What Hard Money Lenders Will Never Tell You

    by Aditi Bansal

Updated on Montag, 22. Mai 2017

Any investor making many offers usually has starting money costs that add up at a very high rate. This has limited the numbers of offers that most investors make. However, investors looking to increase their offers on more properties without an increment on their starting money should consider lenders that offer true 100% financing on deals by leveraging the clients’ business lines of credit. The private money lender may secure a business line of credit of a customer who needs funding in addition to 100% financing which it merges into one package.

tags  #Hard money lenders  #Real estate investor #


Hard money lenders have a history of luring investors into closing a deal without giving them complete information or sometimes misinforming them about any additional costs. Nearly every real estate investor thinks that they have 100% financing during the closing of a deal, not until the lenders inform them about other expenses not covered by the loan. Most real estate loans will not cover the starting money comprising of the inspection fee, earnest money, and evaluation fee amongst other expenses. The investor will have to pay the costs to bring the property under contract.

The 100% Financing Options

The lenders will intentionally leave out information about the extra cost until the investor secures a loan and when they get to learn about other expenses. This means that the majority of commercial hard money loans only cater for between 60 and 75 percent of the actual property value or the after-repair value. A hard money lender may choose to provide 100% of the financing without other additional costs, but in rare cases will this happen. They, therefore, employ the three 100% financing options below to finance the real estate investment deals:

  • Type 1: The first type of funding covers only the 100% purchase price of the property leaving the investor to cover the starting money costs. It is the most popular 100% financing method among most hard money lenders.
  • Type 2: The lender may finance the repair, closing money costs and the buying price of the property. However, the investors should be ready to cover the valuation costs, inspection fees, and earnest money. This 100% rarely happens, but most lenders may provide it in cases where the investor has an attractive deal.
  • Type 3- the third type of 100% financing covers everything, including the starting money items, closing costs, repair costs, and the purchasing price. The only financing option allows the investors to get a deal without additional payment. However, most commercial hard money lenders will never provide this funding option.

Starting money may cost a real estate investor between $1,600- $2,100 with the inspection fee standing at $500, valuation falls at $600, while the earnest money ranges between $500 and $1,000. Most new investors without starting money can get the true 100% financing options to cover the expenses, although it is common for the already established investors to cover their own starting money costs.

This page has a focus on Hard money lenders, Real estate investor was shared by Aditi Bansal.

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