How Does A Hard Money Loan Work? 9 Jun 2020 10:56 AM (5 years ago)

It is quite common for people new to the real estate investing market to not quite understand all the jargon and terminology that is out there. One particular term is that of “hard money”, which continues to be very poorly understood. That said, more investors are trying to increase their understanding of this type of construction, which could suggest there is starting to be more knowledge of the inner workings of a hard money loan. Let’s take a look at just what it is, however.

Just What Is Hard Money?

In most cases, a hard money lender (HML) is not a bank or traditional financial institution, but rather a small group of investors or even an individual.

Hard money lenders are companies that loan money to fund real estate investor transactions for the short term.

Essentially, the money they lend you is based not on your credit score and ability to repay a mortgage over a long period of time, but rather on the value of the property that you want to buy. Percentage-wise, they are far more expensive than traditional mortgages. However, because they are short term loans, usually only for a few years rather than the 25-year average of a mortgage, they can be quite affordable, so long as you know what you are getting into, and you use the loans properly.

Who Needs a Hard Money Loan?

The two most common types of people who look for hard money loans are property developers and fix and flip investors.

Fix and flip is really a slang term to describe a type of real estate investment deal. The fix part is where a real estate investor purchases an undesireable single family home below market value and does some repairs to the property in order to make it more appealing. The idea is to significantly increase the market value of the property with the minimal expense possible so that the home can be resold for profit.

They use it to fund interesting deals, because it is quite common to be able to get a 100% finance deal with hard money loans. However, in order to get this type of loan, you are likely to have put down a number of important assets. You have to be able to prove that you have a property that you will be able to sell for a profit very rapidly, and most lenders will also want to know why you can’t get a regular mortgage. It is common for new investors to use hard money to get their first property so that they can get started with investing. Others take out a hard money loan, fix a property, and then get a regular mortgage to pay off the hard money loan but keep the property.

What this all means is that a hard money loan allows people to have quick and easy access to significant sums of money, without having to jump through red tape and complex bureaucratic hoops. Indeed, perhaps the greatest benefit of the hard money loan is how quickly you can get hold of funds.

They have lightning-fast approval times (which in reality is around five days). When you get your money faster, you’ll be able to jump on the best deals instead of watching them slip away.

If you do require funds as quickly as that, then it is best to find a local hard money lender. This is because many will want to meet you in person, and they will also want to see the property, particularly if they do not know you yet. Once you have that relationship in place, however, things can move very quickly. In fact, a lot of hard money loans do not require you to complete an appraisal of the property, and the only cost associated is that of the origination fees.

Naturally, different lenders have different rules and regulations in place. You can find a hard money lender that will charge you around 12% in interest and as little as 1% origination fees for a loan of at least one year, or 2% origination fees for loans of shorter duration. If you look properly, you might even be able to find a lender who doesn’t charge any origination fees at all. However, not all hard money lenders are created equally. You must understand that they are a type of secondary investor. You invest in property, make changes, and make a profit. They invest in you, while you make those changes, and they profit. It is a very easy way to make a passive income, therefore, for those who have those types of funds available. Unfortunately, therefore, it is also a sector that lends itself to some underhanded tactics and you do have to be careful to not fall prey to a loan shark, which is a very dangerous situation.

Loan sharks often have ties to organized crime or other gang type activity. If you turn one in to the police, you might be answering to some very angry friends of theirs. At that point, paying the debt will be the least of your concerns.

If a deal seems a little bit too good to be true, or too easy to access, you need to be careful. This is particularly true for your very first hard money loan. Once you have had one successful transaction, you will have a relationship in place that you can build on. Because these lenders need you to make their money, they will usually be happy enough to provide you with loans time and time again.

So what should you look for in a good hard money lender? Usually, they will charge around 13% in annual fees, as well as around 5% origination. However, this does depend on which state you are in. Some will also ask you to pay a commitment fee, which may seem like an unnecessary expense, but may actually be really good protection for both you and them. Do your research, and you should be able to get a really good loan product.
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New Hard Money Lender Launches In Beverly Hills 1 Mar 2020 1:39 PM (5 years ago)

Almost everybody around the world would be familiar with the city in California known as Beverly Hills. It is home to Hollywood stars, and the rich and famous. Unsurprisingly, lots of interesting projects start here each year, and they require some significant financial investments in order to be completed. However, startup companies, in particular, find it difficult to get their foot in the door.

Wilshire Fund Opens in Beverly Hills

Fortunately, a new company has been launched, which provides hard money loans to those who want to finance a project in this area. Wilshire Fund, as the company is known, aims to provide an alternative way to finance real estate.

Wilshire Fund is a California-based private lender offering finance solutions for real estate borrowers seeking transaction loans and/or cash-out when traditional financing is not available. Our team of expert loan officers specializes in identifying the best rate and terms for loans tied to residential or commercial real estate assets – ranging in value from $200,000 to $15 million.

Background of Wilshire Fund

Although this particular element of the business is new, Wilshire Fund has already existed for some time. They were first established in 2005, serving all of the state of California. Their specialization has been in both commercial and residential loans. The company is also committed to excellence, hiring only those with the best experience in the field. In fact, although the team is small, they have a combined experience of over six decades in real estate consulting, loan brokerage, and commercial real estate.

What the company particularly prides itself on, is their level of service and personal attention. Compared to other financing options in the area, they offer much better rates. Because the cost of living in Beverly Hills is substantially higher than anywhere else in the state – and indeed the country – these are some very interesting proposals that could open up the market to more investors and individuals.

With the average cost of living in Beverly Hills, CA being 463, that puts it 239% higher than the average of California and 363% higher than our nation’s average. This simple outline of the cost of living index was formulated using prices of: goods and services (weighted 33%), housing prices (weighted 30%), groceries (weighted 13%), utilities (weighted 10%), transportation (weighted 9%), and health care (weighted 5%). Thus, goods/services, along with housing influences the majority of the cost of living index.

Wilshire Fund as Hard Money Lender

As a hard money lender, Wilshire Fund is committed to a personalized service and to make very quick decisions. They offer this commitment to all customers, regardless of the amount they want to borrow. That said, the average price of a home in Beverly Hills is $3,059,600, compared to the national average of $175,700, which does demonstrate that the loan amounts are likely to be substantial.

Some even believe that the prices of homes in Beverly Hills are so substantial that it has become an untouchable market. But for Wilshire Fund, it is about understanding the unique needs of every individual, and the unique offerings of each property. The company has a complex process in place to determine which loans are available, and they are happy to discuss these with anyone interested. In fact, they even offer an online loan application to further expedite the process.

The economic times continue to be incredibly stressful. In markets like Beverly Hills, it seems almost impossible for regular individuals to get so much as a foot in the door. Luckily, hard money lenders like Wilshire Fund aim to change this, thereby ensuring that the market remains not just competitive, but also fair. It is certainly a lender to watch, therefore, and one that could provide people with the opportunity to purchase a luxury property.

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Proven Ways To Make Money In Real Estate 21 Feb 2020 1:36 PM (5 years ago)

There is no industry in the world where more money has been made than in real estate. Yet, many people still worry about getting involved in it, mainly because they feel that they need to have a significant amount of capital. However, that isn’t true. Hard money loans are just one way in which you can enter this market with little to no capital to your name.

Success Stories

There are numerous success stories out there from people who had made it big in real estate with little to no money. For instance, there is Kent Clothier Sr.

Before his career in real estate, Kent started out in the supermarket industry in the Dallas area, managing a billion-dollar supermarket operation by the young age of 32. Kent brought his expertise in the grocery industry with him to Memphis and began American Wholesale Grocers in 1987. By 1995, he built the enterprise into a $50-million venture, which he sold in the late 1990s before pursuing his passion for real estate and establishing Memphis Invest.

Another example is Dean Graziosi, who has a trailer park background and now owns more than 400 properties. There are many others like these two and what brings them together is not that they had, or didn’t have, any money behind them. It is that they had the guts to try things and now have a fantastic amount of money and knowledge.

Real estate is no more or less difficult than making money online. It is simply about knowing what you do and don’t need. One thing you do not need, which may surprise you, is good credit. You also do not need significant capital. Yes, you will have to start with the lower priced properties at first, but this is where you can start to grow. Lastly, when you start, you also do not need to have any major assets to get financing. You simply need to get creative.

How to Make Money in Real Estate

There are two key ways to generate money in real estate. The first one is the passive method, which means you buy property and hold it, by purchasing turnkey properties.

If you leverage turnkey investment properties, then most everything is already done. All you would need to do is purchase the investment property, let the professionals manage it and collect your monthly cash flow checks while your tenants help you build equity.

