Monthly Archives: September 2012

A smart, savvy and aggressive real estate investor will see the benefit in paying the higher interest rates and fees associated with hard money financing and will know that by using private financing as an investment tool and strategy there is more money to be made in the long run than waiting for traditional financing to come through.
The most important thing for real estate investors looking to utilize hard money as a tool to rehab and flip properties is to accurately price all construction costs and then build in the proper “buffer” money in the event the project goes over budget. The next most important thing is to know the market; more specifically, know what the property will be worth when the renovations have been completed. This will allow investors to aggressively price their properties to sell quickly. All too often I see borrowers get into trouble because greed gets in the way and either the property is not priced to sell or the construction budget falls far short of the actual cost to properly rehab the property for a fast resale.
Today’s private lending environment is full of lenders with money to lend and if a borrower/investor does his due diligence, accurately prices the cost of renovations and lists the property at 10% under market value to ensure a quick sale there are profits to be had.
As a rule of thumb, you should be prepared to put down 25-30% of the purchase price and should then be able to find a hard money lender willing to lend 100% of construction costs so long as the total loan amount does not exceed 70% of the as-completed value of the property.

This basically means that these people have a property in their hand and they want to make some good profit on it. They usually want to close the deal as fast as possible and for that, they need financing.
If they have a good credit history, then they could go to the traditional lenders but most of them don’t have a good credit history and conventional lenders won’t lend them with a bad credit history as they require a lot of documentation before approving a loan.
These are the people who have found some really good properties but they can’t find funding due to their poor credit history. They are looking for a bad credit lender but it isn’t very easy to find one.
Hard money or private money lending is basically a substitute financing in comparison to the typical traditional financing. Their rules and regulations are quite different as they are privately held. They make their own rules of funding and they don’t believe in selling their loans to Wall’s Street or any other secondary market.
They are also termed as money lenders for bad credit and their popularity is on the rise due to the recent credit crunch and worsening conditions of banks.
These are the people who work on their own and therefore, don’t follow any specific guidelines. Their lending is based upon the property and not the borrower.
That’s why; they are able to lend you even if you have bad credit scores because if you have good collateral in hand, then they will fund you irrespective of your poor job or credit history.
Before going to the money lenders for bad credit, one should make sure that their tangible asset is good enough i.e. they have a piece of real estate in hand, which seems promising.
This shows that hard money loans are based upon equity. The amount of loan approved will be based upon the equity of your property.
Usually, when you are going to a conventional lender, you need to put 20% equity but that won’t be the case with money lenders for bad credit. They will ask you to put more equity down than 20%, as their loans are only based upon that.
You need to understand that if you have a bad credit or bankruptcy in the past; it will definitely affect your loan. It won’t be that easy to obtain a private money loan in that situation.
For example, if you had a bankruptcy discharged in the last 12 months or if you are in the middle of bankruptcy, then you won’t be able to get a hard money loan. You’ll have to wait for some time.
On the other hand, if you have tax liens or judgments attached to the property, then that will make hard money loans very difficult for you as well.
Also, if you have collections, then some bad credit lenders will be fine with it but there would be others, who would not like to lend you until you sort that out.
But the most important thing is the property. If your deal is really good and the comparables are good enough, then hard money lenders would fund it. That’s it.
Let’s say, if you have bought a property of 5,000 worth for ,000, then you have a very good chance that you will get the funding but if you are buying that property for 0,000, then the chances would be very low.

This post is only for those foreclosure investors who are willing to invest in a home, which is in a foreclosure situation and is vacant.
It is very important to realize that foreclosure loans are not a single event but it is a whole process, which has different parameters and steps.
When you a buy a property, you need to sign two things. One is either a mortgage or a trust deed and the other is a promissory note, which is kind of a contract between the borrower who is taking a loan and assuring the other party i.e. lender that he will pay him back.
This promissory note is made against an asset i.e. your property and it means that if the borrower wouldn’t be able to pay back to the lender in time, then the lender can start the foreclosure process against that asset.
This is the main concept behind foreclosure loans.
The first step of foreclosure starts when you are due your payment and your lender sends you a notice reminding you about the promissory note.
At this point, the lenders may give you an opportunity to pay back or maybe not. It depends upon them on how they want to carry it forward.
Depending upon that particular state’s rules and regulations, the lenders can submit lis pendens or a notice of default against your property.
After this, there will be a waiting period, which varies in every state. In some states, it may take up to 60 days. Whereas, in others it may 6-9 months. You have to check the timeline in the state your property is located.
After the submission of notice of sale or default, it could be checked in a County Recorder. In some states, you will have to go to the county recorder office and check it by yourself but some of them are available online too.
Here, it is important to understand that the notice of default and notice of sale are entirely different events happening in different timeframes.
So, after the issuance of notice of default, publication of the sale of property happens in a newspaper. These are not the national newspapers but are specifically related to real estate.
After the notice of sale has been published for some time, then the actual sale of the property happens. There will be an announcement about the sale in the newspaper, which will have the time and location details.
On that particular day of sale, every real estate investor who is interested in buying the property will be there to take part in the bidding process.
The lender will start the bid and investors will be asked to bid against that. If the lender has placed a higher bid, which no one can afford, then may be there wouldn’t be any bidding and the lender will have to lower the price.
In the other scenario, different investors will bid and the one with the highest bid will win.
Now again, the situation would be different in different states. Some state will give some time before selling the property to the bidder and if the borrower can pay his loan off, then he can retain the property. Others just sell it on the spot.
There are two types of foreclosure process, one is judicial and the other is non judicial. If your property is located in a state, which follows judicial foreclosure process, then you need to go in front of a judge and everything will take place in front of him. Whereas, in non judicial foreclosure process, there is no need of a judge.
At some places, you will have to take cash with you at the foreclosure sales and at some, you need to take the cheque.
Another important thing, which you will have to do is to put some money down like between -10,000 and you will have to make a commitment that you will pay the rest by a particular deadline.
Before applying for foreclosure loans, one should have a detail view about how the whole foreclosure process proceeds and what are the foreclosure laws.
Most of the times, you can pay cash and then get a refinancing from your hard money lender, so the things keep moving.
One of the most risky things associated with foreclosure is that you never know that you will get the property or not. So, if you will ask your lender to send evaluators to draw comparables, which will cost you extra money.