Real Estate Funding – Hard Money

Real Estate Funding – Hard Money

Real estate funding using hard money can make all the difference when it comes to real estate investing.
This is how I fund 85% of my deals using hard money lenders.
What are hard money lenders you ask?
These types of lenders are private investors who lend you money based on the property itself. Unlike conventional lenders where they want to check your credit and verify your income, these lenders only care about the deal.
Here’s how it works. Most hard money lenders will lend up to 70% LTV. (loan to value)
Basically speaking these types of lenders will loan you money up to 70% of the fair market value.
Let me give you another example using round numbers. Lets say you found a distressed property that you know is worth $120k FMV or ARV (After Repair Value)
If you take $120,000 ARV and multiply it by.70 you come up with $84,000.
In order for the investor to fund your deal you must purchase the property for $84,000 or less.
Buying the property at 70% of the market value protects the lender, that way if the deal goes bad for you the lender can take back the property and still generate a massive profit.
Note: Once you’ve been able to establish a relationship with a lender, under no circumstance should you ever allow a deal to go bad. Treat these types of investors as if it were your own money you were investing. That’s why I always recommend you educate yourself first and then take action.
In today’s market you can find tons of real estate deals for even less than.70 cents on the dollar.
Expect to find deals between.30 and.65 cents on the dollar. They’re out there trust me, you just have to know where and how to find these deals.
What can you expect to pay a hard money lender for your real estate funding?
Every lender works in different ways and it can also vary from state to state, but generally you can expect to pay anywhere from 3 to 9 points, interest of 10% to 15%, and your repair costs.
A point equals to 1% of your loan amount.
Generally hard money loans are due payable in 6 month or less. That’s why it’s important you learn how to manage your flips correctly.
Also depending on how great of a relationship you’ve been able to establish with your lender and depending on how great of a deal you’ve been able to put together you can generally role your payments and rehab cost into the loan.
Basically speaking you might only need to come in with the closing cost up front and points.
Remember, find the deal first, then work out the numbers with your hard money lender.
Where to find real estate funding with hard money lender?
Hard money lenders are everywhere, but the easiest way to find them is to do a search on the internet.
Go to your favorite search engine, type in the name of your city along with hard money lenders. Normally a list will pop up in the S.E.R.P.S.
Go down the list from top to bottom and give them a call.
Don’t bother wasting their time if you don’t have a property. Like I said before their mainly interested in speaking with you, if you have a property already under contract.
Real estate funding using hard money lenders can put you a step ahead of the competition.