Attracting Hard Money Lenders
By Paul Esajian on March 9, 2016
There is something to be said in real estate about the ability to use other people’s money. Regardless if you currently use conventional financing at some point you will have a need for a hard money lender. Like everyone else in the real estate business you need to find the right partner to work with. Hard money lenders will not just fall on your lap. Even though there many options available you still need to put your best foot forward to attract them. They are not just going to lend hundreds of thousands of dollars to anyone. Finding and working with the right hard money lender is all about your presentation. Here are a few things you can do to find the right hard money lender for you.
Sell Yourself. The best time to find a hard money lender is before you need them. Having a potential deal to offer is a plus but not essential in starting your search. The most important item that a hard money lender evaluates is you. When you meet a potential lender you need to be prepared to sell yourself. Most hard money lenders are interested in starting a relationship. They will take one off deals but are looking for investors they can do work with as long term partners. They want people that have the personality and temperament they can trust. You can tell them about all the deals you closed but that isn’t as important as your personality. They need to be able to work with you from the offer to the closing. If they don’t trust you or your personality is abrasive there are plenty of other investors they can work with. You need to present yourself in a way that shows your best qualities without flaunting them. Selling yourself is the first step in attracting hard money lenders.
Develop A System. Selling yourself is important but only the first step. Hard money lenders will not give you money solely based on your smile and good looks. You need to have some substance behind your style. You need to have a well thought out system for evaluating potential deals. Tell your hard money lender what kind of due diligence you will perform on every deal. If you have a sample summary you can provide it will strengthen your presentation. If not walk them through work kind of numbers you look for and what split is acceptable to you. From there tell them that you will provide everything from a cost of repairs to a list of comparable sales. Your job is to make deciding on the property as easy as possible. You will give them an unbiased evaluation and let them make a decision. The more detailed you are in your grasp of the evaluation process the better you come across.
Lead Generation. One of the questions that will be asked is where do you get your deals from. The more individual the source the better chance you have of finding a partner. There are dozens of real estate investors in almost every market. Many of these investors are fighting over the same pool of deals. In order to stand out from the pack you need to look in alternative areas. Not only will you have more deals to choose from but the profit margins will be higher as well. You don’t need to divulge everywhere you find deals but you need to be ready to answer. Typically the greater number of deals you produce the higher your percentage split will be. This can end up being a huge number when you go from three deals a year to eight. Before you sit down with a hard money lender you should have a good idea of everywhere you get your deals from.
Website. We live in a vastly different world from even ten years ago. As important as a personal website was in 2006 it is essential in 2016. Most people, regardless of the business, start their search online. Your presentation may have been great but if your website is down it will have a negative impact. Before you go into a meeting take a look at your website and see what it says about you. If it is old and outdated this is the perception you give off. Your website doesn’t need to be state of the art with all the bells and whistles. However, it has to be functional and modern looking. If not a hard money lender may give pause in working with you.
Look around. The number of hard money lenders has exploded in recent years. In the past there may have been just a handful in a given market. Today that number has increased to dozens. As much you may want to work with a hard money lender there are more options than ever before. Even if you think you got a great deal it is worth it to talk to a few more lenders. You never know what someone else will offer that makes more sense for you. Like every other potential partner in the business you should talk to at least three people before making a decision. You want to find a hard money lender that is flexible and easy to work with. This often takes a few meetings to find but they are out there.
A good hard money lender can change the way you make offers. Even if you don’t currently have a need you never know when you will down the road.