Hard money isn’t the answer for every real estate investment but, wielded properly and effectively, it can help you take advantage of lucrative opportunities. Here are some tips to help you maximize the benefits of your hard money loan.

1. Find the right deal. Hard money loans are more expensive than conventional loans, but there are myriad circumstances in which the advantages of hard money (e.g., speed, flexibility, accessibility, etc.) will cancel out these costs. Private lenders look for loans against properties that they believe will return sufficient profits to repay the loan, so if you can find a good deal before you approach a lender, it will give you a better chance of securing your loan. Note: Reputable hard money lenders want to profit from the interest on your loan, not by foreclosing on the property and taking over the ownership. They’re looking for borrowers who will be able to repay on time and in full.
2. Choose the best lender for your deal. Reputable private capital lenders are typically backed by private investors who want to invest in the real estate market indirectly. However, it’s important to be sure that you’re dealing directly with a lender and not with a broker masquerading as a lender. One of the advantages of hard money is that you are working with someone with direct control of the funds rather than a loan committee or a middle-man. While loan terms and interest rates vary from lender to lender, the best hard money lenders will offer competitive rates that satisfy their investors and still allow you to earn a return on your investment. Lenders should be willing to present you with their terms upfront so that you know how much the loan will cost before closing time arrives.
3. Compile the necessary documentation. Although private capital lenders don’t have as many (or as strict) requirements as conventional lenders, they will still want to know about you and the property that will secure the loan. It’s a good idea to come prepared with a title report, financial documentation for your business and/or the property, leases and rent rolls (if the property has any existing tenants), and an executive summary with photographs of the property and your plans for it. Most lenders will also insist on obtaining an appraisal of the property.
4. Make your own contribution. As opposed to conventional lenders, hard money lenders are much more willing to work with their borrowers in a partnership. Because of this, they want to know that you also have skin in the game, so they will often require slightly higher down payments than their conventional counterparts. However, because they will use different (and higher) appraisal values to determine loan amounts, you can often still get more money by opting for a hard money loan.
5. Meet your lender’s deadlines. One of the main advantages of hard money loans is the speed with which they can be obtained. Most private capital lenders can approve loans in only a few days, but to do so, they require your cooperation in getting the information they require as quickly as possible.