Hard Money Lending Success – It’s All About Relationships

Hard Money Lending Success – It’s All About Relationships

For those who are new to real estate investing, it often seems as though there’s an “inner circle” of deal makers-the people who know where the deals are, how to get the money to buy them, and always get there first. It’s no accident that the same real estate investors work with the same hard money lenders and private lenders again and again. They’ve built a successful relationship based on helping each other to make money-and anyone can do this!
Seasoned pros who have built incredible wealth through investing in real estate know that their relationships with hard money lenders is key to finding the good deals before everyone else, and having a ready source of private money to borrow to purchase those properties.
Here’s how even the biggest novice at real estate investing can forge relationships that lead to more and more successful real estate transactions:
Have lunch with your hard money lender. Once you have found a good, seasoned hard money lender, invite him or her to lunch once every few weeks. And you can do this with a few lenders. Get to know them personally, as well as their restaurant preferences, and always pick up the tab. Over lunch, you can discuss what deals they’re working on, what you’re looking for-and you might even pick up a deal!
Of course, it might take several months of these lunches to produce any deals. But you’ll get to know more about their business (their lending criteria and what kind of deals they work on most often) and they’ll get to know your business structure too (for example, whether you invest as an entity or an individual, and whether you prefer to “flip” investment properties for a quick profit or “rehab” them before selling).
Share the wealth with your hard money lender. Once you know your hard money lender(s) well, you can refer real estate investment deals to them that fit their criteria. They’ll appreciate it, and most likely, they’ll remember that they “owe you one.”
Make the hard money lender’s job a little easier. You can do this by submitting a professional, organized loan package with compelling information about why the investment is a good idea and what your plans are-and why the lender should make a loan to you with confidence. Anticipate questions that the hard money lender or private lenders might ask, and answer them in the loan package.
Get to know the private lender too. Private lenders can be real estate professionals or savvy businesspeople, but very often, they are simply retirees with money to invest. They lend out their money and it comes back to them effortlessly in the form of mortgage payments-with much higher interest than a CD or money market account would pay.
But just because private lenders don’t have to be actively involved to collect their checks doesn’t mean that they aren’t curious about the deals they are funding. If you send your loan payments directly to the private lender, remember to always send them in early, enclose information on how the project is going (such as before and after photos), perhaps let them know how much profit you made, and thank the private lender for being a “partner” in your project’s success. That makes the deal more rewarding to them-and those private lenders will be more likely to help you with future real estate financing needs.
Work with the same real estate investing team of hard money lenders and private lenders for continued success. Once you have a successful investment deal or two under your belt, don’t forget who helped you get there! If it’s possible, work with the same hard money lenders and private lenders on other deals-doing so shows that you are a person of integrity and someone they can trust.
Real estate financing through hard money lending is not about your credit score, your income or even whether or not you’re gainfully employed. Hard money loans are based on asset value-the quick-sale price of the property you’re buying. And that means that anyone can be a successful real estate investor…as long as you have the right relationships.

