The Best Way To “Woo” Hard Money Lenders
By Paul Esajian on February 16, 2017
One of the biggest roadblocks for investors old and new is finding the capital needed to fund their deals. As difficult as this may be at times there are more outlets for capital than ever before. In the past there were only one or two hard money lenders in a given market. Today you can probably find at least a half dozen lenders if you use all of your resources. Just because there are lenders available it doesn’t mean they are going to throw money at every new investor who asks for it. You still need to sell yourself and your vision of the business before they will commit to anything. If you are looking to attract a hard money lender here are five important characteristics that most lenders look for.
- Honesty. Getting a hard money lender’s approval is more about your personality than anything else. They need to feel comfortable that you are going to put their capital to use the right way. If there are any doubts as to your honesty and sincerity they will probably go in another direction. Many investors who are seeking money often try too hard and actually do more harm than good. There is nothing wrong with saying that you don’t know something or have never heard of a particular term. By trying to portray yourself as an expert and talking yourself in circles you come across as false and immodest. This leaves some doubt as to your character even if you have the best intentions. Someone lending tens of thousands of dollars need to be assured that you are going to do the right thing. As corny as it sounds honesty really is the best policy.
- Positive Attitude. There is always a fine line in having a positive attitude and being too over the top. Generally speaking the more you can see the positive in a situation the more people want to work with you. Nobody wants to hear about your problems on a given deal. This is especially the case when trying to attract a hard money lender. They don’t need to hear about people you worked with in the past who may have caused the deal to go south. They aren’t interested in the past five times you tried to attract capital and failed. They would rather work with a person who is constantly focused on problem solving and the positive in a situation than the other way around. Sometimes having a quiet confidence in your abilities says more about your personality than anything you can physically say. Remember this the next time you meet with a hard money lender.
- Education. There are a few misconceptions about working with hard money lenders. The first is that anyone can get approved. While the guidelines are typically more relaxed you still need to show that you can comfortably repay the loan. The second is that you will be given the capital and then free reign to do with it what you please. This only happens with a solid relationship and after a proven track record of success is established. In most cases you need a firm plan for what you want to do on a given deal. You need to arm yourself with education on the deal and the business prior to your meeting. Trying to get capital should be viewed like a job interview. There will often be unusual questions presented to you with the purpose of trying to throw you off. The more you know about the business the easier these are to answer. Take to time to learn about how hard money works and the ins and out of a rehab deal. Leave no stone unturned and constantly seek the right answers. The more you know the easier it is to find capital.
- Humility. As much as hard money lenders don’t want to hear about negatives they also don’t want to hear about all of your accomplishments. Without realizing it they probably know much more about you and your business than you think. A few minutes on google and social media can paint a pretty good picture. As tempting as it may be you need to fight the urge to boast about all of the deals you may have closed. You can say things in a way that makes you sound successful without coming across like a jerk. If you have closed so many deals and are so successful a hard money lender may ask what you need their money for? The humble approach is always the best.
- Perspective. Where do you see your business in five years? It is important that you always have a big picture view of where your business is now and where you want it to be down the road. A hard money lender will lend on a deal to deal basis but they are more comfortable with someone who is committed to the business and has a clear vision. The more detailed your plan is to the specific market, property types and price points the more likely they will lend the capital you are looking for.
Getting money from hard money lenders is an important part of growing your business. You may never think that you will use them but you never know what your business has in store down the road. Your personality and approach go a long way in getting a lender to work with you.