What differentiates a good hard money lender from a bad one?

A good lender is loaning to help instigate development and build positive relationships with real estate developers. Often, developers will work with the same lender over the years on their residential rehab projects, and develop a trusting, mutually beneficial working relationship.1 However, before committing to a lender, it’s vital to make sure you’re working with a competent lender, as well as to consider whether or not hard money is the right option for your development.

Finding the Right Lender

The most common bad lender is one that is not a lender at all. There are a lot of hard money lenders that aren’t lenders at all, and they don’t actually have the money to lend.   They present themselves as lenders and offer hard money loans, but when it comes down to the wire they collect some fees and then either refer the loan out to an actual lender or do nothing at all. The key to finding a good lender is to make sure to work with a competent company that actually does make loans.

If you’ve assessed your property with your hard money lender, agreed upon a reasonable down payment, interest rate, and maturity date, there’s no reason that it can’t be a positive experience that will catalyze your real estate development. Before committing to any lender however, consider the nature of your project and determine if hard money is the right route for you. If your project isn’t suited to the structure of this type of loan, any hard money lender- good or bad- isn’t going to be right for you.

Is Hard Money Right for You?

Consider the nature of your project; hard money isn’t the answer for every real estate buyer. It’s most frequently used by investors who have experience buying, renovating, and selling houses. If you’re buying your primary residence, you might want to reconsider. If you have a good credit score, income, and the property is not distressed, there’s no reason to disregard conventional financing from a bank that lends through Fannie Mae or Freddy Mac2.

Likewise, if you need quick approval and you have a viable plan to renovate a home for resale, hard money is likely the option for you! Most hard money lenders have your best interests at heart and it can be a mutually beneficial financial relationship for years to come.
Socotra Capital is California’s premier hard money lender for your real estate investment needs. Contact us today to get started on your quick approval!

  1. “The Truth about Hard Money Lenders.” Foreclosure University. Accessed November 25, 2015.
  2. Hard Money 101: Everything You Need To Know About Getting Started With Hard Money Loans.” REtipster.com. April 6, 2015. Accessed November 25, 2015.