Your second option is to earn an active income. The most common way to do that is by flipping properties, after you have added value through renovations or development deals. The big thing to learn about, however, is how you can get your foot in the door without having a huge amount of capital. To do that, there are multiple options available to you, including:

Lease options for seller financing
Trading jewelry, cars, and other fixed assets you have
Finding someone in a distressed situation and taking on their payments
Finding an investment partner
A loan
Peer to peer lending
Home equity lines of credit
Hard money lending

If you are hoping to earn an active income through real estate, which means you will buy and sell properties in a short period of time, then hard money lending is probably the most viable option, and the most preferred one.

Hard money loans, sometimes referred to as bridge loans, are short-term lending instruments that real estate investors can use to finance an investment project. This type of loan is often a tool for house flippers or real estate developers whose goal is to renovate or develop a property, then sell it for a profit. Hard money loans are issued by private lenders rather than mainstream financial institutions such as banks.

The reason why this works is because real estate is based on a simple cash flow principle. This means that, so long as you earn more than you spend, which means you are in positive cash flow, you are doing well. Real estate investments are some of the best investments around to generate continuous positive cash flow, which is why they are so popular, and why so many people have literally made millions of dollars doing so.

8 Key Strategies to Make Money in Real Estate

There are eight key strategies that you could consider if you want to make money in real estate. You could decide to focus on one strategy at a time, or you could combine them in ways that are suitable to you. You are likely to find that, as your incoming cash flow increases and your assets and savings increase, it will become easier to make money in multiple ways, thereby also increasing the speed with which you make more money in real estate. The eight strategies are:

1. Investing in long term residential rentals, which is a passive form of income with a lot of security: people always need somewhere to live.
2. Taking out lease options, which is a perfect starting point in which you lease a property while also having the option to buy. This is a good option if house prices are going up, because you will have set the purchase price before this increase.
3. Home renovation flipping, for which you either need quite a bit of cash behind you, or a good relationship with a hard money lender. In this case, you purchase cheap and distressed properties, fix them up, and sell them for a significant profit.
4. Contract flipping, which means that you find people who are willing to sell at a ridiculously low price, and bring them together with an investor looking to buy. This means that there is less risk for you, because you will never have to close escrow either. However, it is quite tricky to identify these properties.
5. Short sales, which means you find those who are willing to sell their property for far less than it is actually worth, and certainly less than the balance outstanding on their mortgage. This is generally accepted if a quick sale is needed to avoid foreclosure.
6. Purchasing vacation rentals, which is a great way of earning a passive income while at the same time having a piece of property that you can use yourself if you are on vacation. By working with a good property manager, there is not much you need to do to earn your income.
7. Through hard money lending, which you will probably only be able to do once you have been involved in this field for quite some time. When you first start out, you will look for hard money lenders to help you get on the ladder. But as you continue, and if you are successful, you can become a hard money lender yourself. There is a lot of profit to be made in these loans, and the risks are very low.
8. Investing in commercial real estate, which you will probably only be able to do once you are truly established.

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Flipping Haunted Homes – The Next Big Money-Maker 9 Feb 2020 1:32 PM (5 years ago)

The paranormal, ghost hunting and spiritual activities are very popular and fashionable right now. Yet, in all of this country, there is just one recognized haunted house. It is in Nyack, NY, and is legally recognized as being haunted.

“As a matter of law, the house is haunted.” This sentence in a ruling by the New York Supreme Court in July, 1991 generated international headlines for a real estate dispute surrounding the sale of 1 La Veta Place.

This is of significance because according to law people cannot just describe their house as being haunted when they want to. This, in turn, makes it an important issue for real estate professionals, who must make sure that they represent their properties properly.

Meanwhile, every year, thousands of people travel to Salem, MA, during Halloween in the hopes of being able to witness some spooky goings-on. There is a real appetite for the paranormal, such as for things that make noises in the dark. And that includes haunted properties.

Are Ghosts an Investment Risk – Or the Opposite?

Trulia has completed a piece of research that indicated that a haunting was not good for house prices.

We found that most Americans consider both deaths and hauntings when finding their next home. Millennial men are the exception, with some possibly dying to live in a haunted home, according to Trulia’s September survey, conducted online by Harris Poll among 2,098 U.S. adults ages 18 and older.

What this research showed more than anything, however, is that it presents a very interesting possibility for investors. On average, 43% of us will not buy a haunted property, rising to 50% among those who did not complete high school. What this means, in conjunction with the fact that there are legalities involved with whether or not a house is haunted, is that people have the opportunity to snap up properties at reduced prices because of suspected hauntings.

Fix and Flip – Seance and Flip?

It seems that there is a real market for haunted properties. Indeed, the haunted house in New York was sold and is now worth quite a bit money. Men who are between the ages of 18 and 34, meanwhile, are also a target demographic as they would like to purchase haunted properties. Meanwhile, those with a graduate degree and those over the age of 65 don’t care about ghosts, so they are also a purchase demographic.

But then, there are those properties that you could snap up because of the worry that there are ghosts, and hold a seance or other event to “evict” the ghosts, only to then sell it at a profit. This is perhaps the easiest, as well as quickest and cheapest, way to fix and flip a loan, and you are guaranteed that hard money lenders will be interested in it.

Paranormal Disclosures

Hard money lenders want to see a quick profit. They will happily lend you money to purchase a property if they believe you will be able to sell it within no more than three to five years and at a profit. This is easily achieved with a haunted home. However, you do have to be aware of the paranormal disclosure laws, which lead us back to the property in New York.

Essentially, some states require homeowners to disclose certain events. Those events include hauntings and also recent deaths, or any criminal activity that took place in the home. Hence, you need to make sure that you remain within the law, and that you find out how long after those events you no longer have to disclose them. Buy cheap because of a ghost, sell expensive because it is probably gone. It is the perfect way to flip real estate.

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Hard Money Lenders Can Help, But You Do Have To Be Wary 2 Feb 2020 1:26 PM (5 years ago)

A lot of people are interested in using hard money lenders if they want to get a quick and easy loan for a property, particularly if it is for an investment. While these types of lenders offer fantastic opportunities, particularly for fix and flip investors, it is also important to be aware of the pros and cons of hard money loans. Unfortunately, there have been situations in which people have lost thousands by turning to these lenders.

Hard Money Loans for Investment Properties Only and Not for Homes

Hard money lenders are only interested in the value of a property, not the individual’s debt to income ratio. It is also for this reason that these loans should not be used for family homes, but only for investment properties. Unfortunately, a lot of families see these loans as a way to get on the housing ladder, in the hopes of then being able to find a better loan by the time they have to pay it off. Because there is no guarantee that this will actually happen, you should never consider a hard money solution as an alternative to a regular mortgage.

Need to Avoid Loan Sharks

In fact, even those who use a hard money lender for an investment property must put measures in place to avoid loan sharks.

Loan sharks make their money by charging very high-interest rates, which are often against usury laws. Loan sharks might use threats of violence to encourage borrowers to repay the debt. All loan sharks are hard money lenders but, fortunately, not all hard money lenders are loan sharks.

Loan sharks are a significant concern for people looking for hard money loans. At the same time, con artists presenting as lenders are a concern as well. These con artists will convince people to pay them for an administrative service, and then don’t come up with any money in return. What these people prey on are people who have fallen on hard times and are desperate for money. This is not necessarily to buy a new property either. It could be, for instance, to renovate, to pay the mortgage, or to pay for any other bill. People who have bad credit often have financial difficulties anyway, which means that they are often in even greater need for some loan to tide them over or to pay for unexpected expenses.

Not all hard money loans are a bad idea, however. In fact, in a sense, a credit card is a hard money loan, and many of us have those. There are many different types of hard money loans out there, and they serve very important purposes. However, as a consumer, you must be responsible and consider what you are borrowing, why, and who from. This is about protecting yourself, something you should do with any kind of financial product. So what are some of the different types of genuine hard money loans that you may want to consider?

1. The Mortgage Refinancing Loan

When you refinance your mortgage, you essentially take out a second loan, which you use to improve the overall value of your property. This means that, for a short period of time, you will have a different loan to value ratio for your property, which is something that many lenders do not recommend. This, in turn, is exactly what people go to hard money lenders, because they use the money for a short period of time to complete the refurbishments of their property, after which they take out a new mortgage. It is important, however, to only do this if it will save money in the long run.

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting debt under control. Before you refinance, take a careful look at your financial situation.

2. The Equity Loan

The second type of hard money loan is the equity loan.

A home equity loan – or HEL – is a loan in which a borrower uses the equity of their house as collateral. These loans allow you to borrow a large lump sum amount based on the value of your home, which is determined by an appraiser, and your current equity.

Equity loans, again, are very tricky financial constructions. It also means that you lose out on the equity in your property, at least for a certain period of time. Hence, you need to think about whether or not this really is the best idea. It is tempting to take one out just because it gives you cash in your pocket with which you can do what you want, but there are significant risks associated with it as well.

