Hard Money Lender, Why should I use a Hard Money Lender?

I am a hard money lender. I make loans on commercial property and land.
I cannot make residential home loans.

If you have recently "graduated" from a weekend seminar on flip'n houses,then I cannot help you. Remember, I am not a hard money lender that can make loans against houses. I only can lend against commercial property or land.

Most of my hard money loans are "cash back" refinance loans to the existing owner of the real estate. I am usually not the best source for someone trying to purchase a commercial property (or land) because of the fact that I limit my loans to typically 50% of the purchase price. And most buyers do not have the other 50% to buy the property.

So the typical loan I make is to someone who already owns the real estate. The borrower has a large equity position in the property, and usually wants to tap into the equity in the property to use for whatever reasons they may have...

The deal with a hard money lender like me is that I am NOT going to ask for tax returns or bank statements, but because of this, the loan will be expensive as far as interest rate and points. Also, keep in mind, my loans are usually only one year in length. This means that the borrower only has 12 months to figure out how to pay me back. Typically, this means getting another loan to pay me off, or selling the property.

So, bottom line: My money works great for equity rich commercial/land deals where the borrower understands that it will be expensive and short term money in exchange for no tax returns/bank statements or documented income from the borrower.

Hard money lenders like me are not the answer to every loan scenario. Actually, hard money loans are just a tiny sliver of the lending community, but our niche in the lending market place certainly is welcome relief to many who need us.

Want the full skinny on what I do? Check out my hard money lender website.

Want to see if you can be a hard money lender? Take this test:

What follows is a true life (happened yesterday), example of a potential hard money deal.

Broker: Here is a nice loan for you. Property is a 10 unit apartment outside of Dallas, TX.
Property will appraise for about $1.3 million. Due to the fire, the owner just wants to sell the property and be done with it.

My buyer has negotiated a purchase price of $780,000 (which would be 60% LTV). He is a good borrower, with a 589 score.

Buyer intends to use $200,000 of the proceeds for fixing up the fire damaged units.

How fast can you fund this 60% LTV hard money loan? Buyer is a licensed contractor, and has already received numerous sub-contractor bids to fix up this property.

Expected time to re-model should be 2-3 months, at which time the buyer is simply going to sell the property for around $1.7 million or so. This will probably only be a 9 month loan for you.

OK - that's the hard money loan request. DEAL or NO DEAL?

send me an email with your answer: mailto: I have an answer to your hard money test

Good luck to all who answer.

Is it me? Have I lost my mind? My compassion? Am I too cynical?

Typical conversation I have with a borrower:

Hardmoney Tom: Your property sounds fine, and I like making 45% loans on 20 acre parcels in Texas.

Potential Borrower: Great, how quick can you fund it?

Hardmoney Tom: I typically fund 3-7 days after I receive title and appraisal. Tell me more about this cash back refinance... How much do you still owe on it?

Potential Borrower: The bank is really jamming me up on this. The loan guy at the bank is a complete moron, and I refuse to call him anymore.

Hardmoney Tom: Oh, you are current on the existing loan aren't you?

Potential Borrower: Yeah. I have been setting aside all the payments for the last 6 months.

Hardmoney Tom: Setting aside? What does that mean? Are you current and up to date with the existing loan you have now?

Potential Borrower: Yeah, I have some of the payments right here. The jerk at the bank told me they won't accept my payments anymore. Can you really fund this new loan in the next 3 days?

Hardmoney Tom: Hmmmm... Sounds like the "idiot" bank has you in foreclosure. What happened? And when is the foreclosure sale date?

Potential Borrower: I told the guy at the bank that it might be a while for me to get back on my feet. But I specifically told him that eventually, I would get all my missed payments caught up.

Hardmoney Tom: How many payments behind are you?

Potential Borrower: The bank says I am 11 payments behind, but that's not right. They have some stupid accounting system... The foreclosure sale is set for next Friday. Can you close this new hard money loan in the next 3 days like you said you would.

Potential Borrower: I just want to get away from this bank... I don't like them.

Potential Borrower: I am not that picky about interest rate, but we do need to close quick.