Hard Money Lending Success – It’s All About Relationships

For those who are new to real estate investing, it often seems as though there’s an “inner circle” of deal makers-the people who know where the deals are, how to get the money to buy them, and always get there first. It’s no accident that the same real estate investors work with the same hard money lenders and private lenders again and again. They’ve built a successful relationship based on helping each other to make money-and anyone can do this!
Seasoned pros who have built incredible wealth through investing in real estate know that their relationships with hard money lenders is key to finding the good deals before everyone else, and having a ready source of private money to borrow to purchase those properties.
Here’s how even the biggest novice at real estate investing can forge relationships that lead to more and more successful real estate transactions:
Have lunch with your hard money lender. Once you have found a good, seasoned hard money lender, invite him or her to lunch once every few weeks. And you can do this with a few lenders. Get to know them personally, as well as their restaurant preferences, and always pick up the tab. Over lunch, you can discuss what deals they’re working on, what you’re looking for-and you might even pick up a deal!
Of course, it might take several months of these lunches to produce any deals. But you’ll get to know more about their business (their lending criteria and what kind of deals they work on most often) and they’ll get to know your business structure too (for example, whether you invest as an entity or an individual, and whether you prefer to “flip” investment properties for a quick profit or “rehab” them before selling).
Share the wealth with your hard money lender. Once you know your hard money lender(s) well, you can refer real estate investment deals to them that fit their criteria. They’ll appreciate it, and most likely, they’ll remember that they “owe you one.”
Make the hard money lender’s job a little easier. You can do this by submitting a professional, organized loan package with compelling information about why the investment is a good idea and what your plans are-and why the lender should make a loan to you with confidence. Anticipate questions that the hard money lender or private lenders might ask, and answer them in the loan package.
Get to know the private lender too. Private lenders can be real estate professionals or savvy businesspeople, but very often, they are simply retirees with money to invest. They lend out their money and it comes back to them effortlessly in the form of mortgage payments-with much higher interest than a CD or money market account would pay.
But just because private lenders don’t have to be actively involved to collect their checks doesn’t mean that they aren’t curious about the deals they are funding. If you send your loan payments directly to the private lender, remember to always send them in early, enclose information on how the project is going (such as before and after photos), perhaps let them know how much profit you made, and thank the private lender for being a “partner” in your project’s success. That makes the deal more rewarding to them-and those private lenders will be more likely to help you with future real estate financing needs.
Work with the same real estate investing team of hard money lenders and private lenders for continued success. Once you have a successful investment deal or two under your belt, don’t forget who helped you get there! If it’s possible, work with the same hard money lenders and private lenders on other deals-doing so shows that you are a person of integrity and someone they can trust.
Real estate financing through hard money lending is not about your credit score, your income or even whether or not you’re gainfully employed. Hard money loans are based on asset value-the quick-sale price of the property you’re buying. And that means that anyone can be a successful real estate investor…as long as you have the right relationships.

Hard Money Lenders and Regular Mortgage Brokers – How They’re Different

Hard money lenders are just another type of mortgage broker–or are they? Well, yes and no. Following are a few ways in which hard money lenders are actually very different from regular mortgage brokers–and what that can mean for real estate investors.
Private lenders vs. institutions
Regular mortgage brokers work with a number of institutions such as big banks and mortgage companies to arrange mortgages, and make their money on points and certain loan fees. The bank itself tacks on more closing costs and fees, so by the time the closing is over, the borrower has paid anywhere from a few thousand to several thousand dollars in fees, points and other expenses. And the more mortgage brokers are involved, the more points the borrower pays.
Hard money lenders, on the other hand, work directly with private lenders, either individually or as a pool. If the hard money lender works with the private lenders individually, then for each new loan request, the hard money lender must approach each private lender until s/he has raised enough money to fund the loan. The money is then put into escrow until the closing.
Alternatively, instead of approaching private lenders individually for each new loan, the hard money lender may place private money from the private lenders into a pool–with specific criteria about how the money can be used. The hard money lender then uses predetermined terms to decide which new loan requests fit those criteria. The loan servicing company that collects the loan payments pays them directly into the pool, and the pool pays a percentage of those payments back to the private lenders.
Different types of properties–investment vs. owner-occupied
While regular mortgage brokers can work with residential properties or commercial properties, hard money lenders vastly prefer investment properties–also known as “non-owner-occupied” properties (NOO for short). That’s because “owner-occupied” (OO) properties have restrictions on how many points the hard money lender can collect (ex. a maximum of 5 points), and the term must be at least 5 years.
With NOO properties, hard money lenders can charge higher points and fees and offer loans for shorter terms, sometimes even one year or less. While that may seem risky and expensive, the profit from one good “flip” transaction can easily make up for higher loan expenses.
Knowledge of predatory lending laws
Owner-occupied (OO) real estate properties are subject to what are known as predatory lending laws–a set of laws designed to protect consumers, especially the under-educated, minorities and the poor–from unscrupulous and unfair lending practices.
Hard money lenders must be fully knowledgeable of both federal and state predatory lending laws. And private lenders will only work with hard money lenders, because a regular mortgage broker usually is not familiar with predatory lending laws and may make a mistake that gets his license suspended–and may even jeopardize the private lender’s loan.
Saving money with hard money lenders
Now that we’ve discussed some of the differences between hard money lenders and conventional mortgage brokers, you can see some of the reasons for using hard money loans for investment properties that you intend to flip or rehab and resell. Here’s another reason: by dealing with a hard money lender who has direct access to private lenders (rather than several layers of brokers), you may be saving yourself thousands of dollars in points and extra fees.
Furthermore, using a hard money lender can help you quickly obtain the loan you need, with the term you want, and with no risk to your personal credit. And if you can develop the right kind of relationship with the right hard money lender and private lenders, you too can be part of the “inner circle” of real estate investors who seem to find out about all the best deals first–and are building real wealth.


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