Real estate investors, especially flippers, who are doing more deals more rapidly usually start to run into a major roadblock at some point: As if the process to getting a mortgage or loan wasn’t already painfully slow and difficult, banks limit the number of mortgages you can hold and usually have little interest in loaning money for houses that need significant work.
Even if this is your business model, most banks may not be interested in financing your deals… or all of your deals.
Hard money lenders are a solution for many flippers and real estate investors. They are more likely to understand your business model and be willing to loan you money on much shorter terms based on the real estate opportunity versus only your credit score. But how do you find a good hard money lender who can help your business?
Ask a real estate agent. Hard money lenders can be local companies, national firms or just a wealthy individual. If you know real estate agents, you can ask them about hard money lenders in your area. They may be able to refer you.
Ask another flipper or real estate investor. If you’re not sure who’s doing what you’re doing, it’s time to find out. You can track down people buying many of the fixer-uppers in your area with the help of a real estate agent. If you can make a friend of a fellow flipper, they will likely be able to give you the best advice on hard money lenders. If you haven’t yet started networking at your local Real Estate Investing Association, you really should. That could even be a good place to find a hard money lender.
Check online. BiggerPockets.com maintains a directory of hard money lenders on their website. Sometimes you can find hard money lenders on Craigslist trying to sell houses they’ve been forced to take and sell. Look for “fixer-uppers” and “For sale by owner” listings. And, of course, you can just google it. Try googling “hard money lender” (plus the city and state you’re doing business in). A similar search on Facebook would also give you some leads.
Once you’ve found some hard money lenders, how do you decide if they’re right for you?
It’s really important for you to know clearly what it is you want to do in your real estate investing business, and what kind of financing you need to do it. Start by getting in touch to build a relationship. You don’t need to have a deal underway right now to connect with them and find out if you’re a fit. (In fact, it’s better to reach out first… BEFORE you have a deal!)
Some hard money lenders may be a really good match for the kinds of deals you’re working on. If you have a steady deal flow and you’re managing your projects well, you will be able to access capital from the right hard money lender for you.