For brokers that are assisting property investors with finding loans, it can be difficult, especially if the borrower can't get a traditional loan through a bank. That's where hard money, or private money, loans come in. Although these types of loans are easier for risky borrowers to obtain, finding a good hard money lender is not as easy as it sounds. Here are three tips for brokers new to hard money lending.
When looking for hard money loan sources, it is important to understand that these loans typically have a term of one year or less. However, the term can be seven years or more. In order to meet the needs of the client, you have to be absolutely sure that the lender has enough capital to fulfill multiple loans simultaneously. Experienced hard money lenders should be able to handle short-term loans, as well as medium-term loans. If the lender cannot fulfill the needs of your clients adequately, there is no point in dealing with them – move on and find one that can.
Fast Processing Times
One of the reasons borrowers look for hard money loans is that they need the money quicker than what a traditional lending institution can provide. For a real estate investor, the ability to get their hands on funds faster than a competitor means they have a better chance of scooping up a hot property. For developers, obtaining funds sooner rather than later means less chance of construction delays and faster time to market. Either way, as a broker, it's your job to make sure the lender you choose can get the funds released as fast as possible so your clients can move on and make some money.
Choose Experienced Lenders
The last thing you want to do as a broker is to deal with an inexperienced hard money lender, especially if you're not experienced yourself. Look for a lender that has a track record and has proven themselves in the industry. Get referrals, pay attention to industry news, and stay away from anyone just entering the marketplace. Let them practice on someone else. Reliability, trustworthiness, and experience all go hand-in-hand. Don't settle for a lender that is less than exemplary in all of these areas. Your clients will be happier and so will you.
When it comes right down to it, choosing a good hard money lender for your clients really does come down to common sense. If the lender has a good reputation, experience, plenty of capital, and the ability to fund the loan quickly, then you're on the right track. For more information about hard money loans, contact us. We'll be more than happy to answer any questions you might have and point you in the right direction.