Hard money lending

My partner and I just started a real-estate biz. We have no money to buy our first foreclosure property. I have excellent credit so borrowing from that perspective is not a problem. What companies are out there that will lend hard money, to a real-estate biz that just started, with no money down?


You should probably do a little reading in the forums. Also check the resources menu → hard money lenders for resources in your state.

If you are looking for a hard money lender to borrow you cash to buy rentals they will ussualy do only 65%-70% LTV so you will have to come up with some “skin”, but if you will be buying and rehabbing they will borrow you 65%-75% of the ARV(after repair value) so that means if you can buy right (which you should be doing no matter what) you will be able to buy, fund the rehab all at 100%. example: asking price 100k, ARV 140k x .75% ARV=98k now minus the repair cost of 15k = 83k. So now you can see how the hard money lenders will fund 100% of the pruchase and rehab. HML are very useful in this style of investing.
Good luck

Newbie question here. What exactly does a "hard money " lender do as opposed to a mortgage company???

Hard money lends typically make their decisions based on the property where banks or traditional mortgage companies will typically make their loan based on the loaner’s ability to repay the loan.

HMLs are usually a MUCH higher interest rate and much more expensive.

Thanks Crickett

My wife and I want to get into the rental and flipper business. We are pretty much debt free except the house and a car. Our balance sheet and income statement are pretty strong. Our credit rating is about as good as it gets.

I was just curious if I should approach a regular mortgage lender first because of our liquidity and credit rating or use a HML.

Many thanks!!!

Actually your are not 100% correct in your analysis of Hard Money. There are some siginficant benefits to using Hard Money.

Hard Money Loans vs. Conventional Loans

There are a lot of misconceptions regarding Hard Money Loans and Hard Money Lenders (HMLs). Most of the confusion surrounds the differences between conventional mortgages and HMLs. I wanted to take a moment and try to answer many of the general Frequently Asked Questions as well as to compare a HML to a Conventional non-owner occupied investor loan.
Frequently Asked HML Questions

How does the program work?
HMLs provide Real Estate Investors access to asset based capital. We can fund quickly, typically within 72 hours of receiving the final docs from the Title Company. Hard Money is available for adequately collateralized loans on single-family residential houses and other Real Property including commercial projects.

What is the interest rate?
The interest rate depends upon the Lender. The rate will range from 14% interest only to 18% interest only annual interest rate payable monthly in most cases.

What Loan-to-Value are MLS looking for?
Typically a loan does not exceed 70% of the after-repaired-value (ARV).

How long is the loan for?
HMLs typically write the notes from 6 months to 12 months depending on the Lender and your needs.

What are the costs?
Costs vary depending on which Lender you use. All loans will require at-least a Title Policy, Vacant Dwelling Insurance, Inspection, “As-Is” Appraisal & Flood Certificate. Most require origination points.

Can I get repair money?
Yes. HMLs can fund repairs. HMLs require a “Draw Request” form to be filled out to identify the completed repairs to the property, Copies of the invoices from the vendors. Then, we will pay you once the work is inspected-HMLs do not pay in advance for any work.

Does my credit matter?
Yes and no. For the most part, HMLs look at the value of the property after it is repaired, how much you are paying for it, and how much the repairs will cost to determine how much we will lend. In some cases, with your consent some HMLs may need to checkout your credit history.

How do you decide how much to loan?
Typical loans range from $25,000 to $1,000,000: All loans are considered on a case-by-case basis. Each HML has their own criteria.

Do HMLs need an appraisal?
Yes, HMLs require “as-is” and “as-repaired appraisals”.

Do HMLs require inspections?
Yes, HMLs require inspections including the interior before funding and before a repair draw to ensure the work is completed in a satisfactory manner.

Do I need to put any money down?
In most cases, Yes. Most HMLs want to ensure that you have enough resources to finish the repairs and cover the costs of the loan plus any surprises. Therefore most HMLs require that origination/discount points and other required items be paid at or before closing. We are confident that if you cannot afford to close you typically cannot afford to take out this type of loan.

How much will my payments be?
To figure your monthly payment simply, multiply the rate by the loan amount and divide that number by 12.

Will HMLs finance commercial properties?
Yes, many HMLs will on a case-by-case basis finance commercial properties and then only if the loan is secured by improved real property such as the building and land.

Will HMLs finance apartment buildings?
Yes, many HMLs finance apartment buildings however understand that it will take us longer to get our due diligence done.

Do HMLs allow interest to be deferred to the end of the loan?
Some HMLs do. Most however have interest payable monthly. Again, we are confident that if you cannot afford to make monthly interest payments you typically cannot afford to take out this type of loan.

How do HMLs compare to a traditional non-owner occupied investor loan?
You might be surprised how competitive HMLs really are.

Final Analysis

In many cases an HML can be obtained faster and easier then a conventional loan and while in almost all cases the amount you can borrow from a HML exceeds the amount you can qualify for from a convention lender the cost difference is minimal. HMLs are not for everyone and every HML has a different program and qualification process. However if you need fast access to capital for REI then a HML may be your new best friend.

Good luck and may all your investments be profitable!

WOW !!! Thank you for that online educational degree !! You left no grey areas . That was FANATASTIC insight and overview into the HML network.

I hope that many investors have an opprortunity to review your writing , I assure you that I will be printing this and using it to my advantage !

Hard money lenders are the way to go when seeking loans of $1,000,000 and up. Those seeking to purchase highly valued investment properties and those who already own such homes and want to cash out large amounts of their equity via refinance loans also turn to private money lenders.

In comes the real estate investors. Savvy buyers seeking to purchase properties on the cheap, fix them up and sell them for profit are the staple of hard money lenders. These loans come with less red tape less restrictive qualification criteria than bank loans.

Borrowers facing foreclosure should look to hard money loans as a viable resort. Private money lenders will often make funds readily available if the risk is low.

Some of the funding available are as follows:
Up to $100,000,000 toward
» Debt Financing
» Equity Financing
» Bridge Loans
» Mezzanine Loans
» Construction Loans

Property types include:
Apartments (general)
Garden Apartments
Condo/Loft/Town home Apartments
Hi-Rise Apartments
Office (General)
Single Tenant Offices
Owner Occupied (general)
Business Condominium/Co-op
Mixed Use (general)
Office over Retail
Apartments over Retail
Industrial/Flex (general)
Warehouse (general)
Mini Storage Facility
Retail (general)
Free Standing Retail
Strip with Anchor
Strip without Anchor
Regional Malls
Factory Outlet Center
Care Facilities (general)
Assisted Living Facility
Independent Living Facility
Senior Housing
Congregate Care
Medical Clinic
Medical Offices
Hospitality (general)
Hotel / Motel (non-flag)
Hotel (flag)
Leisure / Resort
Special Use (general)
Car Dealership
Golf Course
Mobile Home Park
Parking Garage
Raw Land
Residential Subdivisions

Capital sources include:
Life Companies
Pension and Trust Funds
Mezzanine and Bridge Lenders
Endowments and Foundations
Opportunity Funds
Investment Companies
Corporate Finance Groups
Hard Money Lenders
Conduit Lenders
Mutual Funds/Hedge Funds