A “hard money lender” is a version of a private lender that analyzes a lending opportunity based on real estate collateral value. While credit, income and other factors weigh in, they are not always reviewed in the traditional manner. They typically lend for a very short period of time (6-24 months) and are usually more expensive than your conventional commercial or residential property loan due to higher risk and shorter duration, however, they are often instrumental for real estate investors and developers for speed, ease of capital and a variety of other factors.
What makes Direct the "soft" hard money lender"?
We are different than the traditional hard money lender in that we are not strictly asset based. We lend based on:
The credit worthiness of a borrower
Our relationship with the borrower
The LTV/ARV of a specific transaction
And depending on the circumstances, several other factors…
We look at the whole picture and find a way to say YES. We look for borrowers that, in the short term, can make monthly payments and in the long term have an exit strategy. We look for borrowers unafraid to have cash in the transaction or to put up additional collateral in lieu of cash. We look for projects that will carry themselves and, most importantly, make the borrower money.
Top Ten Most Important Things To Consider When Choosing A Private Lender
1. What is the lender’s reputation?
We pride ourselves on our reputation and the longstanding relationships we have with our clients. The partners of Direct have a combined 45+ years in the real estate business in various capacities including brokerage, property management, investment, development, financing, and title.
2. Are you dealing directly with the decision makers.
At Direct, the owners take a very active role in the day-to-day operation. We service all of the loans and we make all of the decisions. The speed and fluidity of the transaction often depends on it.
3. Is the lender actually in control of their own funds or are they acting on another’s behalf?
At Direct, there is no middleman. We are in total control of our own funds.
4. Will the lender provide you with a loan proposal so that you can see the full terms of the loan?
We provide a transparent loan proposal in writing and in advance to allow for questions prior to closing and to ensure that there are no surprises.
5. Are they consistent?
Watch out for inconsistencies from a potential lender. The Direct track record is proven, and because of this our customers come back again and again.
6. Is there a prepayment penalty?
At Direct, there is no prepayment penalty.
7. Is there a back end fee?
Some lenders charge a fee up front and another fee upon payoff. At Direct, there is no back end fee.
8. What are the extra charges? Is there a fee for legal, document preparation, appraisal, etc…?
We do not charge any fee for legal, document preparation or appraisal. We charge a placement fee at the time of the loan.
9. How is the interest on your loan calculated, especially during the construction period?
We calculate interest based on the funds outstanding at the time a payment is due.
10. Is there an application fee?
At Direct, there is no fee to apply.