If you are compiling a list of hard money lenders, there are a number of things to consider. Private financing is often an excellent choice for rehabbers and other real estate investors, but not all providers are the same. Here's what we think you should look for.

First, list all hard money lenders that specialize in financing rehab projects. They have more experience. They are better able to evaluate the deal that you have made. They can offer advice. Because they have helped other people complete these deals successfully.

Some private individuals are just beginning to "dabble" in the world of finance. You might see their ads in your local newspaper. They usually say something like, "Money to lend for any good purpose." If you want to create the best list of hard money lenders for rehabbing, you might want to omit those local-only, non-specific ones. They are often a waste of time.

Speaking of time, as you list all hard money lenders specializing in rehab funding, note how quickly they can close. Then you can go back through and delete the ones that take the longest. The best lenders that we have found can close in as little as two weeks by offering pre-approval.

Pre-approval is another thing to look for. You will find that not everyone on your list of hard money lenders will offer to evaluate your creditworthiness and your experience ahead of time. Some want to know that you already have a deal in place and are just getting your finances in order. If you know that financing is available, you will have more confidence when you approach a seller. If you have a proof of funds letter in hand, your seller will have more confidence in your offer.

So, to recap, you want to include in your list all hard money lenders that offer funds for rehabbing, can close in as little as two weeks and can provide a proof of funds letter. You probably already have a short list, but let's narrow it down even further. Cross off anyone that charges a penalty for early repayment. It is simply illogical for a rehabber to accept that kind of fee. It will cut into your profits, if you can renovate and resell a property quickly. And, of course, that is your goal.

A few other things to look for: a variety of payment plans, a plan for repair funding, 100% financing of the purchase price and help with closing costs. If you follow all of these suggestions, you will probably end up with only one or two groups on your list of hard money lenders. Those are the ones that we think you should consider for your next rehab project.

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