Hard Money Lenders – The Secret of Successful Funding!

Hard Money Lenders – The Secret of Successful Funding!

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Category : Home Loan , Real Estate Loans

Actually, only a small number of lenders truly understands the whole concept of fix and flip investing and these private hard money lenders are categorized into the following five basic types:

1. Residential lenders

2. Commercial lenders

3. Bridge lenders

4. High end lenders

5. Development lenders

Amongst these five different types of lenders, you need to find out which lender is going to be suitable for your real estate investment. Generally people start by investing into a single family home, that’s why they choose residential hard money lenders.

But the basic difference between the lenders depends upon the source of funds. That’s why; they can be easily categorized into bank lenders and private hard money lenders.

Bank Type Lenders – If you are working with a lender who is providing you funding with the help of some financial institutions, where they will sell or leverage your paper to the Wall Street in order to get you money. These types of lenders will be following some rules and regulations specified by the banks or Wall Street.

That’s why, in order to get the loan, you need to follow these rules and regulations, which isn’t suitable for a real estate investor interested in doing fix and flip investing.

Private hard money lenders – These are the lenders who work on private basis. They usually work in a group of private lenders, who likes to lend money regularly. Their best quality is that they do not sell their paper to any financial institution or bank. They have particular rules and regulations, which are made to help a real estate investor.

Private Lenders That Are into Fix and Flip – You can easily find residential hard money lenders, who are really into fix and flip loans. Most of the real estate investors find it quite difficult to get financing for buying a property, which they have taken under contract.

And when they finally a good property and contact a lender for funding, their loans can get rejected on the basis of some neighborhood problems. Then the investor look for another property but the lender couldn’t fund them because of market depreciation.

In this way, an investor is always looking for properties. But some lenders don’t have enough money to fund their deal, whereas others are continuously increasing their interest rates, which can’t be afforded. Apart from all these issues, you can find lenders who are willing to lend money on fix and flip properties.

These lenders also have certain rules and regulations like a typical bank or financial institution but they are designed to work in favor for the real estate investor.

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!

Private Hard Money Lenders – Choose the One, Which Suits You Best!

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Category : Hard Money Loans , Real Estate Loans

I want to talk about the core difference between private and institutional lenders. An institution is basically a bank or a credit union, which provides funding for different stuff.

On the other hand, private is more about a bunch of people, who works under a private organization, which works towards helping people buying and selling good deals by providing financing. They are not held by government or any other regional organization but they work by themselves and use their own money.

Now, we come down to two basic types of lenders in the world of real estate:

1. Institutional lenders

These are the hard money lenders, who are a part of a bank or any other federal organization and they work with them. Although, it is quite difficult to get a loan from them because they look at lots of things including the borrower’s credit history, job, bank statements etc.

These are only stuffs that institutional hard money lenders are concerned about. They don’t have a real estate background, that’s why; they don’t care much about the worth of a property. Even, if you have a good deal, they won’t lend you unless your credit or job history is satisfactory.

There’s a huge gap between institutional lenders and real estate investors, which isn’t easy to fill.

2. Private hard money lenders

Private money lenders are usually real estate investors and therefore, they understand the needs and demands of a borrower. They aren’t regulated by any federal body and that’s why, they have their own lending criteria, which are based upon their own real estate understandings.

Their main concern is property and not the borrower’s credit history or bank statement. The motto of private hard money lenders is simple: If you have a good deal in hand, they will fund you, no matter what. But if you take a crap deal to them, then they won’t fund you, even if you have excellent credit history because they believe that if you’ll make money, then only they would be able to make profit.

If you have found a hard money lender but he or she hasn’t got any experience in real estate investment, then they won’t be able to understand your deal. They will always think like a banker.

A true private money lender is one, who can help you in evaluating the deal and giving you a proper direction and funding if you find a good deal. But if the deal is bad, they will tell you straight away. Before rehabbing a property, they know what would be its resale value, due to their extensive experience.

