If you’re looking for ways to get your real estate deals done fast, it’s hard to beat hard money lenders.
However, even though you can quickly get your hands on the cash, you need to know what you’re doing to avoid some of the risk associated with this type of funding.
In this guide, we’re going to break down exactly what those risks are, as well as 10 different ways you can find hard money lenders.
(And, if you haven’t already seen it, check out our guide on essential tools for your real estate investing business to save even more time & energy — and get more deals done.)
But, first…
What Are Hard Money Lenders?
A hard money loan is a loan with short terms and (in general) higher interest rates than a traditional loan.
To get these loans, you’ll typically use the property you’re buying as collateral to secure the funding.
Unlike traditional loans, hard money loans can be obtained with a less stringent approval process, making them perfect for those deals you need to get done fast.
A hard money loan can be used for:
- House Flipping
- Purchasing Investment Property
- Purchasing Commercial Property
(If you’re interested in learning how to get started as an investor, check out our guide on how to become a real estate investor with no money.)
As a general rule of thumb, you can consider hard money loans as an alternative to a traditional loan. They tend to be more flexible and get funded faster, but the interest rates can range from 8% to 14% so your lenders are beating their stock market returns.
The Pros and Cons of Hard Money Lenders
While the potential upside of a hard money loan tends to outweigh the risks, you want to understand both the pros and cons before you start looking for a hard money lender to invest in real estate.
The Pros of Hard Money Lenders
- Access To Quick Money
- Short-Term Repayment Periods
- No Credit Requirements
- Fast Approval Process
- Flexible Options
- Less Strict Underwriting
The Cons of Hard Money Lenders
- High-Interest Rates
- High Downpayments
- Short-Term Repayment Periods
- High Risk (compared to other funding options)
- Often Require a Proven Track Record of Success
Hard money loans can be a great option for you as long as you understand the risks associated with them and you make sure you’re doing good deals.
If you’re looking for more ways to use these loans to grow your investing business, check out our guide on 15 real estate business models to launch in 2023.
5 Factors To Consider For Hard Money Lenders
Now, it’s worth noting that not all hard money lenders are the same. Some are significantly better than others and there’s a handful of factors you need to consider before you apply for a loan.
#1: Reputation — Before you borrow, you want to make sure the companies are easy to work with, provide great customer service, and can quickly approve your loans.
#2: Speed — You also want to consider how quickly they’re able to fund your deals. You will need clear guidelines on their average turnaround time from when you apply to when you get access to the funds.
#3: Flexibility — A good lender is going to be flexible with you to help you get more deals done. Make sure they can work with you on terms or even make modifications to the terms if needed.
#4: Loan Rates, Terms & Fees — Take a look at the terms, rates, and fees on the loan before you move forward. Make sure you take time to compare those to the terms, rates, and fees of other lenders.
#5: Risks — These loans can be hard to pay back if your property doesn’t quickly sell or you run into emergency repairs that you didn’t account for before you started. They can quickly consume your profits.
Alternatives To Hard Money Lenders
After you understand the factors you need to consider before moving forward with a hard money lender, you’re also going to want to consider the alternatives to these lenders.
- Crowdfunding — Raising money from a group of investors can be a great option for getting deals done if you don’t have other ways to access the money you need.
- Line of Credit — If you need access to money and plan to pay it back as quickly as possible, using your credit to secure a line of credit through your bank can be a great option.
- Traditional Loans — Getting pre-approved for a traditional mortgage through your bank before you start looking for deals is another way to get access to funding without using hard money.
- Private Money — One of the best ways to fund your real estate deals is by working together with people who know you and trust you to borrow the money you need to get the deal done.
Check out the video below for more information on obtaining private money to fund your deals:
How To Find Hard Money Lenders
If you’ve weighed the pros and cons and sought out other types of funding (like a traditional mortgage, private money, a line of credit, or even crowdfunding) and believe hard money is the way to go, there’s a few ways you can find hard money lenders ready to work with you today.
#1: Search Online
The internet is one of the best places to start your search.
You can hop onto Google and type in “private money lenders near me” or “hard money lender near me” to start building a list of options to explore.
Remember, though, that as you’re exploring these options, don’t jump into the first one you find, no matter how good their marketing or sales pitch is.
#2: Tap into Your Network/Connections
Building your network and establishing relationships and connections with the RIGHT people in your local community is another great way to access funds that would typically be off-limits to you.
For instance, building relationships with local real estate agents can help you learn about the hard money lenders they recommend to the investors they know.
Likewise, attorneys in your area will have information about the reputation for the good lenders in your area and be able to tell you which lenders to avoid.
Getting into local real estate investor meetups, like your REIA meetings, can help you connect with other investors in your area who may be using hard money to fund their deals.
#3: Search Hard Money Lender Directories
You can search directories of hard money lenders to see who other people are recommending. This can save you a ton of time — but you still need to vet the recommendations you’re getting.
To start, check out some of the directories below:
- BiggerPockets — BiggerPockets is one of the biggest (and oldest) online communities for real estate investors. They’ve built a database that lets you search for lenders by your location.
- Scotsman Guide — The Scotsman Guide is a marketplace of direct lenders built for mortgage brokers to quickly access hard money loans.
