In our last installment we discussed how to take advantage of the foreclosure market, how to find and analyze the deals to make sure they are profitable. However finding a deal, determining the value, and establishing a good exit strategy is just half the battle. Now depending where you are in your investing career you could just make money finding deals and selling the leads to investors, but making money that way is normally reserved for the beginning investors who may not have money or credit. Let’s assume for a minute that you are not the typical newbie investor looking for a quick buck, but a more sophisticated refined investor who wants to leverage O.P.M. (Others.People.Money) to start doing deals. Well where do you go for O.P.M.?
Good question and the short and sweet answer is simply hard money lenders. Now when I say hard money, I don’t mean your local neighborhood loan shark who might break your leg if the funds aren’t returned in a timely fashion. Nor am I referring to the hard money lender that forces you to borrow from them with exuberant interest rates, just so you can buy their protection. I’m talking about small companies or private individuals who have readily available liquid cash that they can lend for a short time period for the acquisition and rehab of a property.
One of the best places to locate these individuals or companies, is to go to your local R.E.I.A (Real Estate Investor Association) meeting and ask around. You want to ask specific questions when looking for a good hard money lender. Here is a good check list of what to ask when shopping for a good hard money person.
#1 What are the hard money lenders requirements for the borrower and the property?
Does the borrower have to have a certain middle score to get the loan, or is the loan based exclusively on the property and not the person, what is the maximum LTV, are there cash reserve requirements.
#2 What are the terms the hard money lender has to offer? Will the loan be for 6 months or 12 months, how many points have to be paid upfront at closing, what will the interest rate be, how is the draw schedule structured
#3 What type of relationship do the lenders have with their current clients? Are they a very personable small operation who works closely with their borrowers, are they a large firm who don’t know their borrowers on a first name basis. How flexible are they if something happens and you get into a jam, will they work with you; hopefully you won’t ever need them to work with you but this is not a perfect business and sometimes life happens.
Those are some core basic questions you should be asking when trying to select a hard money lender. At the end of the day as long as you are comfortable with the terms and the structure of the loan and the lender does not have a bad reputation you should be ready to move forward. Please make sure you take your time and go through this due- diligence process and do not cut any corners when it comes to selecting good money partners to work with. By the way I found a pretty good resource that will help you eliminate all the risk associated with hard money loans. Check it out and let me know what you think Click Here For Hard Money Resource . Until we meet again keep learnin & keep earnin.