Page 29 - From Ghetto to Gucci: The Basic Principles of Flipping Houses

Hard Money

Unfortunately for most flips, conventional loans tend to be difficult to come by for junked houses
or foreclosures. They are slow and sometimes require inspections and clear pest reports, things
that you will probably not be able to obtain on the worst houses. This is where hard money
comes in. Hard money lenders don’t care what shape the house is in, or what the comps in the
area are. Hard money comes in quick, and allows you to purchase a house when you wouldn’t
be able to through conventional means.

So the question is, how do you find hard money lenders? Unlike conventional money lenders,
hard money lenders are a little harder to pin down. They don’t advertise, they don’t have
branches on Main Street, and they aren’t easy to find if you don’t know where to look.
Fortunately, they tend to congregate in some key places. If you need to look for hard money
lenders, take a trip to your local county recorder. By looking at the deeds of trust recorded
against recent properties, you should be able to determine who the lenders are that are funding
purchases in your county. Sorting through these lenders, you should be able to find smaller
names and organizations that pop up multiple times. These are the hard money lenders, the
people who are willing to lend out on properties.

Once you’ve got a collection of these names, you can go to the foreclosure sale on the county
courthouse steps. These same hard money lenders will most likely be there as well, ready to
immediately step in and lend on purchased properties. If you go to the steps every day, you’re
likely to figure out who the big hard money lenders are based on their activity there.

Once you figure out who you should approach to ask about hard money, you need to carefully
think about how you plan on doing it. Hard money lenders can be, quite frankly, jerks to people
that they don’t like. If they don’t like you, they won’t give you money. In some markets, if the
biggest hard money lender doesn’t give you money, no one will. All of this makes it vital that you
make a good first impression.

The first thing to do is to figure out how you want to pitch your flip. You want very concrete
numbers that are backed up by quotes from contractors and comp-based estimates by realtors.
You’ll need to figure out how to put this together into a package that will appeal to a hard money
lender, very quickly.

A sample pitch would look something like this: “Hi, my name is Jason. I’ve got a house to buy at
240K and comps for 300K after 20K of repairs, sold in three months. Would you be interested in
lending?”

27