The basic difference between institutional hard money lenders and private hard money lenders is that the institutional lenders try to have everything in place and perfect order. They want to have all the figures and the amount of profit they would be making. They completely ignore the main asset, i.e. the property.

Whereas, private money lenders use their own fund and experience to realize what’s store for them. They don’t try to sell the paper or recapitalize. They just look at the property and see if it is worthy enough to rehab or not.

In the end, they just want to make good profits along with the borrower. If anyone goes to them with a good deal, they will fund them. Some of them only fund for the property, whereas, others gives funding for the repairs too as long as they can see a good ROI.

How to Find Genuine Hard Money Lenders?

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Category : Hard Money Loans , Real Estate Loans

Have you tried all self proclaimed hard money lenders in your town and you are unable to find much difference between the guidelines of these lenders and conventional lenders? Are you in search of a genuine hard money lender, who could fund you in as less than 7 days without much hassle?
If you have answered “yes” to above questions, then you have come to the right place. This article will help you in finding the answers to your questions in an easy way.
Before getting into the discussion zone, let us first deal with the 800 pound gorilla in the room…
So, what are the factors which make a “real” hard money lender company?
There are some basic differences between the so-called and real lenders, which you need to understand first. Apart from that, there are some solid reasons of choosing a true hard money lender over a false one.
Difference #1 – A true hard money lender isn’t interested in your credit history. A real lender will never put a condition that if you don’t have a good credit history, you won’t get financing. There are many hard money lending companies, which will say that they don’t care about your credit but at the end of the day, they’ll say that their minimum credit score requirement is 600.
The reason behind this is these lenders are packaging their loans for Wall Street or banks, so ultimately they’ll have to conform to all the legal requirements set up by these traditional lenders, which can’t be afforded by a person who has a bad credit history.
Difference #2 – On the other hand, a real lender ONLY cares about your collateral you are willing to invest in. They will get your property evaluated by professional independent evaluators, who will look at your property without any preconceive notions. They will give a purchase price, repair cost and estimated after repair value (ARV) of the property to the lender and if they find it good enough, they will fund you there and then.
Whereas, the imposters will put your credit score, job history, salary and other finances at the top of their loan requirements list before offering you a loan, which is exactly same as conventional lenders work.
This shows that there is a huge difference between a real lender and an imposter.

Getting Comfortable with Hard Money Investing

Tags :

Category : Hard Money Loans , Real Estate Loans

Many real estate investors overlook hard money loans as a strategy for acquiring property. That’s because these loans are typically used by desperate property owners looking for a way out of the real estate market, rather than into it. But hard money can work for anyone, and it can be particularly useful if you’re a new investor looking to build your portfolio quickly.

Hard money loans can generally be described as high interest loans available to borrowers with any credit rating, as long as they can can provide solid collateral – usually equity in real estate, such as a home. These loans are almost never issued by banks or deposit institutions, but rather by private lenders who specialize in short term lending at high interest.
Normally a home owner in need of a big loan would apply for a second mortgage, using real estate equity as collateral, but bad credit can make things difficult here. If a home owner has missed a few mortgage payments, the banks may refuse to provide more financing – hard money might be the only option in this case.
The limit for hard money loans typically hover at about 60 to 70 per cent of a property’s quick sale value, defined as the price a lender could reasonably expect to realize if the borrower defaulted on the loan, and the property was liquidated fast. The interest rate for a hard money loan is usually in the 15 to 25 per cent range.
Investors can take out hard money loans to buy a property, as long as they provide acceptable collateral – in this case it could even be the property they’re buying. The strategy here is to find a pre-foreclosure property, or any real estate with an owner prepared to sell below below market value as long as the sale is fast. If the investor can re-sell the property at full market value, before too much interest is paid on the hard money loan, he or she can make a significant profit. Hard money loans have helped many successful investors get started in real estate.

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