Emotional versus Logical Hard Money Lenders
Emotional versus Logical Hard Money Lenders
Let's get straight to the point; can all the hard money lenders graded equal? I think the answer is very obvious i.e. No. Hard money lenders cannot be graded equal. Basically, hard money lender could be a guy that has $100,000, who is willing to lend it or could be a company that is multimillion dollar company and has money to lend.
It is important to know what are the important things you need from your hard money lender. I think the number one and most important thing from hard money lender is to know what areas they will do business and what areas, they will stay out of. Lots of hard money lenders that are small town lenders, don't have defined characteristics or defined areas where they would do business and where they won't do business. It is important to find out from a hard money lender where they are willing to do business as much as where they won't do business. So, knowing that makes you more successful as a real estate investor.
When you are talking to a hard money lender, if they won't give you specifics about where they will lend. If there are some things like we just have to check the property out or we take things on case by case scenario, then stay away from that. You need an outline. You need to know where they are willing to go and where they are not. If they are giving answers like, we will just have to see or we take that on a case by case basis or it just depends upon the neighborhood; those types of answers mean that they are emotional hard money lenders. Emotional hard money lender is exactly how it sounds. They are making decisions based upon emotion not making decisions based upon logic.
A logical hard money lender is going to outline guidelines on places that they are willing to lend and if they are willing to lend today, they will be willing to lend their tomorrow as well. That was one of the problems that we experienced almost a decade ago, that hard money lenders would not outline; one day they will be happy doing a property and the next day, they would not and in this way, they were lending based upon emotions; not upon logic.
So, when you are looking for hard money lender; they all are not graded equal. You want to make sure you are working with a hard money lender that has outlined the areas they serve and the areas they won't serve. That is important, because you know what is going on. They will be willing to lend in that area because it is out there. Second thing to look for is you want to make sure that list is published that it is open to the public, everybody sees it, there is not some way that they can change it overnight, it's widely available, it is widely accepted that you know the areas they are willing to serve.
As we have talked about that hard money lenders are not graded equal. I think the next thing is what they charge. You see lots of hard money lenders are going to charge everything they can get away with and their way of establishing what they are going to charge is negotiating with you. So how you sound on the phone, if you sound desperate or if you have to close fast; they change their plans, their fees are based upon their portfolio or something they feel about the market place, a variety of different things based upon their feelings like emotional hard money lenders.
Logical hard money lenders are going to lend based upon the value of the real estate and they are not going to be concerned about emotional issues. They are going to evaluate based upon established guidelines, based upon flow charts, based upon underwriting criteria, that are put together and hard money lenders are going to lend based upon the value of the property, not based upon the individual. So, an emotional hard money lender is going to be worried about a variety of different things that how it relates to a potential owner or a borrower rather than how it relates to a property. So, the bottom line is that hard money lenders are not graded equal. There are emotional hard money lenders and logical hard money lenders. You can stay away from emotional lenders, the better off and successful you are going to be as a real estate investor.
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