Brokers work with a variety of lenders, and it’s easy to get complacent once you have established relationships. In most cases, working with a handful of conventional lenders makes sense, but not every client has the same financial situation or reasons for borrowing.
Banks are also notorious for making their borrowers jump through hoops or fit into boxes to get a loan. When you have a client who can’t get a conventional loan, you can still offer them options when you have a relationship with a hard money lender.
4 Hard Money Secrets Banks Don’t Want You to Know
Of course, conventional lenders would rather you didn’t know about the many benefits of hard money lending. But once you discover them, they open up the lending possibilities for your clients,
1. A 5-day turbo close provides a competitive advantage.
Closing a loan with a traditional bank takes 30 days on average and can sometimes take much longer. Real estate investors who can close faster will have an edge over others with conventional loans. Even when it’s possible for your clients to get a conventional loan, they may want to consider an option that allows them to move more quickly if that's what it takes to win the deal. You might even be able to lowball your offer if you can submit a 10 day close.
2. Flexible deals meet the needs of any client.
Bank lending parameters may be too tight for some scenarios. When this happens, get a quote from a hard money lender to see if it will work for your client. Hard money lenders have some freedom in terms of the types of properties they can finance, including investment properties, distressed properties, residential rehabs, short-term rentals, cannabis businesses, gentlemen's clubs, and so on.
If a client comes to you with a hot opportunity that they can’t figure out how to finance, this is the time to tap into your relationship with a hard money lender.
3. Some loans allow clients to make cash offers.
When competition is cutthroat, your clients need a solution that gives them an edge. A hard money loan is essentially the same as cash. To a seller, a cash offer often takes precedence over others because it’s a simpler deal. The combination of lightning-fast close times and the ability to make a cash offer could be just what your clients need to reach their real estate investment goals.
4. Higher loan limits and unlimited properties attract investors.
Hard money loans are based on the borrower’s equity, so if they have a well-established portfolio, they may be able to secure larger loans—up to $20 million in some cases. This can be useful for clients who are considering purchasing commercial property. If the property is unoccupied, a conventional lender might not want to finance it because of the higher risk involved. A hard money lender looks at the whole picture, and if they think it’s a good deal that has profit potential, they will provide a loan.
Conventional lenders also put limits on the number of properties they will finance. For real estate investors looking to expand, these limits can make it difficult to reach their goals. Hard money lenders have more flexibility, and as long as the borrower has enough equity, you have options to offer them.
Build a Relationship with Socotra Capital
As a broker who has a relationship with a hard money lender, you could be the hero who helps your clients find a lender to finance the deals that a bank won’t touch. A simple phone call could lead to more diverse solutions for your broker business.
If you’re a broker who wants to learn more about expanding your offering beyond conventional lenders, read our free guide, Hard Money 101: A Mortgage Brokers Guide.