In the old days, hard money investors were few and far between. Now that everyone wants to be involved in real estate, there are more and more private lenders popping up. People want to invest in homes, but just don’t know how. Over 90% of those that do the research, take the courses, and look at properties actually never end up purchasing a home.

Most hard money loans are classified as commercial loans but not all hard money loans are commercial loans. They are lend to either LLC’s or Corporations set up by borrowers to put the title to their property in. Private lenders prefer to lend to LLC’s or Corporations most of the time. These days everyone is looking to make quick money and they think that hard money investors will make loans to them to buy them a house, pay for their repairs, and then the borrower try and repair the home, and put it on the market and reap all the profits. If this was your money, would that make sense to you? The borrower then has no risk and the hard money lenders take all the risk.

These days hard money lenders have become hip to the ARV loan, realizing that borrowers want to do deals for free and not have any risk in the game. Those kinds of deals are the ones that put hard money investors out of business very very quickly.

How can you lend someone money, with them taking no risk in the deal? What if they wake up the next day and decide they don’t like the house, and then they do no work, and you are stuck with a house you didn’t want to own, in horrible condition, and now you need to go in and do the work yourself. That is why if you’re a hard money investors you need to look carefully at any deal that comes across your desk and make sure that the borrower is shouldering some of the risk as well so if it goes bad they will also feel some of the financial burden. My advice to all hard money investors, know the area your  lending in and know your borrower!!

 


 

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