Reasons Why You need Hard Money Lenders

Home Flippers need fast sources of funds when they see a promising project or a property deal that they need to close. For this reason, they prefer to deal with Hard Money Lenders for the following reasons:

1. Fast Turnaround of Loan Application.
2. Your Credit Score needs improvement.
3. Your income is not sufficient to cover the installments.
4. The collateral property is not acceptable by traditional lender standards.
5. You need to close a property as soon as possible.

What are Hard Money Lenders

Hard Money Lenders are financial institutions that are licensed to provide lending services. They fill the niche that caters to borrowers who are not qualified for loans from traditional banks. Their borrowers are also, in one way or another, liquidity challenged. These borrowers do not have enough cash to pursue their real estate projects and may not have the necessary connections to secure private lending.

Hard Money Lenders Are Different

Hard Money Lenders deviate from the traditional way of evaluating loans by focusing on the following:

1. They prefer to put weight on your plan and your exit strategy
2. Taking a wager on the property more
3. Seeing a good opportunity if you put more equity into the transaction
4. Less focus on your credit score and your income.

Hard Money Loan requirements are not as many as those from traditional lenders. Hard Money Lenders do not evaluate your loan application based on your capacity to pay or your credit score. They are in the lending industry but are usually risk-aware than commercial lenders. Thus, they can fund a project or release the loan within a 7 to 14-day window. 

How Hard Money Lenders Charge Fees

Hard Money Lenders take more risks than traditional lenders. These risks translate to higher interest rates and even shorter terms. Rates are usually between 7.5% to 15% and loan terms of 6 months to 36 months. They also charge fees that you need to pay after approval to facilitate the release of the funds.

These fees, also known as points, are computed as a percentage of the approved loan amount. So when your hard money lender says that they charge 3 points on top of the hard money loan interest rate, that means that you have to pay up to 3% of the loan amount. To illustrate, if your approved loan amount is $100,000.00 and charged 3 points, you need to pay $3,000.

These fees typically cover all the costs involved in the loan. House flipping requires a short turn-over period to be a viable business, and since you will be selling the property shortly after its rehab, rates usually do not matter. What matters is that you make a profit within your timeframe. 

You See a Property Primed for a Flip, What is Next?

With a plan on hand ready for presentation to a Hard Money Lender, the next step would logically be a search for the best Hard Money Lender in your state. But first, you need to know that there are at least two types of hard money lenders. There are generally two types of hard money lenders: National and Local.

National and Local Hard Money Lenders

The ones who operate on a country-wide scale are the Nationals, while the ones that concentrate on deserving their home states are the locals. National Lenders can typically give you lower interest rates but are more strict in their implementation and need more documentary requirements. Local Hard Money Lenders, however, charge more but are generally more flexible in their approach since they are more acclimated to the local business environment and market. They are also mostly open to flexible terms since they do not have to tread on the policies set by their head office.

Finding the Best Hard Money Lenders

So how do you find the Best Hard Money Lenders in Texas? Finding hard money lenders for real estate investing is both a science of searching and art, the art of networking with the proper channels. You can start by searching on the internet, you can search for the best hard money lenders in Houston, Texas, and a list of articles or ads of organic results can lead you to them. Alternatively, you can search for lender associations and check their members. Check the companies on each link, and you may find the one that may be a good fit for you. You can also attend industry conventions and ask seasoned industry players for tips.

Check These Before You Commit

With the searching done, you can now narrow your list by checking the profiles of the lenders that you have written. Let us expound on the article presented at business-money.com about identifying licensed money lenders. There may be concerns that you need to address when you are searching for the best hard money lender. Here is a list of pointers before committing to a business relationship.

1. You can browse their website and look for proof of investor relationships, like a testimonial or a video interview that you can watch on their website attesting to the business partnership. As a real estate investor or borrower, you can also visit forums or network with house flippers, ask around about their favorite hard money lenders.
2. The longer the Hard Money Lender is in business, the better it is for you since this can indicate that they are already established in the industry and have built a client base already.
3. You can find the profiles of the company’s management team or the owners on the company website and take time to read about them. Here you should find their expertise, experiences, and educational and work backgrounds. Knowing this will give you an idea of their competencies.
4. You may also find their investors or the company’s partner institutions, which shall give you an idea of their credibility and ability to deliver.
5. A lender with a physical office brings more comfort to the transactions. A brick-and-mortar office somehow cements the legitimacy of the lender. You may want to take note of a busy reception area, a copy of their papers, promotional materials, and the ambiance of a busy office. 
6. Is its website updated or current? The blogs posted on their websites should be updated and reflect current events in the industry. No one needs to know out-of-date stuff and news from yesteryears.
7. Does it have other investments like rentals or properties for sale? Property investments mean that the lender is well versed, competent, and shows that they know all aspects of their business.
8. Look for registrations and licenses on all required regulatory agencies. Lenders should abide by the industry regulations set by government agencies, local or national.

Our Final Say

Knowing who to partner with in your house flipping or rehabilitation business will mean a good start for you when it comes to financing, especially. The Hard Money Lender of your choice should be ready to talk to you and may also offer advice on your projects. 

There are ways and guides to help you search for certified hard money lenders. Searching for the right one is not rocket science. Choose the one you think you can establish a long-lasting business relationship with, someone you can trust, and someone who can take care of you. But please remember to take the heart – the pointers in this article will make your search easier in identifying the right one.

GL&L Holdings can help you achieve and start with your first house flipping project. You may also want to read our blog posts, where you may learn more about hard money loans and house flipping. Give us a call at (832) 770-9415 or shoot us an email at info@gllholdings.com. We are here for you.