Where To Get Hard Money
Typical hard money lenders and experienced – a very successful – real estate investors.
There are also small-to-mid-sized lending companies with access to large pools of capital, but their roots tend to also go back to being founded by experienced real estate investors.
A third option to finding hard money sources is to use a specialized hard money broker. The advantage of using a mortgage broker is they typically have relationships with several hard money sources so they can connect you with the best source for your specific deal. Brokers also have experience working with their hard money sources so they understand what the lender is looking for and they know how to submit complete packages to the lenders, which generally speeds up the entire approval process. And since the broker has a vested interest in your deal getting closed (they don’t get paid unless you do) they will work hard to walk your deal through to the closing table .
The biggest disadvantage to using a hard money broker is that they are typically more expensive than working directly with the lender. Since there is a “middleman” in the loan process, the fees charged by hard money broker can add 2%-6% increase – on average -in the cost of the loan.
But with the collapse of the real estate market, many hard money brokers left, or were forced out of the industry and we are just starting to see these specialized brokers re-enter the real estate investing landscape.
Hard Money Lending Today
As with hard money brokers, the real estate market crash of the late 2000’s put a majority of hard money lenders out of business.
Hard money lending has reestablished itself as an important aspect in real estate investing.
As many banks and institutionalized lenders left the playing field or tightened their underwriting guidelines, the demand for hard money loans has surged dramatically in the last few years, prompting non-traditional lenders to return to the market.
A recent study by the Mortgage Bankers Association showed that over 90% of lenders that took part in the survey have or plan to return to the business by 2013.
One of the reasons why the hard money lending business is showing an increase in activity and enjoying a boost in reputation these days is that borrowers are more comfortable with the rates and fees being charged by hard money lenders.
Interest rates and fees have dropped remarkably to the point that they are almost the same or close to the rates being charged by banks, mortgage companies, credit unions, and other traditional lending institutions for non-owner occupied, real estate investment loans.