Category Archives: Hard Money Loans

Direct Hard Money Lenders – How to Calculate an Offer Price of a Property?

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Category : Hard Money Loans , Real Estate Loans

We receive a lot of queries related to the purchase price, repair costs and offer price of the properties. People want to know the calculation process used by direct hard money lenders for making an offer because it is a known fact that hard money lenders only lend 70%of market value after the repairs have been completed on a property.

First and foremost, you need to realize that the offer price and repair costs are two separate containers of money.

Lenders can fund you up to 100% of both of these containers but both of them should be equal or less than 70% of ARV (after repair value).

This doesn’t mean that you’ll get all the money together for closing the deal.

You will get a particular amount of money for purchasing the property at closing table and the repair money will be deposited into an escrow account after the deal is closed by a hard money lender.

If you are in a perfect situation, you won’t have to add any money as repair costs into the offer.

Let me explain this in detail.

It is very important to figure out what kind of repairs you are willing to do and get an estimate. After that you should determine the ARV. You need to take 70% of after repair value and subtract the repair costs.

This is the maximum amount which you’ll get as an offer and still get financing for the purchase price and repair costs.

On the other hand, you need to be very careful while estimating the repair costs and ARV.

But you need to keep in mind that the final amount of ARV and repair costs would be based upon what have been finalized by direct hard money lenders, not you.

This is usually quite different from the calculations of an investor.

The lenders usually hire the services of two different property evaluators to determine the ARV and repair costs. Both of them send more than a dozen comps after evaluating the property.

This is an extremely efficient system for determining the ARV and repairs, which is followed by few lenders like us.

So, if you are fine with putting some money down or invest in repair costs of the property, you can amend the offer price.

Another important thing, which you should keep in your mind, is the fees that are due during loan closing because direct hard money lenders will not finance that. This would be between 4-6% of the total loan amount and you’ll have to pay it from your own pocket.

The crux of the story is that you’ll have to work on several different offers before you get the numbers that make sense.

But it’s a surety that whenever you’ll find the perfect property, it would be worthy of all your time and efforts!

Hard Money Lenders – Investing in Single Family Properties

Category : Hard Money Loans , Home Loan , Real Estate Loans

I have found many real estate investors who find it very difficult to get financing from hard money lenders who will lend them money easily.

This is because many investors want to invest in properties which are quite economical and needs hard money loans under $30-50,000. But the problem here is that most of the lenders are not interested in doing loans for smaller properties.

They believe that these kinds of properties aren’t exciting enough. Sometimes, they also don’t want to do loans of $100,000.

But Do Hard Money is one of those hard money lenders, who don’t mind lending loans less than 40 or 100,000 dollars. We do not have any minimum as far as the loans make sense and you are able to pay fees for that.

So, if you’ve been struggling with investment opportunities and seeing opportunities around you, come talk to us. We would be happy to work with you. We would be happy to do the loans. No minimums or whatsoever and that can enable you to do those types of properties.

That’s why, if you have an investment opportunity around you, which you think would be good enough after drawing all the comparables and doing all the calculations, then you can come to us straightaway because we don’t have any minimums. This could be a great help for those who want to invest in small properties.

Personally, I think that those properties are fantastic. I think they are great way to start in real estate investing or they are even a great way to do lots of properties.

According to me, these properties are the best if you are just starting with real estate investing business. It is also good for those who are interested in working on single family homes because they could be rehabbed easily as compared to the commercial properties.

One of my friends is from Mississippi who only deals with small and cheap homes. He generally buys a property, which is between $30-50,000. He does fix and flip and later, sells them at around $70-80,000 after doing the repairs.

Basically, there are lot of investors who are ignorant about these small or single family properties because they think that the profit margin would be much less as compared to the commercial properties.

But you need to keep in mind that if you have bought a property for half a million dollar and the worth of the properties go down by 10%, then that means there would be a loss of $50,000. On the other hand, if you have bought a property which is worth of $30,000, then 10% loss would only be $3000.

With these kinds of properties, you have a lot more to gain and very less risk involved and that’s why, they could turn out to be one of the best investment opportunity for you.

Best Real Estate Investments – Tips on Making Successful Investments

Category : Hard Money Loans , Real Estate Loans

Being a real estate investor, you need to make sure that you choose the best deals because if you are unable to find that, then you will face troubles while obtaining hard money loans. So, your ultimate goal should be to focus only on finding the best real estate investments.

I have discussed before that if you want to make good money in the real estate scenario, then you need to compare the estimated value of the property to the values you get from the evaluators, which are termed as comparables. In this way, you are using 2 comparables, one from the evaluator and the other based upon your findings.

If there are some deficiencies in your estimated value report, you can use the option of “Property Approval Plus”, which will give you all the information related to the locality where your property is situated. This will definitely help you in finding the best real estate investments with a planned and calculated approach.

That report will have the list of all the homes, which have been sold recently. It will give you a detail account about the background of the property i.e. when it was sold, for how much money it was sold, tax liens etc.

As the list is going to provide you all the details about the homes, which have been sold recently in the locality, so it will also help you to realize that whether the market is in depreciating or appreciating condition.

The report will give detailed information about the particular neighborhood; you are trying to work in. The number of homes that have been sold, the number of homes that are currently in the market and the comparison between the actives and solds of the last few months. These trends would be a great help in determining the final value of the property.

