Lending Guide: Getting Started

Step 1: Find Your Lender

We’ve talked elsewhere in the Lending Guide about how private lending is anything but a cookie-cutter industry. Each lender will be different, from your experience working with a lender to the loan products they offer and the varied contract terms available. While that can make the prospect of finding a private lender more intimidating, it can also mean that there’s almost certainly a lender out there willing to work with you to close financing for your deal.

If you take nothing else away from this section, take this: you should start working to find private lenders before it’s crunch time on financing. Develop and vet your short list of lenders as soon as you know what property criteria you’re looking for.

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How to find a private money lender.

(We feel like there’s an obvious answer here…)

You find private lenders through PMLG’s directory. We connect you with lenders based on four criteria: property location, property type, loan type and loan amount. We’ve found that these four criteria will expose you to the most lenders  willing to look at your deal.

We’ve set up both this Lending Guide and our directory to empower you to find lenders on your terms. We know that looking for financing can be exhausting and discouraging. Often, you’re looking for a private lender because you’ve already had banks turn you down.

Our free, public directory enables you to research each lender before contacting them. You can then choose how you reach out: you can contact several lenders at once, reach them individually by phone or email, or contact through their websites. We don’t require you to create an account to access this information, and only ask for your email if you want to sign up for our newsletter, send search results to yourself or reach out to several lenders at once with our contact form. Start your search now.

However, PMLG doesn’t list every lender under the sun. And we never will, for good reason. We work closely with the American Association of Private Lenders to ensure lenders have no unresolved complaints and follow the industry’s code of ethics.

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Enough about us.

If you’re not finding the right lender in our directory or smartly want to check what else is out there, we encourage you to:

  • Complete an internet search with the private loan type, property type and property location, and research/contact the lenders who appear.
  • Search the other private lending directories on the market. The caution to this is that many allow any lender to list, or they compile all lenders they find without checking if they are fly-by-night types.
  • Ask for referrals from the lenders you speak with if they are unable to do your deal. They will likely not know other lenders’ product offerings, but will give you a new starting point.
  • Attend local real estate investor networking events and ask for recommendations there.
  • Reach out to local small business resource groups; they often know where the local money is.
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Don’t forget to vet!

After narrowing down your list of lenders, you will want to complete preliminary vetting to avoid undue risk. While most in the private lending industry operate according to best practices, you will still find the occasional scam artist or private lender with a gray-area reputation. Calling or emailing the American Association of Private Lenders will help you here, as they know of most lenders and their reputations.

Know your hard money etiquette.

Familiarize yourself with the private money lending industry by browsing our Lending Guide. The guide is completely public-facing and free. We designed it to give you the tools you need to find a lender and work smoothly with them.

Before starting an application, make sure you’ve completed due diligence on the subject property. You should have as many of the following as possible:

  • An executed contract with the seller of the property.
  • A budget and preferably bid for any repairs or renovation.
  • Comps showing after repair value (ARV) of the property.
  • A land survey.
  • An appraisal.

When you do make first contact, be mindful that you will often be speaking with the principal owner or manager. They are very knowledgeable and helpful about what is and is not possible regarding your project and exactly what they can do for you. We recommend that even if you view working with the private lender as a one-off, you still begin developing a long-term relationship.

You may not need this next piece of advice, but for those of you who find the prospect of cold-calling or -emailing a lender daunting, an easy way to introduce yourself and enter the conversation is, “Hi, my name is ________ and I found your information on the Private Money Lending Guide. I have a project that I’m working on that I would like to discuss with you. Do you have a few minutes?” (You telling lenders that you heard about them from us also helps us keep doing what we do!)

The personal side is still important in private lending.

While your deal’s numbers do matter, always keep in mind that private lending is not like working with a bank: the hard money industry runs on relationships. While your first couple deals with a lender may be dependent on your deal’s criteria and your standing as a borrower, you’ll often find that a solid working relationship gives you additional wiggle room down the road.

As much as you’re able, try to work with lenders with whom you feel comfortable and have a complimentary approach to how you do deals. It’s ok to talk to and interview several private lenders to gauge their familiarity with your needs and get a sense of how well you might work together.

Next up: applying and qualifying for a loan.

Beyond what documentation and information lenders will require from you, there are strategies to how you apply for a loan that will help you qualify and receive more favorable terms.

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