Category Archives: Hard Money Loans

How To Finance Real Estate Investing Deals

In order to be successful in real estate investing, you must be able to finance your deals. When you know which financing options you have available, you are able to structure your deals accordingly.
This article explores the financing options you have in real estate investing.
1) Buying with little or no money
Whenever you can buy houses with little or no money, you can have potential to do unlimited number of deals.
An example of such deals is wholesale deals. This involves buying a house for a low price, then you turn around and wholesale it for a higher price. There are two ways you can do this.
Contract Assignment:
You put a house under contract at a low price. You get this contract to your title company or attorney to do title work. You then turn around and assign this contract to another real estate investor who closes the deal.
You walk home with an assignment fee when the deal closes. The terms of the contract assignment are clearly defined and state how much your assignment fee is.
Simultaneous closing:
You put a house under contract to buy, then locate another real estate investor to flip it to and you sign a contract with you as the seller.
You end up buying and selling the house at the same closing table. Your profit is the difference between your buying price and selling price, less any closing costs.
2) Hard money
These rehab loans have a short time frame, such as 6 to 12 months. They carry a high interest rate, and are based on equity on the property, not personal credit.
It can be available fast, sometimes with a few hours or days.
3) Creative financing
This includes techniques like lease options, owner financing, etc, that do not involve putting buying the property for cash. It might be necessary to put some money down, but finance part of the deal through creative financing.
This can be a big money maker and can allow you to do numerous deals without being limited by money.
This technique will not work when the property needs repairs, or when the owner wants all cash for their property.
4) Revolving credit
This can be a line of business credit, credit cards, etc. They require monthly payments which can get high, and the interest rates can also be high.
You can have limited amount of credit and the number of loans you can get.
5) Private lenders
Private lenders are individuals with cash they can invest. Their money is secured by real estate and are willing to invest it to get higher returns than they can get on bank investments like CDs.
Private money is the most preferred type of financing for real estate investing deals.
6) Mortgage loans
You can also finance real estate investing deals with traditional bank mortgage loans. These come with low interest rates with terms about 15 to 30 years.
However they can require that you put 10 to 20% down. They are based on your credit scores and you are limited to the amount and number of loans you can borrow.

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.

Getting Started In The Real Estate Rehab Business

You have decided to start a Real Estate Rehab business. Now it is time to decide where you are going to start and which road you should proceed down in order to make your business as profitable as possible. Of course you are going to discover many different ways and roads you can go down with your business adventure.

Many people will tell you that if you play your cards properly that you can start a business such as this with none or at least very little capital investment. However it would be prudent to dismiss this route in the beginning. You will find many publications that push the idea of buying properties with “nothing down.” I must say, this can be done if you have three or four years of good solid and prudent business experience. So where are you going to begin?

If you do not have any funds to speak of, then you should be advised to seek out a couple, and maybe three good mortgage brokers with a lot of experience. You should also question the mortgage brokers as to the availability of “Hard Money Lenders” available in your area. If the mortgage broker is a good one worth his salt he should have 4 or 5 “Hard Money Lenders” in his back pocket ready to go at all times.

You will quickly learn that a novice or beginning mortgage broker will probably not be able to help you. In order to have back pocket money available the broker will need to have been into the private mortgage money lending circles for at least three or four years. I can attest that when I first started looking for such a mortgage broker, everyone I approached was not knowledgeable on the subject, then one day I visited an office and started talking with the broker. Did I ever hit the mother lode.

This man had the whole area sewn up, at least all of 3 counties and most of another, Exactly what I was searching for. However he was very careful with his lenders, shall I say protective of them. It took a month and a half to finally do a loan, this was in high interest days, and the rates and fees were exorbitant. The broker had every private lender in the area pretty much in his pocket.

He knew the rules and rates that each lender was charging and believe me when I say it took at least two years to get introduced to the lenders using lower rates and fees.

You will learn quickly that you just as well forget about using banks to borrow from. If you have 2 to 3 loans show up in your name when they do a credit check on you. Just as well forget it. You would be laughed out of their office. The belief is you had to have at least one foot in the bankruptcy court. So immediately you are in the spot of borrowing money at high rates and high fees.

Well, welcome to the world of real estate rehabs and foreclosures. However we must not forget that unless we have inventory to work with we will have no profits. A true story I will relate now, has happened to me many times. My wife used to ride with me to visit and inspect prospective properties for purchase.

When we went to check a property out, many times she would grab her nose and appear to be ready to throw up, and tell me ohooo, you do not want this place, smell all the cat mess, and dog mess, look how filthy. After having this happen on a regular basis for a couple years, It came to a point that when she done this, I would get very excited, Why? Cause I knew I was going to make some big money. Especially if everyone felt the same way she did about the property. I believe this was true as some of my higher profits came from these houses.

You will end up paying high rates and fees on a lot of the properties you do. So with this in mind you need to gear all of your buying campaigns and argue, fight and whatever it takes to get your sellers to give serious consideration to doing “owner financing” for you when you purchase the house.

