5 Reasons Investors Should Have Hard Money Loans in Their Portfolio

Private individuals and companies will find it difficult to obtain su5 Reasons Investors Should Have Hard Money Loans in Their Portfolioperior returns without an unacceptable degree of risk in the traditional financial world. Traditional banks, stock brokerages and financial investment companies provide a “range” of investment vehicles but all rely on the same basic tenet that to obtain superior results, an investor must accept a greater degree of risk to his capital.

Superior Returns

Banks borrow money and then re-loan it at the prevailing market rate. Thus, to make money themselves, they must pay the substandard investment rates. Anyone with a CD or savings account knows this fact without being told. Quite simply, trust deed investments eliminate the middle man, the bank, and allow the investor to reap a greater rate of return on the money he invests.


Finding a worthwhile borrower and deal might seem like a daunting process. It would be without the use of a reputable third party private money lender. These companies bring investors and borrowers together. They protect both parties as they scrutinize both the lender and the borrower. In addition, they examine the deals for risk and security. For the investor, private money lenders are an excellent venue for identifying potential deals within their financial parameters and risk tolerance.


There is a “menu” of loans available. While most fit the traditional mold of monthly payments, many can be customized to fit the needs of an individual investor. From short term with balloon payments to long term guaranteed rates, trust deed investments perform like most traditional real estate loans.

Asset Backed Security

The benefit of making a loan on a “real” asset at a substantially discounted valuation makes these hard money loans an extremely attractive option. While there can be occasional defaults, the investor obtains a real estate property that can be sold and still provide a sizable gain. In addition, all insurance, title search and legal documents required in bank-sponsored loans are also required on these deals.


The same private money lending companies that bring investors and borrowers together for hard money loans can also provide access to a wide variety of investment services. You can be as involved as you like or can simply wait for your monthly payment.


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5 Reasons Mortgage Brokers Should Partner with Hard Money Lenders

A successful mortgage broker understands the powerful impact that networking has upon their business. It is in the Brokers hand_Shakebest interest to develop strong relationships with the RIGHT people.

By doing so, you will benefit yourself while simultaneously becoming a more valuable resource to your clients. Here are 5 reasons why you need to develop a relationship with several hard money lenders.

  1. Easy commissions on loans that close fast and require almost no work on your part.
  1. Instead of having to turn-down a prospect you are actually finding them a solution thus creating future business for yourself.
  1. Many private money loans are paid off by obtaining a less expensive agency loan at some point in the future thus giving you an opportunity for additional business.
  1. Okay, those are the obvious advantages, consider the following. Private lenders are spending all of their resources building and nurturing a client base of high net worth people that are out buying investment real estate. Those people also have plenty of “traditional” borrowing needs as well. And, they are out there selling real estate and meeting plenty of buyers that could be referred to YOU.
  1. Private Lenders are also out there working with realtors on closing purchase transactions. YOU should be getting some of those purchase loan referrals.

The bottom line is that working with private money lenders is not just about the commissions earned on the hard money loans, but also about growing YOUR business. Ask for those REFERRALS. Be the broker that clients can depend on and ALWAYS have the solution they are looking for.

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Hard Money Basics

Hard money lenders are lending companies, or individuals, offering a specialized type of collateral backed loan. They tend to lend short-term capital (also called bridge loans) that provide funding and or cash, based on the value of the collateral. Hard money lenders can and will utilize all types of collateral- cars, boats, land, airplanes, hard assets, paintings, etc. to complete the loan. For the purposes of this page, will narrow to mortgage or home loans. Hard money lenders tend to focus on the value of the collateral rather than the borrower’s ability to repay, FICA score, debt to income balance; instead of based on their own personal income or other assets, as is common with traditional lenders. Hard money lenders typically charge much higher interest rates than banks because they fund deals that do not conform to bank standards such as verification of borrower’s income, assets, or credit score.

Hard money lenders will offer a range of requirements on how much they will lend (loan to value), what types of real estate they will lend on (commercial, residential, multi-family, land) and minimum and maximum loan sizes. Hard money lenders that lend on residential property must be licensed through their state regulatory agency and through the National Mortgage Licensing System (NMLS). Borrowers should verify the lenders license through the NMLS in order to prevent problems at closing, as many states require the lender’s license number to be listed on the loan documents. Not having the license number on the loan documents could prevent the loan from closing.