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How to Get a Hard Money Loan: A Guide for Beginners

So, you just got that great bank-owned property under contract and now you need a loan to buy, fix and flip. You went to three hard money lenders, and they turned you down.

Why? Because you STINK at selling your deal. That’s right, you need to learn how to SELL your deal to a lender.

Start by getting a binder from Office Depot, with a set of tabs you can print on.

Mark the Tabs into Sections and Include This Information

Hard Money Loan Presentation

Your professional hard money loan presentation wins the day.

About Me. This section should contain a FNMA 1003 loan application, a copy of your credit report, a copy of your driver’s license, and a brief resume of your experience.

If you have no experience, then at least put a list of books and seminars you’ve been through.  A list of references would help, too.

Purchase Contract. A copy of the purchase contract with addenda goes here.

Appraisal. Ideally, an appraisal, but at least a real estate broker BPO (broker’s price opinion) goes here.

Insurance Binder. A copy of a commitment to insure from your insurance provider goes here.

Title Commitment. A copy of the title commitment goes here.

Photos. Detailed photos in and outside of the property in color go here.

Inspection. Have a professional inspection done of the property and put his report here.

Repair estimate. A repair estimate from a licensed general contractor and a copy of his license go here.

Numbers. Insert a spreadsheet of the breakdown of the numbers.  Your purchase costs, closing costs, holding costs, repairs, realtor fees, etc.

Timeline. A diagram of the outline of your construction project goes here.

Now, you’ve got a product you can sell.  Go out and approach your hard money lender and see if your results are different!

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About the Author...

William Bronchick, J.D. is a nationally-known attorney, author, and speaker. He has been practicing law and investing in real estate since 1990 and has been involved in over 2,000 real estate transactions.

Bill has served as President of the Colorado Association of Real Estate Investors since 1996. He is the author of many excellent real estate investing courses.

You can visit Bill Bronchick at his web site: LegalWiz.com

Comments

  1. Dean F. Thon says:

    2/6/13

    Dear Sir(s):

    I have access to several class A investment Commercial properties but I don’t have the funds for a down pament and get shot down every time.

  2. Gowsal Azam says:

    Hi
    Mr. William Bronchick ‘s information help me lot .
    Thanks so much.
    Gowsal Azam

  3. James Elcock says:

    Exit Strategy and the 5 C”s of credit: Character, Capacity, Capital, Conditions, Collateral should be included.

  4. Brad Emmer says:

    I actually am writing a book about hard equity lending. But, anyhow…what I would add to your list, from a lender’s perspective, is a copy of the borrower’s recent credit report and bank statement showing enough cash to pay for the repairs. Of course, if your credit is terrible, and the lender doesn’t ask for it anyhow, then, no, don’t include it. Why open up a can of worms? But, if it’s good,…use it to your advantage. We, as hard money lenders, are credit score driven, to a degree. It’s a mixed bag as to what other hard money lenders think. Some do and some do not care about this. But, it only makes sense to show it off, if your credit is good. I think it is somewhat predatory for a lender NOT to care, as it displays too much eagerness to take the property, as opposed to just earning interest. As for repairs, my comment is based on the assumption that “lending “rehab money” is gone with the wind, these days, after the 2007-8 crash, etc. Although, maybe there are some hard money lenders who are still adventurous to lend those funds also. However, based on our market here in Florida, hard money lenders are maxing out at 60-80% LTV of purchase price. The closing and repair costs are usually the borrower’s burden. On that premise, if the property needs substantial repair, the bororwer better have the funds. otherwise, he is setting himself up for failure.

    Investor borrowers are generally an over-optimistic bunch. They envision a profitable outcome far too often, and neglect thinking seriously about all of the things that can (and often do) go wrong. Repair delays, vandalism, under-estimating expenses, municipal regs, and bad tenants are just a few of the contributing factors. The idea and preparation of “selling” your deal to the hard money lender is good. But, don’t “over sell” it. If you do too good a job on a “newbie” hard money lender, you, the borrower may end up over-leveraged, not able to service the debt, and in default. As a Publix Supermarkets executive once said: “Take care of your downside. The upside will take care of itself.”

    • Brian says:

      Hey Brad, just curious about your product.
      Do you lend on ARV or contract price and will
      you accept recent relevent resale comps or include REO’s
      and Ssales into the mix?
      Do you require escrow and what is short term rate, 3-6 mo..?

      I do have other questions or would like to speak to you in more detail.
      I do flip property so please give me a call or send an email.

      I look forward to hearing from you.

      Brian Mahoney
      321-222-7801

      Brian Mahoney
      32-222-7801
      C- 848-448-0333

  5. Rich Colburn says:

    Mr. Bronchik thanks for the info. I have heard of the “credibility packet” but only had a vague idea what it should contain. Thanks for the breakdown, very helpful.

  6. frank says:

    Real good info thanks

  7. i have bad credit score and a judgement showing on the credit report where am i stand with that situation?

  8. verry good informations thank you very much for those informations i needed them thank you.

  9. Shawn J Dostie, Auctioneer says:

    I don’t know if you remember me, my name is Shawn J Dostie, I was called loanwizard many years ago, used to have a published atricle or 2 here. Anyway, I have a good friend inerested in finding hard money lenders in Ohio. Do you know where I can find that resource quickly?

    • Jeanne Ekhaml says:

      Hi Shawn,

      I would tell your friend to attend all the local real estate groups – that’s a great place to meet local real estate professionals – or even call the clubs and ask if they know local hard money lenders. Our list of Ohio Real Estate clubs is here: https://www.creonline.com/oh.html but you can also try Meetup.com or NAREIA. (Your article is on our Money-Making Ideas page.)

What do you think? We would love to hear your opinion.

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