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Finding a private money lender is an essential part of any real estate investor’s business. In the old days (pre 2006) you could easily get a mortgage or even hard money loan simply by showing up in the lenders office and filling out an application. If you could walk and talk you qualified for a loan.

But today in the post credit-bubble market those days are over. Getting money for your real estate investing business is much more difficult and likely to get even more difficult as the credit markets sort things out. So how do you get money for your real estate investment business?

The answer is a private money lender.

One of the keys to finding a good private money lender is determining if they have similar goals and objectives as yours. You need to understand what they are trying to achieve and if your private lending program fits their needs. For example, if the private money lender wants an investment for a 10 year period, but you plan on doing quick flips every 6 months, it will not be a good long-term relationship. You and your private money lender need to have similar goals for a good long-term relationship that will result in repeat business.

So how do you determine if you and the potential private money lender have similar goals. You need to discuss your plan and ask questions similar to a job interview. We would recommend a series of questions similar to those listed below. Obviously, you can modified these questions to fit your personality, but the information you get will go a long way in determining if this is a person you want to do business with.

Important Questions to Ask



How much do you have in liquid funds?

Do you have other monies you might want to consider for an investment program that pays 9% to 15% and secured by local real estate?

What type of investments are you in right now?

How much are they making on your current investments?

How long do you want your money invested for and do you have plans coming up that will require your principal back?

How available is your money or is it tied up in investments that are not readily accessible?

Are you a “Qualified Investor” (person must either have a net worth of about a million dollars or have an annual income in excess of $200,000)

Do you know anything about real estate investing?

When would like to start investing?



 

 

 

Asking these questions will flush out how close your goals are and will foster a good long-term relationship.

Hard money lenders have always been the reprieve of real estate investors who want to close a deal but are short of funds. Sometimes, investors still use this kind of financing even they already have money. Before you call those investors crazy, read on about hard money lenders. Here some of the basics that you should know about them.

They are easier to convince compared to banks and traditional lenders. People have called hard money financing “easy access to credit” and why not. Because hard money lenders, who are also known as private lenders, usually work on their own, you won’t have to convince a lot of people to get your loan approved. If the lender says yes to you, then that’s it; No more approval of other personnel and office superiors. Conventional lenders usually need the nod from a certain number of personnel before they release loans.

One reason why private lenders do not take long in processing loan applications is because they use a different system when evaluating borrowers. If traditional lenders look at your creditworthiness based on you credit score, private lenders care about the deal you are presenting. They want to know what deal you want to close using their money and if you will be able to repay them wit the profit you’ll get from this deal. For instance, if you want to rehab a property, they will assess whether that house indeed has a potential to yield profit. They will look at how you plan to transform an old house into a new home. If they see that you will be able to repay the money through that deal, then they will finance it.

Because of this system, hard money lenders are more exposed to risks of defaults. Add to this the fact that they lend money even to those who have poor credit scores. As mentioned earlier, private lenders care about the deal borrowers present and not about their current income or other proofs of creditworthiness. That is why they use a higher interest rate compared to traditional lenders. If banks are stringent in screening loan applicants to ensure their survival, the high interest is private lenders’ way of keeping their business running. Rates vary depending on location but an 18% interest is common.

Read articles and watch videos about hard money lenders online at rehab-real-estate.com and discover more information about these lenders.

Hard money lenders are the people to approach if you are seeking funds for your investment properties. Because they prioritize the value of a property, for which a loan is being made, over a borrower’s financial status, you can still borrow money from them even if you have a poor credit score.

The loans provided by these non-traditional lenders are called hard money loans, or HMLs. Contrary to what other people might believe, obtaining HMLs are faster and easier compared to applying for banks loans from conventional lenders such as credit unions and mortgage companies. You don’t have to wait for weeks just to know the results of your loan application because there are many hard money lenders who can verify a loan’s eligibility as soon as the borrower submits the needed documents.

Meanwhile, if you are in need of quick financing for your investment properties, listed below are some tips on how you can find lenders of hard money:

Most hard money lenders are just private individuals who want to earn money by funding investment projects. Therefore, they usually don’t have storefront offices like banks and mortgage companies. One way of finding them is to ask people you know. Who knows, your next-door neighbor might be a lender of hard money. Another strategy is to ask recommendations from your fellow real estate investors. As we all know, many lenders of hard money prefer working with real estate investors, which is why your colleagues in the housing business can give you a number of referrals. Accountants and settlement attorneys are also good sources of names. Accountants usually have access to people who have a large amount of ready money on hand and may be willing to finance your flipping or rehabbing projects. Settlement or closing attorneys can also give you recommendations since they are the ones who prepare loan documents for these lenders. Reading the newspapers will also help you find lenders of hard money since some of them advertise their services on the local paper. Surf the Internet. There are numerous sites that enable lenders of HMLs to find clients. Going online is one of the fastest and surest ways to find a financier for your investment properties.

Hard money lenders have their own set of criteria when evaluating loan applications and terms vary from one lender to the other. Therefore, to avoid confusion on your part, you should educate yourself about the ins and the outs of hard money lending. Meanwhile, if you want to learn how you can use hard money to enhance your real estate investing business, visit REIWired.com.