Taking the “Hard” Out of Hard Money Lending

Sometimes, it’s all in a name. Archibald Leach understood that, and changed his Hollywood name to the much more attractive “Cary Grant.” In a similar way,

many hard money lenders prefer the more user-friendly moniker, “private lender.” The problem is that the term “hard money” can conjure up an image of a loan shark, an enforcer, a hapless victim, and a pair of cement shoes.

However, the reality is that hard money lending isn’t a bad word. Rather, it is a reputable and reliable source of funding for serious fix and flip investors. There are many situations that are particularly well-suited for working with a professional hard money lender.

Why you might need a hard money lender:

  • You identify a property that must be bought in a very short time frame to take full advantage of its potential return on investment.
  • You are interested in a property that needs serious rehabbing, but not interested in paying for repairs out-of-pocket.
  • You have circumstances which make it difficult to be approved by a traditional banking institution.
  • You prefer a short and easy loan application process.
  • You want quick access to funding.

Contrary to what you may have formerly believed about hard money lenders, professional hard money lenders are interested in successful investments for everyone concerned. Private money lenders value a good relationship with their clients. They are interested in the success of your investments, not only for themselves, but for you as well. Since fix and flip investment represents a tremendous opportunity for financial gain, it is good to find a lender who will work with you on more than one deal. Fix and flip investing is, by its nature, a type of investing that requires an almost constant supply of readily available financing. Hard money lenders easily meet this need in the following ways.

Hard money lenders provide:

  1. Asset-based lending with more collateral options than traditional banking institutions
  2. Fewer requirements for borrowers to meet for loan approval
  3. Willingness to fund the cost of repairs to be made to the property
  4. Lower down payments than banks may require
  5. Faster loan approval
  6. Rapid funding of approved loans
  7. Easy application process
  8. Reasonable terms and rates, with no hidden fees
  9. Short-term bridge loans for rehab properties
  10. Flexible repayment options

Perhaps the most important thing a well-qualified, experienced hard money lender can provide is a shared vision about your investment opportunity. Hard money lenders understand the ins and outs of fix and flip financing in a way that traditional lenders rarely do. Since traditional lenders must calculate loan-to-value ratios on the property as it stands before any repair work you plan to do, they may be ill-equipped to handle your particular needs. Hard money lenders, on the other hand, have a clear picture of where the property will be in terms of after repair value, and they take this knowledge into consideration when calculating the funding available to you for the project.

All these benefits are available if you choose a reputable and knowledgeable lender with which to work. How can you find reputable private lenders in your area? What are some things to look for when choosing a lender?

The following guidelines will serve you well when considering a hard money lender:

  • Is your lender licensed and bonded in your investment area?
  • How knowledgeable is your lender about the real estate market in your area?
  • Can your lender provide references from previous or current clients?
  • Is your lender upfront about listing any fees associated with your loan?
  • Is your lender readily available to discuss issues you may have with your loan application?
  • Does your lender offer flexible terms and rates which are clearly defined for your particular loan opportunity?

Once you find a lender who meets your criteria, you will likely have a profitable and successful investment relationship for a long time to come. Taking some time to develop this type of relationship for your REI team will take the “hard” out of hard lending, and assure you of the type of reputable, professional lender you want on your side for fix and flip investment. For more information about how hard money can increase your return on investment, please contact us. With years of experience as hard money lenders, we can answer your questions and partner with you so that you can take optimal advantage of your investment opportunities.

Center Street communications are not intended to provide business, legal, tax, investment or insurance advice.  No Center Street communication should be construed as a recommendation for any business or investment strategy by Center Street or any third party.  You are solely responsible for determining whether any investment, investment strategy, business strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.