The scoop on hardmoney lenders...

…can someone help fill in the blanks for me please?

So, hardmoney lenders are basically private investors. Correct?

How do you find them? Through brokers? I understand they typcially charge 12-17%. Do they hold title just like a bank would? Is there an advantage to using hardmoney lenders instead of a bank? Could I be a hardmoney lender if I had some money? How would I go about that?

Thanks for bringing me up to speed.

Hard Money Lenders -

These are lenders that are using the asset for the basis of justifying the loan. They typically do not have many, and in some cases none, requirements for their borrowers. (The name comes from the fact they are lending on the hard asset and not the soft borrower’s credit profiles). They can be private investors or they can be banking institutions.

Finding them is easy, just do a web search for Hard Money Lenders or visit a local REI club and you’ll see plenty of them. They don’t hold title - the person buying the house holds title. They do however have you secure the note with a deed of trust, mortgage or similar security instrument like a typical bank who is the lien holder would.

Could you be a Hard Money Lender? Sure, all you have to do is loan money to someone based on the asset and you’re there. Is there more to it? Of course. Would it be wise to start out lending, probably not, but you certainly can do it. The interest rate they charge of say 14-18% with 1-5 pts at origination would make for a profitable business model by most standards. Underwriting the loans requires a good deal of understanding of the rehab process however.

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