Monthly Archives: June 2013

6 Reasons why Borrowers use Hard Money to Fund Deals

Private money lending or “private hard money loans” are an excellent investment choice for established and experienced real estate investors.  The process offers a far better platform for the explanation of complicated but lucrative deals to accredited investors. Finding investors willing to make these types of loans may seem daunting but using a reputable, third party private money lender actually makes the process far easier than a traditional bank loan.

Availability

There are thousands of accredited investors willing to invest in real-estate secured deals that ordinary banks will not or cannot back. Not having access to traditional bank funds is not an end for a complicated but otherwise sound deal. In other words, there is a significant amount of capital in active search of excellent, real-estate secured deals.

Versatility

Institutional or government requirements are often the reason that many traditional banks decline to fund an otherwise excellent real estate deal. Individual investors do not have to adhere to the same protocols and can make informed decisions based solely on the merits of the deal.

Affordability

Interest rates are comparable to many traditional bank loans when all the fees and points are considered. In addition, terms are not set in stone and the details can be customized to meet the needs of either the borrower or the investor.

Responsiveness

Accredited investors have usually been involved in their own business or in a firm at an executive level. As such, they understand the need for making decisions in a timely manner. Borrowers can trust that they will have a response in the shortest possible time without the need for the investor to confer with committees or oversight boards.

Security

Borrowers know that they are obtaining funds from legal, reliable sources. Contracts are binding and the borrower can rely on the fact that the requirements of the deal will be honored. All traditional safeguards in a real estate deal are observed so that both the investor and the borrower can make informed decisions and act accordingly.

Ease of Use

10 Must-Knows About Hard Money Loans

Hard money loans made by private investors are one of the best sources of financing for investors looking to take advantage of the great prices in California’s residential housing market. With attractive terms and rates on one to four unit homes, they make it possible for you to purchase great opportunities even in today’s constrained lending market. Here are 10 things that you should know about these exciting financing products:

1. Hard money loans make tough transactions possible. When you have a slam-dunk transaction that will not pass muster with a bank, they are your best option.

2. They are less expensive than you think. While hard money typically costs more than a bank loan, most borrowers can get loans at very favorable rates and terms. Given the returns that most real estate investors expect to make from properties bought with hard money, the loan is quite inexpensive.

3. Cash reserves matter. Most private lenders want to ensure that you have enough money to service their loan, no matter what.

4. Private loans can be used for construction and rehab financing as well as for straight purchases.

5. Hard money loans are fast. You can expect your loan to close in days or weeks instead of months. While loans usually take two to three weeks to close, three day closes are possible.

6. Hard money lenders are flexible. Since they are private individuals, they can frequently structure loans creatively to meet your specific needs.

7. Flips, rehabs and other distressed property transactions are not a problem. If they will make you money as an investor, they are a perfect opportunity for a private lender.

8. Access to private mortgage loans makes it easier for you to get the best deals. Being able to buy with no loan contingency or with a very short loan contingency makes you a much more attractive buyer to the sellers of distressed property with a great deal of upside.

9. Hard money loans are available with a longer amortization period or, in the case of short term loans, on an interest only basis. This frees up more cash flow for you to use to make other investments.

10. Private mortgagers are usually more worried about your character than your credit score. While you must be creditworthy, most private lenders will not immediately dismiss you on the basis of your FICO score alone.