Why You Need Multiple Hard Money Lenders

I’m helping out a new investor who’s interested in doing his first rehab. He’s been doing his marketing and getting a lot of leads and he finally came across a highly motivated seller. He gathered up all of the necessary property information and we evaluated the deal together.

The good news is that the numbers worked so he could move ahead with the deal. The next step in the process was to get a proof of funds from his hard money lender. Well, when he went to the hard money lender, the lender told him he was out of money and couldn’t help him.

With the collapse of the real estate market I saw a lot of hard money lenders go out of business, so hearing this guy was out of money was no big surprise. I referred him to a few other lenders that I knew and he quickly found one he could work with. Right now he’s finalizing everything.

Now, had I not had a few hard money lenders “in my pocket” this investor may have lost a potentially profitable deal.

That’s why I encourage all new investors to have at least two or three lenders you can count on. I can think of few things that would upset me more than knowing I had lost a $50,000 deal because I couldn’t secure funding for it.

So what’s the best way to find a good hard money lender? I would start locally if I were you. Go to your local REIA meetings and find out who the successful investors are and who they use. Personally, all of my hard money lenders are local.

If you can’t find any local lenders then there are plenty of national companies to help you too. You can use a website like this one or any other number of real estate websites and they’ll list plenty of national lenders for you to choose from.

Also, you need to know what type of lender they are. Are they a “true” hard money lender where all they care about are the numbers on the property? Or are they a “hybrid” lender who cares about your credit score and wants you to have “some skin in the game,” in addition to the numbers on the property?

Then there are things like how many points do they charge? What interest rate do they charge? How easy are they to work with?

Obviously, a true hard money lender is ideal, but if push comes to shove and you’re about to lose a deal you should take whatever you can get. Also, even if you’re not a rehabber I would still encourage you to have hard money lenders lined up.

I don’t do any rehabs myself. I mostly do paint and carpet and that’s it. However, I still have hard money lenders in case of an emergency. I sleep better at night knowing I have access to hundreds of thousands of dollars should I ever need it.

So if you don’t have a hard money lender on your “team” yet, I would make that one of my top priorities for the coming week.