It is basically something that you should do yourself. While determining the value of your property, it is necessary to start your research by looking at the subject property and then determining the actives and solds in the neighborhood, having similar features. This is the best practice, which is ignored by many new real estate investors and ultimately, they have to pay the price.

After you are able to determine a rough value of the property in mind, this estimated value can be used as a comparison. But if the estimated value of the subject property isn’t right, then you need to an extensive research because it is the most important step. You can talk to other evaluators, drive in the neighborhood by yourself and check if you are missing something.

Finally, the Property Approval Plus will tell you about the economics of that particular area i.e. whether the homes are being sold or not or what is the nature of the market, if it is appreciating or depreciating. What is the condition of the homes, which are up for selling or the conditions of foreclosure properties?

Do Hard Money can help you in getting all of this data, if you will check their “Property Approval Plus” section. This service is quite cheap and it gives you some very important information, which will ultimately help you in making the final decision.

What Are Hard Money Loans?

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Category : Hard Money Loans , Real Estate Loans

To get a hard money loan, you just need to have a good collateral or property, which is completely opposite to a traditional loan, where the lender is only interested in your particulars. That’s why; you are eligible of getting these loans even if you have a bad credit history or no job history.

This is the reason behind the success of hard money and fix and flip investing.

There are investors who get confused while looking for hard money loans because of the usage of terms like “hard money lender” and “private money lender” in the real estate investment business.

What I have learnt from my experiences is that a hard money lender is basically a professional lender, who is doing it for a living. They usually have higher interest rates and they also charge points, which is 1% of the total loan you are getting and you will have to pay that right after your loan is funded.

For example, a hard money lender can also charge you up to 20% interest and 4 points. Most of the lenders I have used, are the people referred to me by my friends or I have found them via internet.

On the other hand, most of the private money lenders are my friends or colleagues i.e. people who are within my social circle. They charge you less interest rates like 8 to 10% with no points.

If you are looking for good amount of money, hard money lenders could be the best choice. That’s why; they are the best options in case of mortgage as these lenders feel more secure that they will recover their money soon.

While doing my first deal in real estate, I used the services of a lender who charged me 15% interest rate and 3 points for 80% of the purchase price of the property including repairs. The rest of the funding was done by private money as I use them on second or third place.

So, basically I am using private money for 25% of my fix and flip needs.

This is basically what I know about private money versus hard money. There are some major differences but the main purpose is to have good connections and building up good relationships amongst each other to get complete funding for your deal.

I don’t use my own money for funding a deal, even though I can afford it because when there are two parties involved, the profit margin also increased and in that way, both of them can make money. It helps you in spreading wealth.

You Can Invest in Rental Property

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Category : Hard Money Loans

All that money lost in the stock market. Wow, no one thought it would or could happen so quickly. It did though, and millions of people lost millions of dollars, and they and you want it back.

Well, that just may be possible. An investment tool that originally came from the stock market is available to use in another area today, Real Estate. Property values have fallen in real estate from 8% to 30% depending on what part of the country you live in. This makes a real estate investment for the average investor more realistic than it has been in years.

I’m not talking about those so called real estate investment opportunities that you are asked to buy after midnight on TV. This is not for those looking for Zero Down Payment real estate deals, although there may be opportunities with foreclosures with values that have dropped by as much as 50% This requires that you actually have money to invest. It can be as little as 3-1/2% up to 30%. With the magic of leverage, your returns are multiplied and can help earn those stock market losses back sooner than you may realize.

Let’s say you want to start very modestly, and have $25,000 or $30,000 to invest. With your credit still intact you can purchase real estate previously valued at $150,000 or more as an investment. It could be a small commercial or rental property with an income stream. There are still lenders, even today, making conventional commercial loans.

Let’s use a $100,000 property as an example. You should be able to purchase the property with 20% down plus closing costs of about 5%. Now you control a $100,000 investment for about $25,000. If that $25,000 was in the bank and earning 5% interest, and banks are paying less than that as of this writing, you would earn $1,250 in a year. If that $100,000 real estate property appreciates only 3%, that’s 3% of the $100,000 value you control, you earn $3,000 on your $25,000 investment and that’s 12% return on your investment. That’s the magic of Leverage.

It gets even better, so let’s take a closer look. Now that you have bought the property you have to pay for it, usually by the month, and there are expenses. By choosing your property wisely in the beginning, the monthly income from rentals should pay the payments, taxes, insurance, and maintenance of the property and provide cash flow (additional profit). If it doesn’t, you are paying too much for the property and with the downturn of real estate values it should be easer to negotiate a price that will allow you to meet your goals.

If your personal situation permits it, with Government programs like VA and FHA, you should be able to increase your returns far beyond 12%. FHA financing is available for a four unit apartment building if the buyer is planning to live in one of the units. This allows you to leverage up to $280,000 in real estate for less than $10,000 down and allows you to get the seller to pay the closing costs for you up to 6%. It also allows the property to be financed up to 30 years, which gives you lower payments and more cash flow. Now let’s look at that return on investment. 3% of the $280,000 you control is $8,400 a year and an 84% return on your $10,000 investment.

Of course it’s a little more complicated than this, but not much. Leverage is a wonderful tool to use in investing today. Look into it, it could go a long way toward making up for your losses.

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