This is the most profitable way, but you will consider yourself very lucky if you can get 7 to 10 percent of your sellers to do owner financing. It is worth enough for you in extra profits that you should always try. In fact for every house you buy you will find you visit the property and talk with the owner at least 5 to 6 times over the period of sometimes 4 to 6 months. Each visit you should be concentrating, searching for a way and fighting for owner financing.

Why You Should Be Finding and Using Private Money Lenders

Real estate investing requires fast available money. If you are working hard, and have many deals underway, you may quickly find yourself running into a very common financing problem for investors, the finance wall. You have hit the maximum amount of loans and debt your bank is willing to deal with you on. Other mortgage companies are shying away from the deals, due to your portfolio, and amount of loans. You may not be large enough, or attractive enough at this point for commercial loans. This is the time to find and start using private money lenders.
Private money lenders are exactly what it sounds like. These are family members, friends, and other local investors who have ready cash, looking for opportunities to get a good return on their investment. Don’t trouble yourself asking other investors who their private lenders are. Even if they don’t laugh at you, they are not going to provide you their carefully cultivated, and protected list. These are the people they turn to for making their deals, and if you empty the coffers of their private lenders, their deals would fall through.
The easiest place to start finding private lenders is with family members. If you have any family members who have built up a sizable nest egg, you may be able to offer them better than average returns on their investments. This can be especially true today with low interest rates on CD’s, and the low returns on investments in stocks and bonds. Make sure you inform them about your exact plans including the potential risks. Expect to pay a higher interest rate than a standard mortgage loan, your private investors deserve a good return on their investment.
If you need to search for other potential private money lenders, you can start with professionals in your area. Doctors, Lawyers, CPA’s, Dentists, and Executives often have money they are wanting to invest in high profit investments. Don’t expect this to be an easy sale. They earned their money, and saved it by being smart, and investing well. You will need to have a detailed plan on paper including your proposed costs, renovations, and strategies for making a profit on the property. You will need to lay out whether this is a short term investment for flipping a house, or a long term proposal with rental property.
One critical aspect of finding private money lenders is establishing a great reputation as a successful real estate investor. Once people know your property investments result in profits, you may have private money lenders calling you, wanting in on the action. Guard your list carefully, and make sure your investors always get a great return on their investment. Most of your private money lenders will be in your local area. Very rarely does anyone from a great distance choose to invest in property they cannot see.
Using private money lenders may quickly become your preferred resource for borrowing money. Just make sure you follow all the same precautions, and legal procedures you would with a bank loan. You need proper legal protection in place for both sides of the agreement, clearly stating each person’s risks and obligations.
Using private money lenders is one of the most important ingredients for building your real estate investment business. With a little hard work, lots of honesty, and integrity, you will soon have your own list of private money lenders to turn to for your next hot deal.

Bad Credit Hard Money Loans for Funding Your Next Fix and Flip Deal

The shakiness of today’s real estate market is pretty obvious to everyone. This is ultimately creating difficulties in finding loans for flipping properties as well and if your credit score is bad, then the situation becomes worse.

But you don’t need to worry because as a real estate investor, your ONLY job is to find good investment opportunities. If you will keep wasting your time looking for a lender instead of finding good fix and flip deals, then you are going to end up in a problem. You need to understand that if you have found a hot property, it will draw the attention of money lenders itself.

After finding a property and making sure that it is worth investing, you need to get in touch with your local lenders. It is necessary to have a sound relationship with the right hard money lender because of two basic reasons:

1. They will fund you if you have found a good deal, irrespective of your bad credit

2. They will also advice and educate you through the whole process of buying and selling your real estate investment deal

Finding money lenders for bad credit isn’t very difficult if you’ll do your research properly and it is better to start this search by contacting your own lender.

But don’t give him a call asking about what-if or imaginary situations or if they will lend you on that with bad credit or not. As an alternative, you can check their website and look at the properties they have recently funded and try to find similar properties for investing.

Every true hard money lender put all these information on their website to make things visible to their customers. You can get all the details about those funded properties on their website.

The next important step that you should take is getting a proof of funds letter. While you are trying to find a good deal and planning to take it under contract, there are people who would like to know that whether you have finances available to invest in the deal or not. For that, you need to show them your proof of funds letter.

You can easily get a proof of funds letter after paying a minimal fee to your lender. You need to understand that it doesn’t guarantee you that you will get your financing. But it gives a guarantee that there are funds available for that specific property if it gets under contract.

If you really want to get bad credit hard money loans for your property, then you need to follow every rule and regulation set by these lenders. It is very important that the property you are willing to buy meets their guidelines. You also need to check their website to know what are the states or counties, they do lend in and what types of properties they are looking for i.e. commercial or residential.

You need to make sure that you are meeting their requirements and hence, playing by their rules. If you are having difficulty in finding good properties, then your lender can always help you with that by giving you some really good advice as they are experts of real estate investing business.