As a real estate investor, choosing the right hard money lender can make the difference between a lucrative deal and a costly mistake. But how do you know which lender to go with?
To make the right choice, you must carefully explore and compare your options. At ABL, we take pride in our 500+ 5-star reviews. Over the last 15 years, we’ve helped fund over 7,000 projects with about $3.3 billion in loans. We’re confident we can help you, too.
What Is a Hard Money Lender?
A hard money lender is a private lender that offers short-term, asset-based loans. In real estate, this means loans secured by a property, typically the one being financed, and where the property’s value is the main criterion by which borrowers are qualified.
This differs from conventional mortgages, where lenders focus on your credit and income. While these may still be factors for hard money lenders, they’re not as important as the deal itself.
For example, ABL requires a credit score of at least 660, and we review your company income when underwriting. However, we’re most interested in the property’s before- and after-repair value (ARV), letting you borrow up to 70% of the ARV and 92.5% of the loan-to-cost (LTC).
Steps to Choosing the Right Hard Money Lender
Before settling on the first hard money lender you come across, follow these steps:
1. Understand Your Needs
First, determine your real estate financing needs:
- How much funding do you need, and how quickly do you need it?
- What’s your exit strategy, i.e., how and when do you plan to repay the loan?
- What’s your risk tolerance, and what interest rates are you comfortable with?
- Are you looking for a one-time loan or an ongoing lending relationship?
After answering these questions, it’ll be easier to narrow your choice of lender.
2. Find Local Hard Money Lenders
Next, search for local hard money lenders that meet your basic criteria. A local lender like ABL will have experts on the ground who know the ins and outs of your market and can connect you with a reliable network of other real estate professionals in the area.
3. Evaluate Their Reputation and Experience
Not every hard money lender is created equal. To ensure you get the best service, research how long lenders have been in business, what project types they typically fund, and their overall track record. Check online reviews to see how past and repeat borrowers rate their experience.
4. Check Loan Requirements
Every hard money lender has its own loan requirements. Before you reach out to lenders, look up their basic loan criteria.
For example, ABL hard money loans must meet the following standards:
- $75K – $50M loan size
- 12-24 month loan terms
- Property type: single-family, multi-family, condo
- Minimum credit score: 660
- Up to 70% of ARV
- Up to 92.5% LTC
5. Compare Loan Terms
At this point, you should have a shortlist of hard money lenders to choose from. Consider pre-qualifying with at least three of them. From each lender, you’ll get a pre-qualification letter outlining the loan terms based on the information you provide. Compare these offers against each other to determine which is best for you. Pay attention to:
- The interest rate
- Origination fees
- Any prepayment penalties
- Other fees and terms
What Makes a Good Hard Money Lender
To ensure you get the best hard money lender for the job, here are some things to look for:
Local Lender
The more local your lender, the more familiar they’ll be with your market. A local lender can give you insights on what they’ve seen work for past investment properties nearby and connect you with their network of other real estate professionals in the area. For example, ABL has local teams all across the U.S.
Partnership
Look for a lender who does more than disburse funds. They should be a partner willing to guide you through the entire investment process from start to finish.
Flexible Terms
Every real estate project is unique. Find a lender who can tailor loan terms to your situation and work with you as plans change. This can give you a significant edge over competitors who are limited by rigid financing solutions.
Competitive Rates
Your interest rate can significantly impact the overall cost of a loan. To lower costs, find a reliable lender with competitive rates. Even a few basis points can make a big difference.
Fast Underwriting
In real estate, deals move fast. To seize opportunities before they’re gone, you must have capital ready. That’s why it’s important to choose a lender who can close on loans quickly. For example, ABL can close on loans in as few as 30 days.
Partner with ABL
Get your next real estate project off the ground with a hard money loan from ABL. We’re happy to walk through your deal with you and let you know if we’re a good fit within 24 hours. Pre-qualify today!