5 Tips To Help Ace Your Next Hard Money Lender Meeting
By JD Esajian on June 14, 2017
Every real estate investor should have access to a hard money lender. Even if you have your own capital or don’t think you will ever need hard money you never know what the future holds. There are certain situations where using hard money funds is the best possible option. Getting access to these funds doesn’t have to be a stressful or intimidating process. By asking the right questions and being prepared to supply the right information you greatly increase the chances of finding the right hard money partner. As uncomfortable as meeting with a potential hard money lender may be it is important to remember that they want to work with you just as much as you have an interest in working with them. Here are five tips to help you ace your next hard money meeting and find the funds you are looking for.
- Know The Process. Prior to sitting down with a hard money lender, you should have some information on how the process works. The initial meeting should not be the time when you learn about the rates and terms. You need to ask your real estate agent, attorney or a fellow investor on what you should expect. The internet is also a great resource to learn about the process. You aren’t looking for specific rates or fees but a general overview or what a hard money lender is and how they operate. Understand why they are doing it and what they may want out of a transaction. Most investors know someone who has used hard money in your area. Ask them for ten minutes of their time to help break down what a hard money lender does and what you should expect in the meeting. At a bare minimum, you need to understand the process prior to any meeting.
- Research Your Lender. All hard money lenders are not the same. Think about the differences with traditional lenders in your area. The practices are similar but there are certain things that set them apart. The same is the case with hard money lenders. It is important that you do your due diligence and find out as much about who you are meeting with as possible. With the growth in hard money lending there is a good chance that your lender has a dedicated website. If so, browse the site and look for any previous projects they may have posted. See if there are any specific markets that are more popular than others. Read the description about your lender and see if you share anything in common that you can use as a talking point. Meeting a hard money lender in many ways is like a job interview. You need to do your homework and try to make an impression. You wouldn’t go into an interview without doing your homework so don’t meet a hard money lender without doing the same.
- Know The Numbers. You should always know the numbers that are important to the lender. If you are asking for funds on a specific deal you need to be prepared to back them up with real data. Even if you are sitting down without a property in mind you need to have some idea on your numbers. As obvious as it sounds the goal of a hard money lender is not to simply complete a transaction but to make money. They need to be assured that they are going to get a return on their money high enough that is worth the risk. You may be the nicest guy in the world but if the numbers don’t make sense you can forget getting capital. In addition to understanding how the numbers work you should have a firm plan in place for finding & evaluating deals. Your lender does not want you to call them every time you see a new listing. You should have a good idea of what type of deal you have prior to presenting it to your lender. The more you can showcase your knowledge of the numbers at your meeting the more likely they will want to work with you.
- Understand Potential Downside. It is important to always consider the worst-case scenario with every transaction. A good hard money lender not only looks at the upside but also evaluates the downside. It is a good idea for you to do the same prior to your meeting. Think about your exit strategies and some potential problems on a given deal. By addressing them at your meeting you show that you think two steps ahead instead of waiting for a problem than reacting to it. You don’t have to dwell on the downside but you should know what they are and the actions you would take.
- Don’t Be Afraid To Ask Questions. As we mentioned working with hard money lenders is a two-way street. Don’t be afraid to ask questions that will put you at ease and make you feel comfortable. Ask how much involvement they will have on every deal. Will they give you the funds and step out of the way or be over your shoulder on the project every day? Are you given a blank line of credit or are funds released only on a deal by deal basis? Asking questions not only resolves any concerns you have but shows that you know what you are doing and what you want from them.
Access to a local hard money lender can help transform your business. Use these five tips to ace your next hard money meeting.