3. The Bridge Loan

Last but not least, there is the bridge or bridging loan, another complex financial construction.

Bridging loans are short-term finance typically used when there is a gap between the sale and completion dates in a chain. They are also used by people buying at auction, or those who plan to own a home only for a short time – for instance, if they are buying to renovate and then sell on.

These are the most common forms of hard money loans, and perhaps the safest as well. It is with a bridge loan that someone can purchase a property if they have not sold their own yet, for instance. They also are the perfect solution for fixers and flippers. A bridge loan is designed to be only held for a short period of time, which is precisely what hard money loans were intended to do.

We continue to live in difficult financial times, which means people look for various alternatives to find a way to get money together. While hard money loans enable people to do this, they have a specific purpose, which is to help people get money together for real estate. While it may be tempting to use them for other things, you should avoid this for your own protection.

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Why Hard Money Lenders Are Not As Scary As They Appear 25 Jan 2020 10:52 AM (5 years ago)

Many people think of hard money lenders as loan sharks, which are those types of people who will break your kneecap if you don’t pay on time. In reality, however, these lenders are legitimate individuals or organizations that help people get hold of home loans as quickly as possible. Very simply put, a hard money lender is a private rather than a traditional lender, meaning that this is not a bank.

Why Opt for Hard Money Loans

Many people wonder why anyone would go to a hard money lender instead of a bank. The answer to that is “convenience”. A hard money loan may have huge interest rates and run over short periods of time only, but they can be arranged within days and they are quite easy to get. This has made them popular with specific demographics.

Who Uses Hard Money Loans?

1. Fix and flippers love these loans, because they only hold properties for short periods of time, so a lengthy mortgage is not suitable to them.

If you add up all the time it takes to complete a fix and flip, you quickly arrive to a time frame that most people do not expect or plan for. Total completion time: 20 weeks (4 to 5 months).

2. Property builders, who use these loans to purchase land, build a property, and sell it. Again, this doesn’t take a lot of time.

3. Investors, such as real estate investors who see an amazing deal that simply cannot wait. Because a hard money loan can be organized in days, due to the fact that these lenders are essentially real estate investors themselves, it is the perfect solution for urgent deals.

4. People with bad credit who have a deposit ready. They may have had a recent default, foreclosure, or bankruptcy on their file. If they have cash and have spotted a property of value, then they may be considered for a hard money loan.

Bad Credit and Hard Money Loans

Technically, hard money loans were not designed for people who want to buy a primary residence. However, with so many people having bad credit or otherwise not meeting the standards set by regular lenders, they have become a viable option to consider. Essentially, people use them as a bridge loan, meaning that they take the hard money to buy their home, which is usually a two year loan. During this time, they rebuild their credit, meaning they will be able to apply for a conventional mortgage once the time is up.

Getting a Hard Money Loan

It is important that you check directories of hard money lenders so that you find the one that is right for you. This also means being aware of how these loans work. Usually, you will only be able to receive a loan for around six months to a year, although some hard money lenders now extend this to five years. You can also expect to pay substantial interest rates, usually between 12% and 21%. Furthermore, you usually have to pay for “points” or other types of fees.

Hard money lenders charge other fees besides the interest on the loan. The fees are a source of income for investors of hard money loans and it is important you understand the sources of income to negotiate the best rate and terms for your deal.

You also have to have a substantial deposit available yourself in order to qualify for a hard money loan. It is rare for lenders to even consider you unless you have at least 25% of the value in a deposit. The loan-to-value (LTV) rate is often as low as 60%, meaning you may have to save up for a 40% deposit.

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2020 Loan Originations Through Anchor Loans Now Exceed $1 Billion 21 Jan 2020 11:08 AM (5 years ago)

Anchor Loans is the largest hard money lender in this country for fix-and-flip investors. Once again, it has proven its worth by exceeding $1 billion in loan originations within one year, and the year is not even over yet! They have been able to do this for the second year running, allowing real estate investors to get the funds that they need. This is a new national record, as well as a new record for Anchor Loans itself.

No private money lender has been around longer, or loaned out more money to the fix and flip market than Anchor Loans. In 2016 we set the standard yet again, becoming the industry’s first to originate over $1 billion in loans in a single year.

Excellent Performance for the Past 19 Years

To date, the company has had a total volume of $5 billion. They have been in business for 19 years, surviving the Great Recession with ease. Over those 19 years, they have funded some 16,000 loans, setting themselves apart as one of the go-to companies for hard money loans. Their focus, meanwhile, is specifically on the fix and flip investment market.

It costs a lot of money to fix and flip houses. In addition to buying the home, fix and flippers need to pay for repairs, contractor fees, listing and broker fees, holding costs until you sell the home, and more. […] Hard Money Loan / Private Money Loan – Best for experienced or inexperienced flippers who need money quickly.

Anchor Loans as Industry Leader

Anchor Loans first surpassed the $5 in total volume in November 2019, which is an important record in itself. Nowhere in the industry have results like that been achieved before, which has really set Anchor Loans apart as the best in the country. Indeed, their president and CEO, Stephen Pollack, is incredibly proud of the achievements of the company. He believes it is a testament to the dedication, energy, and hard work of every staff member in the organization. Furthermore, he is proud of the fact that the company is now an industry leader.

Given the extremely fragmented nature of lenders to the fix-and-flip market, where substantial numbers of small local firms fund between $5 million and $50 million per year, our attainment of over $850 million in assets under management and $1 billion in loan origination volume in 2016 is a significant achievement for our industry.

There are numerous reasons why Anchor is such a standout company. Their proprietary Fintech platform is one of those reasons, as is their excellent relationships and their overall experience. No other lenders have been able to evaluate, underwrite, and fund their applications as quickly as what this company can. In fact, most of their clients see payments in as little as between three and 10 business days. This is why the company is so preferred across the nation, even outside of California, where they are headquartered.

Anchor Loans has positioned itself as the go-to intermediary between lenders and investors. They help them create opportunities that benefit everybody who is involved. They specialize particularly on rehab properties, as they believe these properties help to improve neighborhoods in particular and local economies as a whole. The company spends a great deal of time, effort, and money on anticipating and understanding clients’ needs, thereby ensuring that they can provide the most reliable funding in the quickest way possible. This strategy has enabled them to build long term relationships based on honesty and trust. More and more, the company is able to enter other types of markets as well, where they also quickly become the recognized expert. 2020 has been an excellent year and they expect 2021 to bring more of the same.

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Real Estate Assets Are Interesting Investments For Private Hard Money Lenders 26 Dec 2019 10:47 AM (5 years ago)

The standards for mortgage qualifications are becoming increasingly tight. While this makes life difficult for some, it also means there are new opportunities for private hard money lenders out there. Indeed, anyone who has some money could consider becoming involved in this, particularly because they are backed by the security of always having a buffer of between 25% and 30% since that is the maximum loan to value. Naturally, it is important to exert due diligence in this.

Crowdfunding and Self-Directed Investment Opportunities

Numerous experts agree that there are more and more opportunities out there for private hard money lenders. They are there to fill the gap left by the institutional lenders stepping away from mortgages as a result of the Dodd Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank Wall Street Reform Act is a law that regulates the financial markets and protects consumers. Its eight components help prevent a repeat of the 2008 financial crisis.

Traditionally, private investors would opt for an IRA or 401k with a focus on real estate investments. Doing this conservatively means that no more than 20% of the retirement account is invested in this, which means another 80% can be invested in a range of other assets, including crowdfunding. The added benefit is that crowdfunding investing can be done outside of the retirement accounts as well. Indeed, again and again, this has been shown to be very secure.

Over the last several years, there has been extraordinary interest in private lending, as it has proven to be both profitable and—on a risk-adjusted basis with proper underwriting and due diligence—secure.

Property Valuations Are Conservative

One of the things that set private hard money lenders apart from banks is that they use a very different underwriting process. Traditional mortgages are limited to 90% for 30-year mortgages. Hard money lenders don’t focus on an applicant’s credit history, instead of looking at the value of the property. They then provide a loan for no more than two years. Additionally, hard money lenders offer much higher interest rates than traditional lenders. Lastly, hard money focuses strongly on distressed properties, rather than traditional homes.

The security of a hard money loan lies in the property itself. This means the valuation methods used have to be more conservative. The professional appraisal is important, but other tools are used as well. This is because appraisals are geared towards traditional mortgages, are based on the opinion of just one individual, are often wholly different to the agreed purchase price, and don’t consider the potential in distressed properties.

Hard money lenders take all the information available to them and make a decision based on that. They simply want to know whether they can get their money back and whether they can make a profit, even if this means taking the property back. This is also why they will only offer a 75% loan to value as a maximum, which gives them that protection. Additionally, they look at properties as if they are the fixer and flipper themselves.

