Make Hard Money… Easy!

Jan 05, 2010 Comments Off by

When I started working as a loan officer I needed a way get more business. Since I was a Real Estate investor and a frequent visitor to most of the web sites I knew that everyone was looking for Hard Money Lenders. So I figured that would be a good way to get started. So I set out to find Hard Money Lenders. I found some that would be willing to pay my broker a commission.

I talked to several lenders to find out where they would lend and what kind of deals they liked. I made up a flow chart so that when I talked to an investor I could figure out which lender would work for the deal. After I was ready I started to get the work out that I could do Hard Money loans. My phone started to ring like crazy sounds good so far.

But most of the investors could talk a good story but when it came time to put the deal on paper most were lost. If they were working with a local hard money lender they could get in the car drive over together and look the deal over shake hands and have a deal. But when you’re working with an out of state lender they only get to see the deal on paper

One thing to keep in mind is that most people will take the path of least resistance. So the loan package that answers all of the lenders questions in an easy to understand format will get worked on before the one that requires a phone calls to get the answers. They don’t want to play phone tag and you want an answer as soon as you can get one, so include all of the needed info.

The most important thing you can do when looking for a Hard Money loan is to write up a deal summary. It should be fairly short but should give all of the information that is important to make the deal work. This way the lender can look it over and see if it is something that they would lend on.

If you do a good write up it will set you apart from the dreamers. Now lets go over what needs to be in the deal summary.

First talk about the property.

What type of property is it?
What is the condition?
What is the ARV? And how did you come up with that number?
What is the cost to market ready?
What is the purchase price?
Any current cash flow?
Any future cash flow?

Second we talk about you.

How is your credit? Just to be clear yes I am going to go off on a rant. Yes credit matters when doing hard money loans. Yes I know lenders who will work with very bad credit. But how bad your credit is will determine which lender you will need to use. Most will pull your credit file. Some do not care about the number but they look for liens and judgments.

How is your financial situation? Basically do you have a job and how much is your income.
Can you put money into the deal? If you can then you will have more options. If it is a commercial deal you may have to put cash in.
Do you have experience doing this?

Third explain the deal

What do you plan to do?
How do you plan to do it?
Will you be adding value?
How will you make the payments?

Before you submit this you need to have some else look it over.

If you will write up a blank template for this then put in the info for every deal you look at it will help you to decide if you even want to do the deal. I have had a few newbies desperately want a loan to buy a property but when it cam to the last two items they could not answer the questions.

Do not try and BS these guys. I had one investor do a write up asking for a loan on a residential property. But the comps they used were commercial.

I faxed the write up and credit file to the lender. They call me back in a few minutes. (My deal was the easiest on his desk) We were talking it over and he pulls up comp data. Yes he had access from his desk. He sees the comps were not real comps, and figures the investor is trying to pull something so he shoots it down.

As always present yourself as a professional.

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