by: Stephen Cook
Finding hard money lenders isn't really a mystery. At least
it isn't a hard mystery to solve. You just need to get out
there and take the right steps toward uncovering them.
There are many different ways their investors, attorneys,
accountants, insurance agents, etc., who are generally to
locate hard money lenders or private lenders. When talking
with other professionals, I tend to refer to my lenders as
"private lenders" simply because not everyone is
familiar with the term "hard money lender." I have
found most of my lenders by asking for referrals from o willing
to help me because I do what I can to help them. Some of my
favorite people to ask are settlement/closing attorneys. They
usually prepare the loan documents for hard money lenders
and most attorneys will be able to give you at least one name.
In fact, on a number of occasions the attorney whom I asked
for a referral was a hard money lender themselves.
Accountants are also a good source for hard money lenders
since they have clients who are sitting on a lot of cash and
need to do something with it. In some cases, they even have
clients who already hold paper. Such people are great to approach
about lending money since they already understand the business
of lending. They have either taken back paper upon selling
a property or they have lent their own funds to someone. Real
estate paper is a very secure investment, and people who understand
the business of lending don't mind doing real estate loans,
especially when the LTV is low and the interest rate is high.
If someone trusts their accountant enough to let them handle
their finances, then a referral from an accountant should
carry a lot of clout.
Another method of finding hard money lenders is to write down
the addresses of homes undergoing renovation. With few exceptions,
if I go to the courthouse with ten addresses to uncover the
lender involved in each of these renovation projects, you
will find that a private lender is funding at least one of
them. Contact the lenders that you discover and get to know
them, especially if they have already lent money on a home
in an area where you want to invest.
Insurance agents who sell hazard insurance policies (particularly
those that specialize with investment properties) have to
put a "loss payee" on all of the policies where
a lender is involved. The loss payee is the lender, so the
insurance agent can tell who are private lenders and which
ones are not. An active agent could probably go through their
records and come up with dozens of names of people who have
lent money privately on policies they have written.
Mortgage brokers can also be a good source for locating
hard money lenders, particularly those that work with investors
on a routine basis. I personally feel that any mortgage broker
that deals with investors should have a hard money lender
in their bag. If they don't, I wouldn't consider them a good
mortgage broker. You may have to pay the mortgage broker a
fee for the referral, but it is worth it if it means getting
a deal done.
Increasing your chances of finding a hard money lender has
to do with the circles that you run in, the people whom you
ask, and the number of people you ask. Chances are if you
are asking the cashier at your local convenience store if
they know of any hard money lenders, the answer you get is
going to be, "Huh?". If you ask an attorney or title
company who works with a number of investors in your area,
it is much more likely that you will find someone who will
be able to provide you with the names of several lenders.
If you don't get anywhere the first time, don't stop asking
people until you find one.