with various resources to complete your project, can be more flexible with terms and will prioritize a project because they are personally invested in your prosperity.
Local lenders want to hear your story.
They will use a flexible underwriting process that caters to your scenario rather than a strict “does it check all the boxes” type of criteria that many nationwide hard money lenders use.
Nationwide lenders typically take your numbers and run them through a computer system to gauge the risk of your deal to determine if funding is possible.
National lenders are forced to use a stricter criteria because many of them package these loans together and sell them to private equity companies.
These nationwide lenders may reject your loan request if your credit score is off by a few points, regardless of how experienced you are or how great your ARV looks.
Local lenders do not worry about how a third party may view the loan because generally local lenders are not attempting to sell your loan to a third party.
Local lenders will oftentimes meet borrowers face-to-face or make themselves available over the phone to answer any questions a borrower may have.
This accessibility and communication can prove to be invaluable, especially to first time borrowers.
Nationwide lenders usually prefer to keep communication to a minimum since they no longer have a vested interest in your project and will not be as willing to answer questions or give advice when needed.
They Succeed With You
Local lenders have a vested interest in your project and will assist a borrower in any way to make the deal succeed.
They know what sells best and what buyers are looking for in certain areas. This information can sometimes make or break a deal.
Many nationwide lenders will package and sell your deal to a third party and therefore are not highly concerned with the failure of your project.
Where to Find Local Hard Money Lenders
Local hard money lenders can most easily be found by tapping into your network.
Asking family, friends, real estate brokers, Google or even utilizing a hard money lending directory site like Moolahlist where all lenders are licensed and verified can be great options to finding funding for your project.
The hard money lending industry is riddled with scammers and if a deal looks too good to be true then you should pass.
Be sure to not pay upfront fees, aside from an appraisal report which the lender should order.