With their singular focus on turning a quick profit, real estate investors are often regarded about as warmly as used-car salesmen. But experts say they’ve played a major role in spurring the housing market’s recovery. By targeting distressed properties, they’ve reduced neighborhood blight and increased the supply of homes in a region where inventory has been very tight.

Clearly, those who have money to invest, and who have at least a baseline of understanding of the housing market, should consider becoming hard money lenders. In so doing, they not only help themselves, but they also help assure economic recovery.

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California’s Barrett Financial Group Now Offers Hard Money Loans 19 Dec 2019 6:18 PM (5 years ago)

In California, both the commercial and residential real estate markets are booming. As a result, people are looking for new methods to finance real estate purchases. It has recently been announced that Barrett Financial Group has developed a number of hard money loans for a range of different types of properties.

Extremely trustworthy, reliable, fast and experienced hard money lenders in California. We provide local hard money for your next new construction project, commercial property acquisition, fix and flip, rehab or buy and hold. Give us a call today to submit your request for your next hard money loan.

Barrett Financial Group will be offering hard money loans for non-owner occupied and residential occupied properties, rehab loans, fix and flips, trustee sales, short sales, cash out refinances, REO finances, commercial loans, business investment properties, land loans, and construction loans. These products will also be available across the state, in all of its major markets.

Barrett Financial Group is a private funder that has many years of experience in every element of real estate lending. This ranges from fix and flip loans to refinancing to bridge loans.

Bridge loans are temporary loans that bridge the gap between the sales price of a new home and a home buyer’s new mortgage, in the event the buyer’s home has not yet sold. The bridge loan is secured to the buyer’s existing home. The funds from the bridge loan are then used as a down payment for the move-up home.

The group focuses strongly on the needs of customers, ensuring that they are efficiently and rapidly provided with the money they need for their real estate projects. Of particular importance is that Barrett Financial Group is very well-known and trusted in the industry.

Barrett Financial Group is outstanding. I have used Trevor and his team twice in the last two years. They are fast, friendly and focused on getting you a great loan/rate. Each time I have found Trevor to be very attentive, he’s always available, approachable and someone you can trust. I highly recommend Barrett Financial.

The organization has built its reputation in Phoenix, AZ, where their hard money lending programs have long been established. For a long time, the company has wanted to expand into California, particularly since they have experienced significant growth over the past three years. The goal for the organization is to assist people who have ambitious real estate projects, ensuring they can turn those into realities. The group works in partnership with a number of highly reputable partners, and they always look for other investment sources to join them.

Naturally, the organization does have acceptance criteria for those who want to apply for a hard money loan. That said, they have numerous criteria that people could fall back on, making their acceptance rate substantially higher than that of many other loans of their kind. The criteria include the ability to provide property collateral, insurability, and credit history. However, as it is a hard money loan, the latter criteria is of the least importance. Indeed, traditional lenders are failing borrowers by placing so much importance on credit score alone.

Traditional lenders provide funding for the majority of financed real estate transactions out there. They loan up to 80% of the home’s purchase price, and with certain types of loans, well over 90%. When it comes to hard money lenders, however, they follow different criteria for underwriting loans. Sure, they do take credit score into consideration, but they also look at a number of other factors.

Essentially, the Barrett Financial Group believes that if people have a poor credit score, the should not be excluded from receiving financing or loans, particularly for businesses or real estate purposes. This is a mentality that they have instilled in all specialists that work for them. Together, they ensure that clients and customers are able to build their own knowledge and find the best loan programs for their customers.

California has welcomed the news that Barrett Financial Group will be offering these loans, not in the least because there is now a flourishing fix and flip market.

California’s real estate markets have performed impressively in 2016. Home sales in most markets are robust and home selling prices continue to rise. California’s performance shows the resiliency of its huge economy, which has regained over 2.2 million jobs since 2010, which more than replaces the 1.3 million jobs lost during the Great Recession. Tight housing inventories, strong buyer demand, and appreciating home prices make California an attractive market for fix-and-flip investing. Here is a closer look at California markets that offer outstanding investment opportunities.

Fix and flip properties are notoriously difficult to receive a normal mortgage on, simply because the intention is to only own them for a short period of time. Most traditional mortgage lenders will only provide loans for at least ten years. With great difficulty, people may be able to find a five-year mortgage, but the early repayment penalties are very high on these. Hard money loans, by contrast, are designed to only be in place for a short period of time, usually for no more than two years, which makes them ideal for fix and flip properties.

Barrett Financial Group brings with it substantial years of experience. They are a trusted partner both for those looking for funding opportunities and loans for fix and flip or other real estate projects, but equally for those who have investments to make and want to ensure that this is managed the right way. It is expected, therefore, that the group will do exceptionally well in this state, particularly if their success in Arizona is anything to go by. The overall impact this will have on the real estate market in California will also be very interesting to keep track up, as it could potentially give more people the opportunity to fix and flip and, eventually, to invest in and become landlords or property managers, to name but a few.

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Getting a Hard Money Loan with a Bad Credit Standing 7 Dec 2019 6:15 PM (5 years ago)

One of the questions people often ask about hard money lending is whether or not it is possible to get such a loan if the applicant has bad credit. Credit standing certainly does play a role in determining whether or not someone can be approved for such a loan, but it is certainly not the only thing, nor is it the thing that matters most to lenders. Instead, a hard money loan is a type of investment, and the providers of these loans are interested in various other issues first.

Traditional Lenders Continue to Fail the Market

Almost all real estate transactions are funded by traditional lenders. Those will always need a down payment, usually of around 20%.

The amount of minimum down payment required will depend on the type of loan that you choose. Each mortgage loan type carries its own guidelines. Gone are the days of 80 / 20 combo loans and liar loans, also known as stated income loans. Today, underwriters closely scrutinize a borrower’s ability to repay the loan. They don’t want borrowers to overextend themselves and end up in foreclosure or a short sale down the road.

That being said, there are numerous other loan constructions out there. VA mortgages, for instance, are available for veterans and no deposit is required at all. However, if an investor wants to purchase a property and get a mortgage for this, they will face three significant problems first:

A traditional lender looks solely at how much a property is being sold for, which is often not its actual value.
A traditional lender will not agree to provide a mortgage for properties that are in disrepair, as they would need to invest in improvements should they decide to liquidate the property.
A traditional lender places the focus on the credit score of the applicant. This means that if someone has perfect credit, and happens to come across an undervalued property that is also in perfect condition, he or she will be able to flip it with ease. In reality, however, finding that applicant and that property is like finding a needle in a haystack.

The housing bubble collapse of 2008 clearly still has repercussions.

Investors and consumers are likely to live with the repercussions of the financial crisis for years to come. In many countries, including the U.S., consumers remain heavily leveraged and many homeowners are “underwater,” owing more than their homes are worth. As consumers continue to deleverage and repair their finances, their purchasing patterns may be permanently altered.

Acceptance Criteria for Hard Money Loans

Hard money lenders are completely different from traditional lenders. They have their own criteria that will determine whether or not they agree to underwrite a loan. One of those criteria is the credit score, but that is certainly not the only one, nor is it the deciding factor. Rather, hard money lenders are interested in things such as:

How much a property will be worth after it has been repaired.
Whether the applicant already has experience in investing in real estate.
Whether the applicant is happy to invest money into the property as well.

Naturally, someone with good credit will be more likely to be accepted for a hard money loan. However, someone with bad credit is not automatically dismissed as a possibility either. For a hard money lender, what matters is the bigger picture, and not a singular metric image, which is what traditional lenders tend to look for.

Tips for Getting Approved for a Hard Money Loan If You Have Bad Credit

If you have bad credit, it is important that you think of ways to increase your chances of being approved for your hard money loans. There are three key things that you should focus on:

1. Make sure you have been fully thorough in your due diligence. The greatest priority for the hard money lenders, is that there is an investment opportunity. You are their investment, so you need to make sure that you have a proposition that sells yourself. This means performing due diligence right from the start.

The due diligence period in a real estate means embarking on the necessary steps to perform calculations, review documents, research the company and essentially do your homework for the investment BEFORE you actually make the commitment.

You need to be able to show, in your proposition, that you have covered every angle. This also means being able to explain each element to the lender.

2. Make sure that you can explain why you have bad credit. Credit history is important to a certain degree, but lenders are far more understanding of the fact that things can go wrong in your personal finances. If there are any extenuating circumstances that caused you to have these problems, and you can explain that there is no reason for those problems to return, then it is likely that the lender will be very lenient and understanding.

