Creative Real Estate Investing - Hard Money Lenders

Hard Money Lenders

These are often used to finance projects that are unconventional, great deals, or where money is needed quickly. Typically hard money lenders will lend 50-70% of the value of the property regardless of the sales price (unlike banks). They will typically close loans in 2–7 days. Credit scores and income are often overlooked by hard money lenders, however they may ask to see a business plan or exit strategy for the project. They may get paid via points (e.g. 1 point equals one percent of the total amount borrowed), interest rate (10-20% per year is common), and an equitable interest. These will vary based on the size of the project and the agreed upon contract. Hard money lenders are collateral based and typically require first position on the property.

True hard money lenders do not charge any front fees whatsoever; nothing for appraisals, app fees, credit fees or anything else. One common secret of many hard money lenders is that they want the property for themselves, and thus do not care if the borrower is unable to continue with their payments. After one or two missed payments, the hard money lender will file foreclosure proceedings and usually add the reclaimed property to their portfolio. They also do not care about exit strategies.