Category Archives: Hard Money Loans

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 favourable 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 amortisation 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.

Easy steps to get Hard Money Loans

5 Ways To Find Hard Money Lenders

Finding private money lenders is not as hard as it may seem. Given the number of borrowers looking for money and the continuing reluctance of traditional lenders to enter the market, the private lending market has expanded to fill the need.

1. Talk to your Friends. Odds are that your friends have existing relationships with hard money lenders. They may be willing to connect you with their lending sources. At the same time, some of them might even be involved in private lending themselves.

2. Network with escrow companies. Escrow companies know where the money for the deals that they close comes from, even if the actual lender information does not get recorded as a part of the deed. If you can build relationships with a few goods, and active closers, you can usually get them to tell you which lenders they see regularly, even if they cannot disclose which lender closed on which deal.

4. Research closed deals. You can also do the leg work yourself by researching closed deals. Private money lenders in California that take security interests in the properties will have their information included in the recorded trust deed. Alternatively, you can also call the buyer and ask them who they used as a lender.

5. Talk to real estate attorneys. Those that specialize in working residential investment transactions should also have a sense of active lenders in the market and can help you find good lenders, especially if they know that you will return the favor by steering the business for the closing back their way.

Finding private money lenders in California is not a simple process. However, by using a combination of research, your connections, and the assistance of the American Association of Private Lenders (AAPL), you can build a book of high-quality lenders that can help you close deals for your clients.

Difference Between a Bridge Loan and Hard Money Loan?

A bridge loan is a short-term loan that “bridges” over the time between when you buy the asset and when you are able to put permanent financing on it. Traditionally, investors have turned to banks or to lines of credit for bridge financing. After the banking crisis and credit crunch, banks pulled back limits for the lines of credit that many investors used as bridges. Those limits have still not come back to the levels that were common before the crunch even though today’s buying opportunities are much more compelling.

Hard money lenders, on the other hand, typically make loans with money that comes from private investors. These loans typically carry origination fees and interest rates that, while still reasonable, are above the market for normal long-term financing. In other words, they are loans that investors typically want to pay off quickly and refinance into traditional loans. Given that private lenders are usually less fussy about the deals that they lend on, provided that they will get paid back, and that they can move much more quickly than most banks, they make excellent bridge lenders. Even though a private bridge loan is more expensive than using a line of credit, they still make great sense because today’s deals needing bridge financing are much more lucrative than their equivalents in the past.

If you want to get deals done and take advantage of today’s excellent property pricing, you either need extremely deep pockets or a way to take out a bridge loan. Given the availability of hard money in the market and the unique execution benefits that they bring, you should consider having one or two reputable lenders in your resource portfolio to take advantage of this unprecedented buying opportunity.