3. Make sure that you give the lender peace of mind. Hard money lenders are private investors so you need to approach them in that manner, showing them that you are serious. Contribute as much money as you possible can yourself, have an excellent exit strategy in place, demonstrate your ability to make the necessary monthly payments and the final payment, and so on.

Regardless of your credit score, the above three steps should help you to have a greater chance at getting approved for a hard money loan. What these lenders want to see is that their money will be returned to them, with interest. That means having a solid, well-researched proposition in place.

As you can see, it is possible to receive a hard money loan even if you have bad credit. This does not mean that your credit score doesn’t matter, but rather that it doesn’t matter as much as what it does to a traditional lender. You are far more likely to be able to receive a hard money loan if you have a solid investment proposition in place that is viable and likely to succeed, regardless of your credit history.

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Hard Money Private Lenders Are Here To Help 2 Dec 2019 2:17 AM (5 years ago)

A hard money private lender will give you a loan that many inflexible lending institutions won’t approve. If a hard money loan is the best way for you to finance a project, start a business, buy a house, or a host of other things, this is for you. Read on to discover how hard money lenders are here to help you.

Why Hard Money Lenders Help Others

Private hard money lenders are real estate investors who want to fund certain kinds of purchases. These borrowers are often real estate flippers, small business owners, and people trying to complete a project. The liquidity of private hard money lenders is their best asset. It’s the private lender’s liquidity that allows them to diversify their portfolios by lending money to unique business opportunities.

There are even crowdfunding companies, like Groundfloor Finance out of Atlanta, that are joining the movement. Groundfloor Finance combines the funds offered by smaller investors in the industry. In 2019, the average amount of hard money loans combined came to $12 million a month.

Jeffrey Tesch manages another hard lender company out of Connecticut called RCN Capital. “RCN should loan out $500 million this year. Business is better than ever, but it’s in the workforce segment,” he says.

The Concrete Tangibles in Hard Money Private Lenders

In the simplest definition, private hard money lenders are people who have large amounts of money to invest. These lenders have the intent to loan money to people with ascertainable financial projects. Hard money lenders will decide on your loan application in as little as one day, although many can take seven to ten days. That’s far less than traditional financial institutions can offer.

The hard money private lender is interested in projects, businesses, or people with solid plans and an attainable goal. They do require collateral, which can be anything from your car or boat to your home or property. They will look at your credit and job history, but they’re more interested in your collateral for the loan.

Hard Money Private Lender: Follow the Rules

The best hard money private lenders want to build a long-term relationship with you. They’re somewhat flexible with people they know they can trust. If you establish a good relationship with them, they’re more likely to partner with you on your next project or business idea.

If you used your home as hard collateral, private money lenders are bound by the Dodd-Frank Wall Street Reform and Consumer Protection Act law. This law encourages hard money private lenders to extend loans to borrowers in real estate.

The Dodd-Frank law regulates what most private lenders can loan you with your home as collateral. The hard money private lender can loan you up to 70% of the fair market value of your home. On average in the U.S., Americans have over $15.2 trillion in home equity. That can make for some great hard money private loans.

Example

Typically, the hard money lender will give you a loan of up to 70% ARV (after repaired value) of your home. For example, say you have a home worth $45,000 that needs $20,000 in repairs. You expect the home to be worth $100,000 after the repairs are complete. That means, the hard money loan may be for up to 70 percent of $100,000, or $70.000. The $70,000 covers your house and repairs.

If you don’t pay back the loan on time, the hard money private lender has the option of taking your property and selling it. It’s prudent to be honest with your hard money lender. Let them know the true value of your property or other collateral you’re using. Give the private lender a financial or business plan on what you want to do, and how you’re going to do it. Let them know how you’re going to come up with the rest of the money you may need.

Final Thoughts

No matter the amount of the private hard money loan, have a lawyer review the terms for peace of mind. If you’re comfortable with the loan terms and are confident that you can pay it back on time, a hard money loan may be right for you.

Sources

https://www.bloomberg.com/news/articles/2019-06-12/high-interest-lenders-up-40-even-as-home-flipping-trend-weakens

https://www.congress.gov/bill/111th-congress/house-bill/4173

https://fisher.osu.edu/academic-departments/department-finance/dice-center/working-papers

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Bad Credit Not A Barrier Towards Getting A Hard Money Loan 1 Dec 2019 6:12 PM (5 years ago)

A lot of people think that, if they have bad credit, there are no finance options available to them at all anymore. However, it is interesting to note that hard money loans are less interested in credit scores and more interested in a number of other things. While there certainly are significant disadvantages to taking out a hard money loan, the fact that they are available for people with bad credit makes them very interesting.

The Problem with Institutional Lenders

A lot of people think that the world of mortgages is dominated by banks and other forms of traditional and institutional lenders. In reality, this is no longer the case as non-traditional lenders begin to take over the financial system.

In 2011, 50 percent of all new mortgage money was loaned by the three biggest banks in the United States. At the same time, six of the top 10 largest lenders by volume were non-banks.

Traditional lenders usually lend between 80% and 90% of the value of a property. However:

They only look at a property’s purchase price, not its potential.

They don’t provide mortgages for distressed or vacant properties.

They care mainly about the credit score of the applicant, rather than the money to be made on the property.

The Hard Money Lender Experience

Hard money lenders also care about credit score, but not much. Their underwriting process is very different, however.

Hard money lenders are primarily concerned with the amount of equity the borrower has invested in the property that will be used as collateral. They are less concerned with the borrower’s credit rating. Issues on a borrower’s record such as a foreclosure or short sale can be overlooked if the borrower has the capital to pay the interest on the loan.

What a private lender is interested in is what a property will be worth after repairs. They are also more interested in whether a borrower has any real estate investing experience. Finally, they want to see people who are happy to put their own money into the pot. Naturally, a good credit rating helps in all of that, but it is not the be all and end all of the process.

How to Get a Hard Money Loan Approved if You Have Bad Credit

If you do have bad credit, then the following tips may be of benefit to you in order to increase your chances of approval:

Focus on due diligence. Make sure that you write a stellar proposition that they simply cannot say no to, by covering every angle.
Provide an explanation as to why your credit score is less than perfect. Explain the things that have gone wrong in the past and what you have done to ameliorate the situation.
Try to give the private lender peace of mind. You need to showcase that it is also in your interest to have a successful project. To prove that you believe in your proposal, you should put as much of your own money towards it as you can. You also need to write an exit strategy and explain how you intend to repay the loan.

As you can see, it is possible to get a hard money loan even if you have bad credit. While that doesn’t mean your credit score doesn’t matter, it is more a case of other things being far more important. That is one of the main things that set private lenders apart from traditional institutions. A hard money lender wants to invest in projects that look profitable and likely to succeed. Hence, they will look at each proposal individually, rather than having a tick box exercise like traditional lenders generally do.

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Private Money Lenders Want To Invest Money In You 30 Nov 2019 8:24 PM (5 years ago)

Do you want to flip houses or invest in real estate? If you don’t have the money, getting a loan can be the next best thing. However, traditional loans from banks and credit unions often take too long and require good credit. Consider private money lenders if you are serious about starting your new business in real estate. Read on to learn more about how these lenders can help you and why lenders want to invest money in you.

Who Are Private Money Lenders?

Who are private money lenders? According to Financing Strategies For Real Estate Investments, a private money lender is “a noninstitutional (non-bank) individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction.” Most private money lenders come from strangers who are interested in investing their money in real estate.

However, friends and family are another alternative lender to consider. If your friends and family have extra money to help you, then it can be convenient to ask them for the loan. They know they can trust you, so you don’t need good credit to get a loan from them.

You can also ask co-workers or other people you have connections with for a loan. However, some people usually have to resort to finding private money lenders online.

Why Lenders Want to Invest Money in You

Why do private money lenders want to invest money in you? Most of them want to do something with the vast amount of money they already have. However, some want to invest so they have enough after retirement. As stated by Financing Strategies For Real Estate Investments, a study showed about 22% of American workers have at least $100,000 saved up for their retirement. Not everyone who retires will leave the money in the bank where it won’t do much good.

Instead, those in retirement, or close to it, want to invest their money to earn more for their future. They commonly profit from the interest they make on the loans they extend to borrowers for flipping houses or investing in real estate. For that reason, there’s always money out there for you to borrow for your new real estate business. All you have to do is look for people willing to invest in your idea.

Getting an Approval

You don’t need good credit to get a private money loan. That’s because these lenders have less restrictive borrowing parameters than traditional lenders. Instead, they look for an excellent plan for the money they’re investing. Creating a mutually beneficial plan for profit will only make a stronger case for them to approve you.

You should also prepare for the unexpected when you are flipping houses or investing in real estate. You might find asbestos in the attic or too much mold in a wall that will cost you more money than you planned on spending. That can create problems if you don’t have a backup plan for how you will pay for it.

