Confused about Hard Money Lenders

Hello to anyone reading…

I am doing some preliminary research into investing prior to deal searching. When looking at some of the referral lenders on this site, I see that one of the main qualifications for the loan types they offer is “Experience in investing” and credit score.

The credit score I am OK with, but don’t really have the experience part yet.

Where does a new investor typically start with their fist couple of deals relating to loan and funding so they don’t have do bend over for the lenders because of inexperience?

Thanks for any insight.

Howdy Krafty:

You may need to partner with an experienced investor to get the experience. One you have gotten a few deals under your belt you may be ready to do deals by yourself. I just tried to help a friend do a deal and my HML said he would do it but that I had to be his partner to get the deal financed as he had no credit or rehab experience. Also sometimes two heads are better than one. It has worked out pretty good but we need a buyer for our beautiful project.


Most hard money lenders are interested most in your financial situation…credit is a factor…not having a lot of experience is not the biggest issue.

tedjr has an excellent point as far as getting a partner

Just so that you can avoid some of the pitfall that many newbies do just by mere ignorance and inexperience especially when you can get a mentor and spit the deals just to get the experience and knowlege that you will learn by doing the deals with them and also vicarioucly because they will share with you their mistakes.

Some HML do not care about experience and it does help because again they understand a novice just does not understand the possible problems nor foresee them.

Here is my analogy:

Go to the bank and say, “I need $50,000 to buy a used Rolls Royce. I’m going to buy it, take it all apart, rebuild the motor, put in a new interior, new tires, etc. When I’m done, it’ll be worth ay least $125K and there are a bunch of collectors hot for this. The whole thing should take two weeks. And, oh, yeah, I’ve never done this before and need a few extra bucks because I have no tools.”

Would YOU, as a lender, have a ‘warm, fuzzy’ or ask for a partner?

TedJr and richmb are right…! See if you can find an experienced partner for at least the first one or two.

Keith (obviously, this is a bit tongue in cheek – but you get the idea!)

Thanks for the feedback from everyone. Much appreciated!

So…finding a partner, huh? Would love to, which leads to my next question…

What is the best way to go about finding a mentor?

Start small, be realistic, and come in with sufficient cash (30-35%) so that a HM lender is assured that you have something at stake.

Most HMs will loan on sufficient equity as long as the project is commesurate with experience. Light renovation for first timer does not sound out of par…

Asking a HM lender for 80% or more is a tell tale clue to the lender that you don’t know what you are doing.

The best strategy I can suggest in approaching hard money when you need a max. LTV loan is to first describe what you have to offer the lender in terms of collateral and payoff strategy. Keep your descriptions simple and to the point. Remember, HMs are concerned with collateral and how they will their money back.

The biggest mistake most RE investors make when approaching a HM is that they start selling their pipe dreams…they talk to much about their “great deals”. Right away the lender starts discounting everthing they are saying and tuning out. Why? Because they have heard it all a hundred times that week…and most if not all HMs are long time real estate pros who have heard and seen it all. So talk a little, ask probing questions, and listen…try to ask questions that paint a picture in the lenders mind what you are trying to accomplish.

As a last bit of advice, realize that a LTV over 70% presents a huge risk to collateral lenders. They will only put themselves in high LTV situations only if there is something especially attractive about the property. For credibility sake, make sure you have something special to offer if you are going to ask for high LTV.

Best of Luck in your Ventures!