Real Estate Tips |6 min read

What Makes a Good Hard Money Lender? Traits to Look For

Most investors don’t have the means to buy new real estate investments outright, so they need to find a way to finance them–typically through a lender. That said, there are different types of lenders to consider, depending on your investment strategy and goals for the property. Today, we’re discussing finding a good hard money lender and some red flags to watch for before choosing a lender for your next investment. 

Contents of This Article: 

How to Find Hard Money Lenders for Investments

There are several reasons why you may choose to use a hard money lender in Baltimore instead of a traditional mortgage lender for your real estate investment. Whether you have less-than-ideal credit or want a flexible, short-term loan, hard money can be helpful in many instances. 

Handshake over a desk with model houses, symbolizing trust in a good hard money lender.

That said, finding a good hard money lender is crucial to help you successfully complete your project. But how do you find a lender in the first place? Here are a few tips for finding reputable hard money lenders.

Tips for Finding a Hard Money Lender

  • Ask for Recommendations- If you’re considering using hard money, talk with your immediate network. Ask other investors, contractors, or property managers for recommendations.
  • Look Online- The internet is another good place to start. You can search for hard money lenders in your area or look at sites like BiggerPockets to help you find resources in your location.
  • Join Investment Groups- There are plenty of sites, like Facebook or LinkedIn, with groups dedicated to real estate investing. You can build an online network and learn about other investors’ experiences.
  • Attend Conferences or Meetings- Another great way to find lenders is by networking at industry events. Here, you can even meet lenders and speak with them in person.
  • Talk to Real Estate Agents- Real estate agents typically have connections with hard money lenders and can give referrals to reputable lenders in your area.

What to Look for in a Good Hard Money Lender

If you’re considering using a hard money loan for your next investment, choosing a good lender is essential. After all, it’s not unheard of to come across a sketchy hard money lender. So, to minimize risk and find the best terms for your loan, there are a few things you’ll want to look for in a lender. 

Infographic displaying what to look for in a good hard money lender.

Here’s what to look for in a good hard money lender. 

  1. Good Reputation
  2. Proper Licenses
  3. Transparent Loan Terms
  4. Local Market Knowledge
  5. Fair Interest Rates
  6. Fast Funding Process
  7. Strong Communication

Good Reputation

It’s probably a given that you’ll want to find a lender with a good reputation and positive reviews from other investors. When searching for a lender, it’s important to check online reviews and testimonials and check out different lenders’ ratings on Google, Yelp, or the Better Business Bureau. Additionally, if you’re looking at a specific project type, like a fix-and-flip, try to find a lender who specializes in the kind of property you’re financing. 

Proper Licenses

Part of your due diligence is ensuring the lenders you work with have the right licenses or certifications. So, you’ll want to verify that the lender is properly licensed and also adheres to state and federal regulations. Additionally, you can go the extra mile and look for lenders in organizations like the American Association of Private Lenders (AAPL). 

Transparent Loan Terms

A good hard money lender will openly disclose all of the costs of the loan upfront and won’t surprise you with unexpected fees later on. Finding a lender who provides detailed information about interest rates, fees, repayment schedules, and any penalties you may incur is important. With that, don’t be afraid to ask any questions you may have about the loan terms or process. 

Local Market Knowledge

A good lender will have a fair amount of local market knowledge. Someone familiar with your local market is also more likely to understand property values, trends, and potential risks, which can help streamline the loan process. 

Fair Interest Rates

Hard money lenders could charge outrageous interest rates if they wanted to. As such, it’s important to research and compare lenders’ rates to find one that’s fair and reasonable. While it’s true that hard money loans typically have higher interest rates than other loan types, they should still be competitive within the market. 

Fast Funding Process

One of the main benefits of hard money loans is the speed of approval and funding–it’s typically much faster than a traditional loan would be. Some lenders can even close a deal within a matter of days. That said, look for a lender who can close deals quickly and avoid working with those with excessive delays or long approval processes. 

Strong Communication

Finally, a good hard money lender is going to have good communication with you throughout the loan process. They should be responsive and easy to contact, answering any question you may have thoroughly and promptly. For the best experience possible, try to find a lender who treats you like a partner, not just another transaction.

Red Flags to Watch for When Choosing a Lender

Choosing the wrong hard money lender can be costly and stressful. As such, it’s important to watch for certain red flags that could indicate an untrustworthy or unsuitable lender. Here are some warning signs to look out for to protect yourself from a risky loan deal and find a good hard money lender.

Stacks of coins with model houses and a rising graph, representing growth opportunities with a good hard money lender.

  • No References- If you can’t find information or reviews for a lender, take it as a bad sign. After all, most good lenders have verifiable references and positive reviews.
  • Pressure to Commit- A good lender will give you time to review the terms and make an informed decision. If a lender pressures you to decide immediately, you should proceed cautiously.
  • Hefty Upfront Fees- Avoid lenders who demand significant payments before approving or funding a loan. Some fees, like application fees, are reasonable, but large fees could indicate a scam.
  • No Market Knowledge- An experienced lender will have a strong understanding of your local real estate market. It may indicate a lack of experience or due diligence if they don’t.

Looking for a Lender Near Baltimore, Maryland?

Finding a good hard money lender is key to a successful real estate investment. It’s important to know what to look for in a good lender and which red flags to watch for before going through with a loan. 

If you’re looking for a reputable lender near Baltimore, look no further than Maryland Hard Money Lenders. Our team of experienced lending professionals can help fund your loan quickly and efficiently. Contact us to learn more about our lending process, or fill out our initial loan application today!

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