For example, you may not be able to stay on schedule to sell. Or worse, you risk losing the property to the lender altogether when you can’t repay the loan. However, if you have a backup plan, then lenders are often more willing to approve you for a loan. That’s because backup plans give the lender faith that you’ll be able to repay the loan on time, despite these kinds of surprises.

The Downside of Using Private Money Lenders

There are several reasons why using private money lending can be a good thing for getting your business up and running. However, always consider the pitfalls of using these lenders before applying for a loan.

Getting a loan from family and friends can be another option for you. But should you do it? Hiccups in repaying those closest to you can deteriorate otherwise healthy relationships, especially when payments are late or behind.

You will also have to deal with higher interest rates with private money loans than you would with traditional ones. So, consider whether building your real estate business is worth the extra money you have to pay these lenders.

If you want a private money lender to invest in you, then research online to find the right one right for you. Get a few offers before deciding on one, so that you know you’re choosing the best loan available to you. Lenders want to invest money in you, so get started today and make your dream business a reality!

Sources

http://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1445&context=honors_research_projects

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What Is a Hard Money Lender? 29 Nov 2019 8:05 AM (5 years ago)

Who do you imagine when people talk about a private hard money lender? Many people don’t have a good understanding of who hard money lenders are. Unfortunately, this kind of private investor is seen by many as a shady person who will break your legs if you don’t pay your debts in time. This image could not be further from the truth.

The Private Hard Money Lender

A hard money lender is a private investor or a group of investors who can offer a hard money loan. The main difference between them and banks is that they are not institutions. Their activities are less regulated, which enables them to create their own rules.

More and more people are entering the hard money lender market. Bloomberg recently reported that private credit is on the rise lately, and it is helping to fuel the current private equity boom. Private credit is now reported to be as big as $776 billion. While hard money lenders are not the bulk of those credit offerings, they are certainly an important part of them.

It’s important to understand who these investors are and what they can do for you. In fact, it’s important to understand what a hard money loan is. They are short-term loans that are generally used to buy properties. They are secured by the property that is being bought, and are considered safe investments. That is, if you are careful and only invest in property after you’ve done plenty of research.

People generally take hard money loans to “flip” houses. That means they buy a property with a low market value, renovate it, and sell it for profit. The idea is that you can buy the property quickly, fix it up, and turn a quick profit. The faster you do it, the more you’ll profit.
This activity is becoming pretty common. According to ATTOM Data Solutions, 2019 marked a 9-year high in home flipping.

Before you look for a hard money lender, you should know that they are not fit for all investments. They are most ideal if you can’t go to a bank or don’t have time for the process.

How Does The Hard Money Lender Benefit?

The hard money lender’s benefit comes from comparably high-interest rates. People who can’t, or don’t want to, use traditional lenders generally seek out hard money loans. This happens for several reasons, and they work as a second option, as well.

Loan fees can be around 5 percent, and the annual interest could easily be higher than 15 percent. Not many investments allow for these profit margins so quickly. Overall, this can be beneficial for both parties.

Another reason why people decide to become hard money lenders is that they can determine their conditions and guarantees. This gives them many advantages during the negotiation.

Lenders generally lend up to between 65% and 75% of the value of the property that they hold as collateral. But, some decide to take on more risk for the benefit of a higher interest rate. The higher the interest rate, the more profit the lender will achieve. The time frame to pay off these loans is often short. Most of them have to be paid in 12 to 24 months.

Keep in mind that fees and interest may vary a lot, though. This practice is not strictly regulated, so lenders can set prices and conditions as they wish. Do your research and tread with caution when looking for a hard money lender.

The criteria for approving loans may also vary from lender to lender. Most of the time, they don’t evaluate someone’s credit for approval. Their attention is most set on the asset that they are lending money on.

Finding The Right Hard Money Lender

If you need a loan, it is important to find the right hard money lender. You need someone that you can trust and preferably who will be near you.

You should look for a professional investor who has experience with hard money loans. Ask for referrals from previous clients or associates. Learn as much as you can about the lender’s past business practices. This will help you avoid fraudulent lenders and scammers.

You should also get to know the hard money lender before you sign any final paperwork. It’s also a great idea to ask an experienced attorney to look at the details of the contract before you sign it.

Remember that hard money loans are not without risk. If you are well-prepared, however, you’ll minimize unhappy surprises.

Sources

https://www.attomdata.com/news/market-trends/flipping/q1-2019-home-flipping-report/

https://www.bloomberg.com/news/articles/2019-09-22/how-private-credit-soared-to-fuel-private-equity-boom-quicktake

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How To Get A Hard Money Loan 27 Nov 2019 7:41 AM (5 years ago)

If you are a small business looking to invest in your company, a land developer or even an architect, you may already be aware of hard money loans. With the inflexibility of banks or other traditional lending institutions, you may have decided that a hard money loan is the best way for you to finance a project without having to sell any property or assets.

How do you go about getting a hard money loan? Much easier than you might think. Here are some tips to go about it the right way.

Find a Good Hard Money Lender

Firstly, it’s important to do your research. The American Association of Private Lenders estimates that there are around 40% more hard money loan providers in the country than there were three years ago! So, although the market has widened, it is not subject to much regulation, so don’t just go to the first one that you come across.

Genuine hard money loan providers will be interested in your project, and they hope to build long term relationships. Some, although thankfully very few, are simply glorified loan sharks. Learn the difference before you get burned. According to Jay Garner, chief executive of Quicken Loans, a lender who has provided hard money loans nationally, companies such as theirs has a mission “to lend to people properly and responsibly, following the guidelines established by the particular agency that we’re selling mortgages to.”

Here are some ways to discern the good from the bad:

Reviews – ask around locally, especially with real estate companies, if there’s anyone they have heard of who is well regarded in the area.
Has this lender financed loans like the one you are seeking at any time in the past? It’s a red flag if they haven’t.
Can you meet the hard money lender, or at least someone that works for them? If not, it’s best to avoid them, as they may just want to get your money.

Applying for a Hard Money Loan

Now you have found a reliable lender you need to present your plan. Even though you don’t need the same amount of documentation as for a normal bank, you still have to come prepared.

Let the hard money loan provider know the value of the property in question. This is one of the most important pieces of information for them, not your credit score. The loan will be given against this. You may need to present budgets for construction or renovation and repairs.
Tell them about the area that the property is in. Have information on how much other homes/businesses went for in the area. They are looking for a good investment. Have your prices of other developments and properties in that area? You can check out zillow.com and realtor.com to do some research.
Show them your financial plan for the property. You can likely get between 60 – 70% of the after-repair value of the property, but you’ll need to come up with the rest. If you have some cash in hand, then it will make the approval even quicker.

If you have a history of making risky, but ultimately good investments, then let them know.

Ensure that you get some legal advice before you sign a contract with a hard money lender. You need to make sure that you are protected within the terms of the agreement. Also, ask your lawyer about any impact that the hard money loan may have on your personal liability.

You should stay in contact with the hard money lender. Give them the information they need to show how much you want the loan. Especially in cases where they only lend to a small number of people, if you miss out, they may have decided to lend to another party.

Things to Note

A hard money loan is not the same as a mortgage or a loan from a traditional lender. The terms are different – usually the approval time is a lot less, and you require less documentation. However, you also will have to pay the loan back much quicker than a traditional loan and at a higher rate of interest. If you think that this works in your favor and that you still stand to benefit from the transaction then it could be a fantastic decision.

Resources:

https://www.bloomberg.com/news/articles/2019-06-12/high-interest-lenders-up-40-even-as-home-flipping-trend-weakens

https://www.nytimes.com/2019/06/11/business/risky-borrowing-shadow-banking.html

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Hard Money Mortgage Loan Advantages 27 Nov 2019 12:40 AM (5 years ago)

“This is a real-estate-driven economy from top to bottom,” says Christopher Thornberg, leading economist and Director of the UC Riverside School of Business Center for Economic Forecasting and Development. So that would make mortgages the cornerstone of the current economy. Today, traditional lenders must abide by strict regulations. Finding mortgages to buy, refinance, or renovate real estate is not as easy as it was just over a decade ago. This is where the hard money becomes a mortgage loan advantage.

If you want to get ahead, or even maintain your position, then you need financing. Previously, many consumers viewed hard money lenders as untrustworthy loan sharks, but times have changed. Banks haven’t been lenient about their terms since before the crash. With statistics showing the average home sale closing in around 73 days, time is of the essence when it comes to buying.

What is the Mortgage Loan Advantage with Hard Money?

Veteran real estate investors already know the mortgage loan advantage they are gaining with a hard money loan. However, if it’s your first time, or you’re buying a home to get into the flipping market estimated at $58 billion, then it’s best to arm yourself with some facts.

