These lead-generation resources and tips help lenders and borrowers connect.
Private lenders and borrowers looking for deal financing run into a number of challenges trying to find and connect with each other. On the one hand, private lenders must be able to vet quality leads. On the other hand, borrowers (real estate investors) or mortgage brokers strive to find and select the right lenders for their deals.
Challenges for Lenders
Most private lenders have a good system and a budget for generating leads through various marketing channels. The hard part is generating quality leads, ones that “fit the box.”
When the lead fills out a loan request form, the deal may appear to be a good one, but you will not know for sure until you dig deeper. Some lead sources are good at screening loan requests, but others are unfiltered and can waste time.
Let’s use a baseball analogy to illustrate. Receiving a lead that appears qualified based on the initial content is first base. The next hurdle is getting the lead to provide additional information about themselves and the loan request. If you can get past all the due diligence (credit report, background check, property valuation), you have made it to second base. When you get to loan docs, you are at third base—and so close to funding. But all lenders know too well that it’s not over ‘til it’s over. Anything can happen to kill the deal before you score a run.
As the lender works hard to close a loan, the borrower or broker may be shopping around for other offers. Competition is one of the greatest challenges private lenders face. Lenders must work extra hard to develop relationships with their clients. Providing excellent customer service is essential. One negative interaction can quickly cause a lender to strike out.
To minimize the risk of losing leads to the competition, it is essential for private lenders to build a reputation online and offline. While word-of-mouth is the best source of new business, lenders cannot ignore their online presence. Ask for reviews/testimonials, stay in touch with your network, and talk about some of the deals you have funded. Even after you have generated a lead, the borrower or broker will still likely do some research on all the lenders they have reached out to. If your online presence is lacking, all that money you have spent on generating the lead could be squandered.
Challenges for Borrowers and Mortgage Brokers
Many real estate investors and mortgage brokers welcome the increased competition in the private lending market. Competition can result in better terms for their deals and better service from the lenders. Even so, finding the right lenders for their deals can still be challenging.
There are not many online resources that show specific details about lending guidelines and pricing. Also, many lender’s websites do not provide specific details about their terms, fees, processes, etc. Borrowers must take the time to contact each lender, receive their quotes and then compare them.
Borrowers that prefer for lenders to initiate the contact will find a few websites that collect some basic details about the loan request and sell it to lenders, who will then call or email the borrower to start the conversation.
Receiving quotes or term sheets from multiple lenders is easy. However, there are several other factors to consider besides loan terms, including:
- Is the lender reputable?
- Can they close on time?
- How long have they been in private lending?
- Do they require a formal appraisal?
- Do they offer extensions?
- Do they lend from their own balance sheet?
Some of this information is not easy to figure out in advance. The question of lending from their own balance sheet can be complicated. Many lenders have multiple capital sources. A lot of lenders manage a fund and have full control of the money to be lent out. Other lenders fund with their own money and sell the loan shortly after closing. Some lenders have a correspondent relationship with a larger lender for certain loan types. Some lenders syndicate their loans to individual investors.
The lender’s capital structure may not be of concern to borrowers and brokers, as long as the terms are favorable and they can close on time. The important thing to look for on the term sheet is the origination fees (points). If points are being charged by some random entity, it could mean the lender is acting as a broker or correspondent and is not a direct lender in the transaction. This may be fine, as long as it is disclosed upfront.
When working with a new lender, borrowers and brokers should be concerned about bait-and-switch lending practices and whether they will fall victim to such practices just before reaching home plate. The worst example of bait-and-switch is when a lender changes the terms of the loan just days before the closing deadline, trapping the borrower into accepting higher pricing, a lower loan amount, or both. Some cases of bait-and-switch may be unintentional. AAPL’s Ethics Advisory Committee recently published an article by Mike Hanna with more information about this subject.
The following four strategies can help borrowers find the right lender:
- Ask for recommendations. Borrowers should talk to their peers in the industry and ask which lenders they have worked with.
- Hire a mortgage broker. Real estate investors can save a lot of time and hassle by working with a broker who already has relationships with private lenders.
- Attend industry events. Local REI club meetings are a great place to talk to other investors and ask for recommendations. Lenders also attend these small local events. There are a few companies and associations that host live events focused on private lending, where you can meet tons of direct lenders, including American Association of Private Lenders (AAPL), Geraci Media, Pitbull Conference, National Private Lenders Association (NPLA), California Mortgage Association (CMA), Private Lender Expo, and National Lending Experts (NLE).
- Online search. It is easy to find private lending companies using an online search, but there is much more to research. See if they have any reviews, view their social media profiles and feeds, read articles they may have published, and check to see if they are a member of a trade association.
Private Lending Lead-Generation Resources
Here are some websites and other resources that can connect property investors and brokers with lenders.
BiggerPockets.com
This is one of the most popular resources for residential real estate investors to network and learn. They have a hard money lender directory that gets a lot of traffic.
- For Borrowers/Brokers: View multiple lenders, chat with them in forums, read reviews, and ask other investors for recommendations.
- For Lenders: Pay a membership fee to be listed, pay extra for more exposure, participate in forums, and post funded deals.
HardMoneyHome.com
This is one of the highest-trafficked and largest lender directories. It has a great user interface and simple lender profiles.
- For Borrowers/Brokers: Search to view lender profiles, read reviews, and make contact directly. You can also request to get matched with multiple lenders.
- For Lenders: Pay a one-time fee to be listed, pay for premium placement, and pay per lead. You may already be listed and not know it.
HardMoneyOffers.com
This is a newer website that primarily matches borrowers/brokers with lenders using a few basic details, but it also has a directory of most of the lenders in the industry. The design and layout is very clean and simple.
- For Borrower/Brokers: Enter a few details about the loan and get matched with lenders.
- For Lenders: Purchase leads with a credit system.
PrivateLenderLink.com
This directory website is owned and operated by the author of this article . The lender profiles provide an enormous amount of details about each lender’s guidelines, but only a small number of lenders show up in searches.
- For Borrower/Brokers: Browse lender’s profiles, make contact directly, and ask for recommendations.
- For Lenders: Create a detailed profile and pay a monthly advertising fee to show up in searches.
PrivateLenders.com
Operated by Connected Investors, this platform may have the largest database of private lenders in the country.
- For Borrowers/Brokers: Search to view basic lender profiles or submit basic details to get matched with lenders.
- For Lenders: Pay per lead and pay for premium placement.
Scotsman Guide
One of the most popular resources for mortgage brokers to discover lenders. It is mainly a print publication, but website does offer a searchable directory.
- For Brokers: Read the monthly magazine to see lender advertisements. Use the website to search by filtering, and contact each lender directly.
- For Lenders: Pay a monthly fee for advertising.
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