There are two types of hard money lenders (HMLs):
- National firms: that lend nationwide.
- Private “Hard-Money” Lenders; These local & ordinary people with money/cash/liquidity know and like real estate and like to lend their money on real estate with a 50 to 75-mile radius. They may be more flexible than the national lender. Some may even partner with you essentially becoming your “equity partner”. They lend because they want a better than average ROI.
Both have their own lending criteria. For instance, national firms usually may want to see a minimum of 20 percent to 30 percent cash contributed by you in any deal you bring them. The private HML’s may want a smaller cash contribution from you. Why? Because they understand the market and are willing to risk a higher loan-to-value than the national players.
Remember, one of the most important things you should know about HML’s is that HMLs fill this void for many commercial or residential N/O/O (Non-Owner Occupied) real estate mortgage loans that do not meet conventional requirements. HMLs help to “bridge” the property so that it will be cash flowing or repositioned for sale and profit.
A hard money loan should never be considered for long term financing.