Gaining Approval and Funding Quickly

One of the biggest mortgage loan advantages that taking a hard money loan will give you is that it’s a quick process. In some cases, with one individual lender, you could be looking at just a single day. But that’s usually if you are very experienced.

Hard money mortgage providers look at the value of the asset. That’s the property that is backing the loan. They don’t care about your credit rating. If you have provided evidence that this is a good investment, they’ll move quickly. Having access to funds this quickly is an important asset for real estate investors in escrow. Some find that their original lender pulls out or simply doesn’t deliver the funds. A hard money lender can step in to provide the cash and make the deal go through.

When you consider that a normal mortgage provider can take around two or three months to extend credit, waiting less than a week will seem like a dream come true. It also means you can get moving faster.

More Financing Available: A Mortgage Loan Advantage

If you apply for a mortgage with a traditional lender, you’ll need to put down up to 20% of the asking price of the property. This will mean that you get better terms on the loan, but that may not be what you want, especially if you’re renovating. Who wants to pay for a renovation five years after it’s taken place?

A hard money mortgage will have shorter terms, but it is possible to borrow against the anticipated value of the property after the renovation. This changes things! You may be able to borrow 100 percent of the purchase price.

A Hard Money Mortgage is Good for Your First Investment

If you are just starting out as an investor, a hard money loan can allow you to purchase property with a minimal amount of your own capital. As long as you present your research on the investment, the hard money mortgage loan provider can also verify that it’s a good investment. With this support, you are at an advantage, as you can quickly start on that project you’ve had your eye on.

Help You Build a Relationship

If you establish a relationship with a hard money lender, this will give you a mortgage loan advantage when you choose to invest again. All you need to do is honor the terms of the contract and pay back the loan on time. Good relationships between hard money lenders and clients can mean that the lender extends more financing, reduces origination fees, and achieves shorter approval times.

Contact a Hard Money Mortgage Provider

Whatever your investment goals are, having a mortgage loan advantage will always stand in your favor. Hard money loans are pretty effective when it comes to the real estate market, which can move fast. Check real estate groups and social media real estate forums to discover hard money mortgage providers in your area.

Resources:

https://www.redfin.com/blog/homebuyers-finding-homes-faster-2019/

www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#69a271da52ae

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Need A Hard Money Home Loan? Expect To Pay More In Interest 21 Nov 2019 8:16 PM (5 years ago)

You can get approved for a loan by using your home or property as collateral. Getting a loan this way is called a hard money loan, and it’s easy to apply for and get approved. But you do need to be prepared for the higher interest rates that come with hard money home loans. Hard money loans continue to be popular. Many people use hard money loans without ever approaching a traditional mortgage lender. People use hard money loans for their mortgage for a variety of reasons.

Hard Money Loans are Often Used for Construction Projects, Flipping a House or Buying Property

Sometimes people get hard money loans to help finance a small business or project. In general, hard money loans are excellent for properties that you fix and flip, land loans, and construction projects. Julie Aragon, a Los Angeles based mortgage expert, relays why some people gravitate to hard money loans.

“Individuals who buy properties, renovate them, and resell them for a profit are known as property flippers, will often get hard money financing because they can get the cash they need fast. This expediency is beneficial when they’re bidding on a property.”

Hard Money Loans Come from Individuals or Investors

The investors who put up the hard money loan usually require you to have higher interest rates. There are some things that can help you find reputable hard money lenders. This includes the most reasonable interest rate possible. Keep in mind if you put your home or another property up as collateral and default, the hard money lender can take that property. It’s their protection from losing the loan money plus interest they gave you.

The Hard Money Loan Lender Interest Rate Range

Financing Strategies for Real Estate Investments is a mortgage hard money lender. They lend you between 60-70 percent of what your property value is. It’s a win-win for most investors because if someone they lend to defaults on their payments, their property can be taken by the moneylender. It’s important to know that reputable hard money home loan lenders want to build a long term relationship with you. They don’t want to have to go after your home or property for a loan to be paid off. There are ways you can research and find out the difference in reputable hard money loan lenders who have reasonable interest rates and the ones you want to stay away from.

Research and Find Reputable Hard Money Home Loan Lenders

Hard money home loan lenders can charge you points and fees based on the amount of money you borrow. Since the loan points are based on a percentage of your loan, you want to be careful to figure out what one or two extra points will cost you when you’re paying it back. For instance, if you borrow $500,000 and your loan comes with two or three points, each point adds another $5,000 to your original loan. You also need to check your hard money home loan lender’s reputation by seeking reviews from others who have used them. Find out if they have a positive history in dealing with those that borrow money from them. If possible, try and meet with your hard money home loan lender because hard money investors are worth having a positive relationship with.

Your Next Step

Your next step is figuring out what type of home loan you want to pursue, and if it’s a hard money home loan, research and find the best one to fit your needs. While your approval time is a lot less, you also have less time to pay it back. Sometimes you have to pay a hard money loan lender back in twelve months. Although sometimes you can stretch it out to two-five years under special circumstances.

If everything above represents what you want to do and then you can find no better resource than a hard money home loan lender. There are so many ways you can benefit from a relationship with the lender. Don’t wait, move forward and find a hard money loan lender that helps you get the future you deserve.

Resources:

https://sfs.columbia.edu/financial-aid/private-loans

https://www.consumer.ftc.gov/articles/0187-when-paying-mortgage-struggle

https://www.thebalance.com/hard-money-basics-315413

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How Successful Builders Aren’t Stopped By Lending Limitations 18 Nov 2019 6:01 PM (5 years ago)

The Great Recession signified death for many businesses, and particularly the construction industry. Very few survived it, in fact. Those that did survive have a solid footing on the market today, but they are few and far between. The vast majority of construction companies continue to struggle. One of the reasons for this is that, although there is more credit available and the underwriting process is easier construction financing, or acquisition, development, and construction (AD&C) loans, are still hard to get.

The Basel III standards impose increased capital requirements on banks for acquisition, development and construction (ADC) loans for commercial real estate projects. These commercial construction loans are now designated as “high-volatility commercial real estate” (HVCRE) loans, and banks are required to assign these a “risk weight” of 150 percent, compared to other business loans, for purposes of calculating the capital they must hold against these riskier loans.

What this means in simple terms, is that new developers don’t even have to bother asking for a loan through a community bank. Indeed, this was a key area of concern for 2018, something picked up on by the Federal Deposit Insurance Corporation (FDIC) and the NAHB, which has observed a dramatic slow down in construction lending. This doesn’t mean that lending is no longer happening, but rather that it continues to be very difficult, despite being in a growth cycle.

For builders, these are confusing times. On the one hand, demand for new properties is up, but creating supply is impossible through traditional means. This also highlights the importance of finding an alternative.

Why Community Banks Won’t Lend

Traditionally, community banks were fantastic sources for AD&C loans, because of the fact that they focused on the local market. Unfortunately, ever since the Great Recession, the risk has simply been too big for them. In fact, statistics show that small banks were hit the hardest.

The recession was especially unkind to small community banks. About 85 percent of banks that failed 2008-2011 were considered small, with assets below $1 billion. Smaller banks tend to have a larger portfolio of small business loans, therefore increased risk. But smaller banks also tend to get involved in local community development and philanthropy.

Bankers haven’t forgotten the Great Recession, and neither have developers. People still prefer to be cautious, despite the fact that, for nine years, a growth cycle has been experienced. The economy may be doing well but people feel they are on tenterhooks and expect another bubble to burst. Construction, in particular, is always very risky, with a lot of failures and defaults regularly noted because resources can no longer be found. Banks do not yet have the security themselves that enable them to mitigate this risk.

Increased Scrutiny

There is a strong sense of risk aversion and one way in which that is mitigated is through increased scrutiny. Different forms of lending have been observed, including an increase in loans for single families. At present, community banks aim to have no more than 35% exposure to each of the different asset classes and this has proven to be a good strategy.

Low interest rates coupled with an improving U.S. economy have stimulated CRE markets nationwide, resulting in strong price increases and high valuations. At the same time, the commercial mortgage-backed securities (CMBS) market has not been a huge source of competition for banks. These factors, combined with historically benign asset quality performance, have promoted relatively strong growth for CRE lending, most prominently among regional and community banks.

It is also believed that, with the appointment of Joseph Otting to the Office of the Comptroller of the Currency, which happened in November 2017, regulatory oversight is going to get better. Indeed, banking partners agree that there will be a loosening of regulations, which could spell benefits at local levels. While this is a fantastic development, it doesn’t resolve the fact that, in the here and now, banks aren’t lending and commercial real estate investors and developers still need funds.

The Solution

In response to the tight regulations of banks, and particularly of community banks, investors and developers are turning to private lenders instead. Hard money loans are reasonably easy to get, particularly for projects that have a strong chance of success. They are high risk, but this risk is mitigated by high-interest rates and short loan terms. As such, hard money lenders can ensure that they get their money back if nothing else.

