Direct Hard Money Lenders & Investors

Majority of the residential and commercial real estate loans are originated by entities that don’t actually lend the money from their own sources. Brokers, correspondent lenders, and other mortgage lenders typically act as middlemen for the loans they initiate and close. Unlike these lenders, most of the companies that do hard money lending are directly funding the loans they originate through their own funds. These private money lenders have tremendous flexibility in terms of the loans they underwrite and service due to the independent nature of their funds.

Direct Hard Money Investors are either wealthy individuals or pools of rich private investors looking to lend money with real estate as collateral. They aim to earn a decent return comparable to the risk involved in their lending focus. Most of the direct hard money lenders are not only wealthy, they are also savvy due to their own competence and experience in property investing.

Traditional loan sources like banks use their deposit base to fund their residential and commercial lending. They are regulated and monitored by the relevant authorities due to the nature of their activity. They have liabilities towards their depositors; due to this any failure in the repayment of the money they lend out can create big mismatches. Banks can be shut down and taken over when their equity capital is eroded. This risk causes the banks and mortgage lenders to follow a rigid and mostly inflexible criteria in evaluating, underwriting and approving loans.

Private money investors who engaged in lending activities in the RE sector can also be referred to as direct hard money lenders. The source of the funds they lend out is entirely theirs. They are not answerable or accountable to any regulating agency or authority as long as they operate in the general legal framework.

Hard money lenders who fund directly are responsible for the performance and the non-performance of the loans they make. Any success or failure is all theirs. Direct hard money lenders evaluate commercial and residential properties in such a way that the underlying collateral has substantial equity component to provide cushion in situations of loan default or non-performance.

Many real estate investors wouldn’t have been able to accumulate a lot of the properties if not for the flexible and common-sense approach pioneered and followed by direct private money lenders.