money lender – Hard Money | Contact MCG, Inc.

November 29, 2012
Shawn Molem
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What Are Hard Money Loans?

Tags : fix flip funding deal hard money money lender money lenders private money real estate

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.

September 19, 2012
Shawn Molem
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How to Find Genuine Hard Money Lenders?

Tags : conventional lenders credit credit history credit score difference hard money hard money lender history lender lenders loan money lender property true hard true hard money

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.

September 13, 2012
Shawn Molem
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Building Your Real Estate Investing Team

Tags : builders risk credit estate investors association hard money hard money lender hard money lenders lenders based make sure money lender money lenders money lenders based money lenders charge need builders risk property real estate team members

Category : Hard Money Loans , Real Estate Loans

To be successful as a real estate investor you will need a “team” of professionals that you can rely on. You do not need to build this team before you start investing. As you progress in your investing career you will meet many people in these fields that you will want to establish a working relationship with. Some team members will not work out and will have to be replaced. Don’t worry about this, as it is a normal part of the business. A great way to find your team members is through referral from other investors. Once you join a local real estate investors association you will meet active investors who will be able to guide you toward competent individuals in the business. One word of caution though – contractors have earned bad reputations. Therefore, most investors will not share their “best” contractor for fear that he will get to busy to do their work. Expect to have to sort through many contractors if you decide to do any rehab work. This team will be needed to successfully close your purchase and sale transactions. Not all members will be needed for every transaction but knowing they are in place will increase your confidence level.

Investor Associations

Most cities have a real estate investors association. You should visit the associations in your area and join one that you are comfortable with. Through these organizations you will find educational opportunities as well as networking opportunities. Attend as many of the educational programs as you can. This will help you to become more comfortable with each area of investing. The more areas you have knowledge in the better equipped you are to be able to meet the needs of sellers that contact you. Through networking at the association meetings you will be able to find many of your team members. You will also find other investors who will be interested in deals that you do not want. You can always pass these deals along for a bird dog fee or an assignment fee.

Wholesalers

You will find many wholesalers at association meetings. If you decide to rehab or rent property, a wholesaler will be a valuable source of property for you. They will spend the time and money to find the deal and negotiate with the seller. This allows you to spend your time managing your rehab or rental property. Make sure you verify their ARV (After Repair Value) on the property as well as their repair estimate. As long as the numbers work, you should not mind paying them their “wholesale fee”.

Real Estate Agents

Most real estate agents are not interested in working with investors. This is because they are trained to make “full price offers” on listed property. In every area there are a few agents that do work with investors. These are usually the most successful agents in the area. They understand that a good investor client means easy repeat business for them. You will find these agents by looking at who has the most listings in your target area as well as word of mouth at investor association meetings. These agents are very busy so it may be difficult to establish a relationship with them. However, it is well worth the effort in the long run. They are especially needed if you decide to be a wholesaler. They will have access to most of the bank owned properties.

Real Estate Lawyers

You will need a strong real estate attorney on your team as soon as possible. This person will handle closings for you as well as title searches. They can also give you legal advice as you run across unfamiliar situations (such as a seller in bankruptcy). You should make sure that your attorney specializes in real estate.

Lenders

There are three main type of lenders that you will be dealing with:

Hard Money Lenders – Based on ARV of property, your credit history and close quickly

Conventional Lenders – Based on your credit, current property value, slow closing

Private Money Lenders – Based on your relationship with the individual

You will find all three types at most association meetings. When you are beginning your investment career you will most likely be working with a hard money lender. They are called hard money lenders because they charge pretty hefty fees to make the loan. They will usually loan up to 70% of ARV for a period of 6-12 months. They typically charge 3-6 points up front to make the loan (each point is 1% of the loan amount), interest rates of 12-18% and will hold repair money in escrow to be paid out as repairs are completed. Although these fees sound expensive they really aren’t. It is much cheaper to borrow from a hard money lender than it is to take on a money partner and give up 50% of any profit made. See the following simple example for a comparison using a 6-month holding period, 3 points upfront and 12% interest and a final sales price of 5,000:

Loan From Hard Money Lender

Sale Amount 145,000

Loan Amount 100,000

Points to Lender 3,000

Payments to Lender 6,000

Partner Split 0

Net Profit 36,000

50% Money Partner

Sale Amount 145,000

Loan Amount 100,000

Points to Lender 0

Payments to Lender 0

Partner Split 22,500

Net Profit 22,500

As you can see, hard money lenders are not as expensive as you thought!