Money is business. Banks may provide a financial service but, at the end of the day, their goal is to make more money. They do so cautiously, in part because they build lengthy lending relationships with their clients. Private lenders, meanwhile, also simply want to make more money. But they do so boldly, working with borrowers for short periods of time. They are two opposite sides of the spectrum, in other words.

Construction loans, in particular, are also highly complex. This is another thing that banks are resistant to. They would prefer something that is easy to understand, easy to underwrite, and easy to work on. Hard money lenders, by contrast, are visionaries. They don’t mind working over complex figures and other difficulties, because they can see what the potential in that project is, and what the end result is likely to be. They are realistic, in as such that they won’t lend on a project that they believe has no chance of success, but they also don’t mind taking risks, sometimes very significant ones.

Today, therefore, there are two classes of successful construction companies. The first class is the one that was around before the Great Recession and that continued to operate through it, never giving up and never having to close its doors. Those are the ones who have the biggest chance of going to a community bank and getting approved for a loan. The vast majority of construction companies, however, are new ones or have re-opened after the Great Recession was over. For them, the banks aren’t open yet, but hard money lenders are.

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What is a Hard Money Investor? 15 Nov 2019 8:39 AM (5 years ago)

So, you and your spouse are ready to buy a new home. Around 32% of homeowners with less than stellar credit got turned down for a housing loan in 2017 alone, though. So, you’ve come up with another idea. You want to rent out another property that you own and put that money toward the house of your dreams. The problem is that the house needs a lot of work. Work that you can’t afford, either. You may want to enlist the help of a hard money investor.

By going through one of these investors, you’ll be able to get the loan that you need in a few days so you can start your renovation project. There are many pros and cons to these types of loans.

To help you weigh these pros and cons and decide if going through an investor would be right for you, here is a quick guide on everything that you need to know about them.

So What is a Hard Money Loan?

Let’s start from the beginning by telling you a little more about the loan. A hard money loan is a short term loan given to you to pay for real estate investments. The money that you’re given can vary depending on what you’re putting up for collateral, your credit history, and the value of the house you’re doing renovations on.

This money is given to you by a private investor rather than a bank. The interest is usually a little higher on hard money loans, and you’ve got a shorter time to pay it off. Even so, it can be worth it for you to use them as a means to fund your real estate projects.

Hard Money Loan Vs. Other Loans

Why not go through a soft loan rather than a hard one? If you wanted to go the soft money route you would have to jump a lot more hoops. First, you have to have a good credit history. This will be reported to your creditor as an inquiry. “This Inquiry will have a small but negative impact on your credit score.”

On top of having a good credit score, you also have to give up proof of income. If all this checks out then the bank might approve you for the loan.

Getting a hard money loan is a little bit easier than that. When you try to get one of these loans, you’ll be giving up property as collateral to the hard money investor. It’s because you’re giving up something physical as collateral that the investors are less picky about your financial status and credit history.

Why Go Through a Hard Money Investor?

The interest rate on hard money loans is higher than soft ones, and you don’t have as long to pay it off. So, why would you seek an investor? The answer is that the process is faster, there is more flexibility with it, and the approval rates are higher.

Speed

Soft money lenders go through your application with a fine-tooth comb. They take everything into account from your credit history to your bank statements. As you can imagine, this makes the process go much slower.

Again, in the case of hard money loans, you’re giving up something as collateral. The hard money investor doesn’t want to have to take the property that you give up, but they can if they have to. This means that they aren’t as thorough with looking over your application. You’ll know much faster if you got the loan or not.

Flexibility

Large banks and corporations have strict repayment schedules that you have to abide by. Hard money investors are a little more flexible than that. If you build a good relationship with the investor, they may be willing to talk things out. You’ll be able to get a repayment schedule that works for you.

Approval

The most important thing to a hard money investor is collateral. If they have to take your property back they can sell it fast, and they know it. They may look through your finances and credit history, but these things will mainly affect how much money you’ll get. It’s more likely that you’ll be approved for the loan than not.

Sources:

Maldonado, Camilo. “32% Of Applicants With Less Than Perfect Credit Were Denied Mortgages In 2017.” Forbes, Forbes Magazine, 27 July 2018, https://www.forbes.com/sites/camilomaldonado/2018/07/27/32-percent-of-applicants-without-perfect-credit-denied-in-2017/#26ea218a4b18

“What Exactly Happens When a Mortgage Lender Checks My Credit?” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/ask-cfpb/what-exactly-happens-when-a-mortgage-lender-checks-my-credit-en-2005/.

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What Are Hard Money Brokers? 11 Nov 2019 8:20 AM (5 years ago)

Hard money brokers

Are you in need of a hard money loan? People with low credit scores or aren’t able to give proof of income to traditional banks and credit unions aren’t able to get a loan. However, hard money loans might solve your financial problems. Learn more about how you can use hard money brokers to get the best loan possible from a lender.

What Are Hard Money Loans

Have you been trying to get a traditional loan? When you have gone through all other financial options, then a hard money loan could help you. It’s easier and faster to get one than traditional ones, which can be beneficial to those who need quick money. Traditional loans take too long and might not be an option for those with low credit.

People might become desperate to help finance their new house flipping business or their investment in real estate. Having the money to purchase a house on the market you want is crucial since it could easily be bought from another buyer.

How Hard Money Lenders Approve You

Getting approval from a hard money broker can be easier than traditional lenders. But you still have to put in the work and effort. You can get approval if the property you want them to invest in is worth it for them. You will have to put up some property as collateral to make the loan a possibility. Without it, you won’t be able to get a hard money loan.

Writing a thorough and organized proposal on how you will repay them will only help you get approval. A sloppy one might not get you far with some investors. Make sure you have an excellent plan for them not to say yes to. Having an exceptional property for them to make a profit off will be a further incentive to approve you for a loan.

However, you shouldn’t be too hasty when you get a hard money loan. According to the Financing Strategies For Real Estate Investments, if you aren’t able to repay the lender, they can “repossess the property because they have a first lien position and will handle it themselves.” This means they have the right to sell the property and take the sell for profit.

What Are Hard Money Brokers

Trying to figure out your first steps after deciding to get this loan might intimidate some. That’s why hard money brokers can come in handy for those who want to get the best deal. Hard money brokers are the middlemen who connect you with hard money lenders that’s right for you and your financial situation.

Hiring A Money Broker

Why do you need a money broker? As reported by the Financing Strategies For Real Estate Investments, hard money lenders will lend about 60-70% loan-to-value of the property you want to put up as collateral. You can’t get a loan that’s 100% worth the value of your home. These lenders need to make money out of their investment in real estate.

So, hiring a money broker can help you connect to lenders who are more likely to invest in the price range that satisfies you. You could search and find excellent money lenders online, but not all of them are willing to contact the borrower directly. Therefore, money brokers can help since they can be a middleman between you and the investors willing to invest in small or large real estates. Without them, you might not have access to investors that maintain a low profile or don’t want to be in contact with the borrower.

However, ask your broker how much they charge you for their services before hiring them. Paying them is another bill you have to think about when hard money loans become your last resort in getting the property you want.

If you are planning on getting a hard money loan, consider hiring a money broker. They can give you excellent connections to investors who match your loan goal or ones who will provide you with the best deal. It can save you more time by having the help of a professional who knows how to deal with busy investors. Research today to see which money brokers are right for you and your family. You can be one step closer to making your house flipping business a reality!

Source: http://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1445&context=honors_research_projects

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Hard Money Mortgage Loan Advantages 27 Nov 2019 12:40 AM (5 years ago)

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Help You Build a Relationship

Contact a Hard Money Mortgage Provider

Need A Hard Money Home Loan? Expect To Pay More In Interest 21 Nov 2019 8:16 PM (5 years ago)

Hard Money Loans are Often Used for Construction Projects, Flipping a House or Buying Property

Hard Money Loans Come from Individuals or Investors

The Hard Money Loan Lender Interest Rate Range

Research and Find Reputable Hard Money Home Loan Lenders

Your Next Step

How Successful Builders Aren’t Stopped By Lending Limitations 18 Nov 2019 6:01 PM (5 years ago)

What is a Hard Money Investor? 15 Nov 2019 8:39 AM (5 years ago)

So What is a Hard Money Loan?

Hard Money Loan Vs. Other Loans

Why Go Through a Hard Money Investor?

Speed

Flexibility

Approval

Sources:

What Are Hard Money Brokers? 11 Nov 2019 8:20 AM (5 years ago)

What Are Hard Money Loans

How Hard Money Lenders Approve You

What Are Hard Money Brokers

Hiring A Money Broker