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How to Find Reputable Hard Money Lenders

by | Jan 9, 2017 | 2 comments

You’re finally ready to purchase that fix and flip property, now all you need is the funding! Your first choice? A hard money lender. The hard money lending industry has been around for centuries in one form or another, but is as popular as ever  due to its promise of quick funding and underwriting flexibility. But, be careful when choosing a legitimate hard money lender for your next fix and flip. Like any growing industry, there are many companies out there looking for an opportunity to take advantage. Avoid suspicious intermediaries, and use these tips on how to find legitimate private hard money lenders to help identify the good guys.

Do your research on legitimate hard money lenders

Researching customer reviews and testimonials usually points you in the right direction. Extremely happy customers and extremely disgruntled customers alike are most likely to post a review – it is important to take note of the company’s response to these reviews. If there is an overload of negative feedback with no response from the company, you should probably shy away. Most companies are more than willing to go above and beyond working with their customers to turn that negative feedback into a positive comment.

Consult your network

Another great way to find a reputable lender is to ask your real estate investor network for referrals of lenders they have used in the past, or questions about any lender you may have in mind. They should be able to point you in the right direction, especially if they have used a hard money lender previously themselves. Chances are, if you have a legitimate lender, someone from your network has either used them previously or at least heard of the company. Use information from other investors in your network to advance your investment potential; tips and tricks from well-seasoned investors will aid you on your road to fix and flip success!

Does your lender care about your success?

A legitimate lender will be just as interested in your success as they are theirs. It is important to take note on the type of inquiries your lender has. Do they ask questions about your exit strategy? Do they care how profitable the deal will be for you? Questions like these show that your lender cares about your success and will work with you to reach your goal. If the lender doesn’t seem interested about how you intend to pay off the loan, they may be more interested in owning your property than getting their money back.
Though research and referrals are a great way to capitalize on the experience of others to determine whether you are dealing with a legitimate hard money lender, remember, not every lender has your best interest in mind. Here are two scams to keep an eye out for.

The Bait and Switch

The bait and switch happens regularly and often with a legitimate, albeit unethical, hard money lender. This lender will provide very attractive terms to the borrower, which can be an offer that is hard to pass up. Once the borrower chooses this lender and takes all other options (lenders) off the table, they adjust the terms that were originally agreed to, right before the closing takes place. This is usually done by either arbitrarily undercutting the value of the appraisal or simply “reconsidering” the previously negotiated terms. Once they know any alternate options are eliminated, usually because too much time has been invested in preparing the deal, they will provide the borrower with a deal that may provide less money but much more commonly a higher interest rate and/or more points due at loan settlement. At this point, the borrower is constrained by time, and needs to purchase the property and get started on the rehab. So, instead of starting from square one, they take the deal.

The Catch and Release

The second type of situation to look out for is the catch and release. This is when the lender will charge you initial fees and/or an application fee followed by many unanswered calls and ignored e-mails. Since the process takes so long, the investor must move on to another in order to fund their deal, realizing they have been taken advantage of but unable to do anything about it. Keep in mind, there are always fees associated with any type of loan, especially hard money loans. The important difference at ABL however, is that we do not collect application or legal fees fees until there is a a very good chance of the loan closing. In addition, if the loan doesn’t close through no fault of the borrower, most or sometimes all of the fees are refunded to the borrower. It is not uncommon to pay fees, so don’t shy away from a lender as soon as you hear that a fee is due – just make sure you do all necessary research to make sure that lender is right for you.
There are a few ways to recognize a hard money scam. First and foremost, use common sense. Watch out for the warning signals! If a deal seems too good to be true, it probably is. Make sure to follow your gut; especially if a deal seems weird, because you’re almost certainly right. Other points to watch out for include a promise of immediate loan approval with little info requested, or a promise of 100% financing, because most hard money lenders won’t lend more than 90% of the purchase price on the property without certain qualifications. Although there is no fool proof way to be 100% sure you aren’t being scammed, one secure route to take is to find legitimate lenders you know and trust. Make sure to do your own due diligence on all lenders to make sure they have a legitimate reputation for closing loans.

A hard money loan from a reputable lender is a great leverage option for real estate investors.

At ABL, we know how quickly an opportunity can pop up and how important it is to have access to quick, hassle free funding. Use whatever resources you have available to you to differentiate between a legitimate lender and a fake. After checking company references, as well as discussing your potential lenders with other investors, choose the lender that best fits your unique needs.


  1. I like your advice to look up customer reviews for the hard money lender we are considering. My husband and I are looking for the best hard money lender to get some funding for a new house from. Since we want a well-liked service, we will definitely have to look at the reviews left for them.

  2. In this article the real estate financial specialist organize for referrals of banks they have utilized before, or inquiries concerning any moneylender you may have at the top of the priority list.


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