You will probably only use a conventional lender when buying long term rental property. Conventional lenders will be necessary when you sell property to homebuyers. A good mortgage broker will be able to find financing for buyers with a variety of credit issues. An average broker will only be able to finance buyers with perfect credit. Make sure you look for brokers who can find financing for people with “A”, “B” and “C” credit. Once you have established a track record as a successful investor you will be able to attract private investors. These are people who have money that they will loan to you in order to get a better return than a bank or the stock market will give them. You can replace hard money lenders with private lenders and stop paying the upfront fees. You may also be able to negotiate a lower interest rate than the hard money lenders charge.

Insurance Agents

There will be two main types of property insurance that you will need. These are “Builders Risk” and “landlord” insurance. When you are dealing with a vacant house that is under repair you will need “Builders Risk” insurance. Builders risk insurance will cover the property and usually the materials being used during the rehab (in case of theft). It is more expensive than a landlord’s policy because of the increased risk. A landlord policy will cover the property only, not the contents. Your renter will need to have a renter’s policy to cover their belongings. Landlord policies usually will not cover vacant property or property under repair. Most agents do not sell both types of policies. Make sure to acquire the correct type of policy so that you are always covered.

September 13, 2012
Shawn Molem
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Hard Money Lending Success – It’s All About Relationships

For those who are new to real estate investing, it often seems as though there’s an “inner circle” of deal makers-the people who know where the deals are, how to get the money to buy them, and always get there first. It’s no accident that the same real estate investors work with the same hard money lenders and private lenders again and again. They’ve built a successful relationship based on helping each other to make money-and anyone can do this!

Seasoned pros who have built incredible wealth through investing in real estate know that their relationships with hard money lenders is key to finding the good deals before everyone else, and having a ready source of private money to borrow to purchase those properties.
Here’s how even the biggest novice at real estate investing can forge relationships that lead to more and more successful real estate transactions:

Have lunch with your hard money lender. Once you have found a good, seasoned hard money lender, invite him or her to lunch once every few weeks. And you can do this with a few lenders. Get to know them personally, as well as their restaurant preferences, and always pick up the tab. Over lunch, you can discuss what deals they’re working on, what you’re looking for-and you might even pick up a deal!

Of course, it might take several months of these lunches to produce any deals. But you’ll get to know more about their business (their lending criteria and what kind of deals they work on most often) and they’ll get to know your business structure too (for example, whether you invest as an entity or an individual, and whether you prefer to “flip” investment properties for a quick profit or “rehab” them before selling).

Share the wealth with your hard money lender. Once you know your hard money lender(s) well, you can refer real estate investment deals to them that fit their criteria. They’ll appreciate it, and most likely, they’ll remember that they “owe you one.”

Make the hard money lender’s job a little easier. You can do this by submitting a professional, organized loan package with compelling information about why the investment is a good idea and what your plans are-and why the lender should make a loan to you with confidence. Anticipate questions that the hard money lender or private lenders might ask, and answer them in the loan package.

Get to know the private lender too. Private lenders can be real estate professionals or savvy businesspeople, but very often, they are simply retirees with money to invest. They lend out their money and it comes back to them effortlessly in the form of mortgage payments-with much higher interest than a CD or money market account would pay.

But just because private lenders don’t have to be actively involved to collect their checks doesn’t mean that they aren’t curious about the deals they are funding. If you send your loan payments directly to the private lender, remember to always send them in early, enclose information on how the project is going (such as before and after photos), perhaps let them know how much profit you made, and thank the private lender for being a “partner” in your project’s success. That makes the deal more rewarding to them-and those private lenders will be more likely to help you with future real estate financing needs.

Work with the same real estate investing team of hard money lenders and private lenders for continued success. Once you have a successful investment deal or two under your belt, don’t forget who helped you get there! If it’s possible, work with the same hard money lenders and private lenders on other deals-doing so shows that you are a person of integrity and someone they can trust.

Real estate financing through hard money lending is not about your credit score, your income or even whether or not you’re gainfully employed. Hard money loans are based on asset value-the quick-sale price of the property you’re buying. And that means that anyone can be a successful real estate investor…as long as you have the right relationships.

September 12, 2012
Shawn Molem
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