- HardMoneyLenders — Hard Money Lenders IO built a database of hard money lenders that you can use as another source of lenders for your deals.
- Lendersa — Lendersa features 4,523 lenders across 50 different states to make it easy to find money for your deals, from residential to commercial, and even land purchases.
- REFlipper — If you’ve exhausted all other options, REFlipper can help you find a lender in every state and 60 major cities across the United States.
Once you’ve found a few good lenders, you’ll want to learn how to sell them on funding your deals.
Check out the video below to see how I do it:
#4: Go Direct
You can also go directly to well-known lenders to apply for loans.
Kiavi
Getting funding for buy-and-hold deals can be difficult to do. Kiava is one of the few lenders that specializes in funding long-term rentals.
- Interest Rate: Starting at 3.875%.
- Loan-to-Value Ratio (or LTV): 90% LTV
- Upfront Fees: None
- Credit Requirement: No Hard Pull, 660 FICO Minimum
- Investing Experience: At least one prior mortgage.
- Maximum Loan Amount: $2 million.
- Prepayment Penalty: None — after 4 years.
- Property Types: Single-family, detached, attached, and 2-4 unit rentals.
RCN Capital
When you’re looking for low downpayments, competitive rates, and funding for up to 100% of the costs and fees for your next flip, RCN Capital is a solid option.
- Interest Rate: Starting at 10.24%.
- Loan-to-Value Ratio (or LTV): Up to 85% plus renovations.
- Upfront Fees: 2% – 5% of the loan.
- Credit Requirement: Minimum 620 FICO.
- Investing Experience: 2 successful flips or rentals.
- Maximum Loan Amount: $7.5 million.
- Prepayment Penalty: No
- Property Types: Multi-family properties, condos, townhouses.
Groundfloor
Groundfloor is a platform that utilizes crowdfunding from accredited investors to help fund your deals, offering interest rates lower than many other hard lenders.
- Interest Rate: Starting at 6.5%.
- Loan-to-Value Ratio (or LTV): 80% – 100% LTC or 75% ARV.
- Upfront Fees: $495 evaluation, $1,200 doc prep, and 2.75% – 4% origination.
- Credit Requirement: Minimum 600 FICO.
- Investing Experience: No minimum.
- Maximum Loan Amount: $1 million.
- Prepayment Penalty: No
- Property Types: Single-family, multi-family, condo, townhome, new construction.
Baselane
For smaller loans and projects with smaller renovation costs, Baselane can be a good option.
- Interest Rate: Starting at 9.99%.
- Loan-to-Value Ratio (or LTV): 85% LTV plus renovations or 70% ARV.
- Upfront Fees: $999 service fee plus 1.5% – 2% loan origination.
- Credit Requirement: Minimum 575 w/ experience or 680 if new investor.
- Investing Experience: None
- Maximum Loan Amount: $2 million
- Prepayment Penalty: None
- Property Types: N/A
Lima One Capital
If you’re a brand new investor who wants to get into fix-and-flips, Lima One Capital could help.
- Interest Rate: Starting at 7.5%.
- Loan-to-Value Ratio (or LTV): 90% of LTC or 70% of LTV.
- Upfront Fees: 1% – 2.25% of the loan.
- Credit Requirement: Minimum 660 FICO.
- Investing Experience: None
- Maximum Loan Amount: $3 million.
- Prepayment Penalty: None
- Property Types: Single-family, multi-family up to 4 doors, townhomes.
Bridge Lending Group
Bridge Lending Groups offers quick approvals and funding and offers a wide range of products.
- Interest Rate: Starting at 5.75%.
- Loan-to-Value Ratio (or LTV): 50% – 65% LTV.
- Upfront Fees: None
- Credit Requirement: N/A
- Investing Experience: None
- Maximum Loan Amount: $5 million
- Prepayment Penalty: N/A
- Property Types: Single-family, multi-family, condos, townhomes.
CoreVest
If you’re currently working with a low credit score, CoreVest might be a funding option for you.
- Interest Rate: Starting at 8%.
- Loan-to-Value Ratio (or LTV):
- Upfront Fees: 2% – 7% of the loan.
- Credit Requirement: None
- Investing Experience: Successful track record of flipping.
- Maximum Loan Amount: $50 million.
- Prepayment Penalty: None
- Property Types: No limits.
Getting funding for your deals using hard money lenders is relatively straightforward.
For the most part, if they pull your credit they’re looking to determine you don’t have a history of defaulting on loans you’ve taken in the past.
They’re also going to want to see that you have a track record of successful investing.
Then, they will want to know that the property you’re getting funding for is worth more than the cost of the loan in case you do happen to default.
Finally, they’ll likely ask you to put down a payment of at least 30% to secure the loan.
When these requirements are satisfied and you accept the terms of the loan, you can usually begin to access the money in as little as 15 days after a decision and appraisal is made.
Final Thoughts
Getting funding for your deals as quickly as possible is only one part of growing a successful real estate investing business. Another part is making sure you can find those deals as quickly as possible, too.
With CallPorter, you can have your calls taken by professionals so you have more time, energy, and focus to find the best deals possible — then use the funding sources in this guide to get money for them.