How to Profit Using Hard Money

Hard Money is an interesting financial animal. Its
history is colorful to say the least. Born by the need
for rehabbers to get access to funds when a property is
in disrepair and which no bank would lend on, it has grown to a
multi-billion dollar industry.

The early lenders were ex-real estate investors who had
made a few dollars in real estate and then became
lenders in their local area. Now the industry is rapidly
moving toward larger financial institutions and even
larger banks.

As a newer real estate investor, becoming familiar with
how to work with hard money can be one of the most
profitable things you can do early on. This is truly the
information business. If you are able to secure a contract
on a single family home (non-owner occupied) you may
be able to borrow 100% of the purchase costs and even
some or all of the fix up money and closing costs.

One of the most important, but often overlooked, benefits
of working with a hard money lender like this is that someone
with a vested interest in your success has agreed, by virtue of
approving the loan, that you have a real deal.
This can be such a huge bonus for the new person. It can force
you to do your homework when contracting properties to buy.

Honestly properties that fit into the hard money parameters are
some of the best real estate deals out there. So if you get a
property approved for a hard money loan congratulate yourself!

Some of the specifics you need to keep in mind when shopping
for hard money are:

ARV

ARV stands for after repaired value. This number is
important because the amount of money you can borrow is
derived from what the property will sell for when youre
done with your repairs. So know your values. Know what
completely renovated houses will sell for. Most hard money
loans are based on 60 to 65% of the ARV. That means if you
buy a property that will be worth $100,000 when the repairs
are complete you will be able to borrow up to $65,000 from
the lender. This could possibly even include the repair costs
and closing costs if your contract to purchase is low enough.

I think its important to mention here that some people falsely
believe that it is impossible to buy a house for less than 65%
of what it would be worth fixed up. Remember this did not
become a multi-billion dollar industry because the hard money
lenders arent lending money. It is absolutely possible and done
every day. So get out there and find a house

Interest rate: While this is are rapidly becoming
standardized there is still a lot of fluctuation in interest rate
from lender to lender. Dont get bogged down with the
interest rate. The norm is between 12% and 18% or more in
some states. While this sound preposterous compared to what
a normal home loan interest is think of it as access to
capital. The money will only be out from three to six months
You should look to pay what is now becoming the average
which is 13% to 15%.
But competition is forcing the rates as low as 11%

Points: Heres where you do need to be concerned and do
some shopping. Points vary from two, which is rare, to ten
also rare these days but more common than you would think.
The average these days is in the 4 to 6 point range. Now when
you consider a point is one percent of the total loan amount just
a $100,000 dollar loan could range in fees from $1,000 to TEN
thousand dollars. Now that could cut into your profits.

There are other things to consider when shopping for hard money.
One of the first things you need to check on is the availability of
becoming pre-qualified. Does hard money lender have a process
to get you prequalified for the loan? Also, will they issue a very
important document to you call a proof of funds letter. This is very
important as most banks and Realtors and even some sellers these
days will require proof that you are able to fund the transaction.

Second is the pre-payment penalty. Youll want to look into this.
Most hard money lenders dont have one any more because they
realize the loan is just for a short time, but still – ask the question!
Some actually do have time limits like six months or a year in which
time the loan needs to be re-paid but they usually offer a payment
program to extend the loan longer. First off, you
dont want to have the loan out that long but if you do – you want
to know your options.

Heres the thing. Dont let this process scare you. As Ive stated
above working with a lender like this is a good thing. You do
your part and find a good, undervalued home to put a contract on.
Then work with your lender to get the house approved. Remember
youve already been pre-approved for the loan so use that proof of
funds letter to get your first or next property.

Author: Mike Collins
Article Source: EzineArticles.com

Originally posted 2009-11-01 19:27:28. Republished by Blog Post Promoter

Hard Money and Bridge Loans For Real Estate

Although the hard moneylenders were largely affected when real estate industry crashed in the 80’s, recent credit crunch has brought more business to this sector. People who are in need of loans are turning towards hard money loans after the financing by traditional lenders and banks has come to a halt. The casualness and irresponsibility of these banks and lenders when giving out loans in the past has hit them hard and they are going through a severe liquidity crisis. With this serious drop in supply for finances, hard moneylenders are seen as a reasonable alternative. People and businesses are short of funds, and naturally they have to go for the best substitute available. A hard money loan comes as a last resort in such situations.

Characteristics of a hard money loan:

Hard money loan goes by the principles of mortgage; the distinguishing characteristics are the interest rate and the time consumed in approval. A loan application can take quite some time before getting through all the procedures and verification process that are part of a bank policy. Whereas hard money loans are issued normally by private lenders (though you can find many commercial hard money lenders as well) in relatively short time at higher interest rates and lower loan to value (LTV) ratio. The interest rate or loan to value ratio is not fixed and it keeps changing with the ups and down of real estate market. Hard money loans are often for short period of time (also known as bridge loans) that means the correct quick-sale valuation of the property is vital for the lenders.

Some tips for the borrowers and lenders:

As a borrower, you need some extra efforts to convince hard money lenders (these extra efforts are compensated by their fast approval time, once they are convinced), a hard money lender will believe you more if you are ready to put your cash into the deal as well. This is why they emphasize on low LTV ratio more than your previous credit score when compared to traditional lenders. Along with the advantage of their availability in even hard financial times, they are a much better option when you need quick finance. Being a lender, you should be extremely careful when determining the current value of property. Over estimation or wrong valuation can cause you serious loss in case of default. Also borrowers should try to reach hard moneylenders themselves, without bringing too many agents and brokers in between, as it will save them lots of upfront costs and expenses.

Author: William King
Article Source: EzineArticles.com
Provided by: Duty tariff

Commercial Hard Money Loans – Best Scenario

One of the best scenarios for commercial hard money loans is when the borrower has an opportunity that he knows he will make a substantial amount of money on, needs to move on it immediately, and regardless of the fees the hard money lender charges. With this scenario the profit the borrower will make will easily offset the fees the borrower has to pay to the commercial hard money lender.

Commercial Hard Money Loan – Scenario 1

For example, we have recently worked with a borrower that had an opportunity to purchase a fleet of trucks for his business at a 50% discount. Total purchase price on the trucks was just over a million dollars with a value over $2,000,000. On the commercial hard money loan the borrower had to pay 3% in fees in order to get the loan or $30,000, to be able to save over a $1,000,000 of needed trucks for his business. He collateralizes the commercial hard money loan with his building and was able to close in 3 weeks. So $30,000 in fees to save over a $1,000,000…

Commercial Hard Money Loan – Scenario 2

Another similar example is when a borrower wants to purchase a property from a distressed seller at a substantial discount. Typically the seller can’t wait 60 to 90 days to close a conventional commercial real estate loan and instead needs to close in a few weeks or will not offer the discount.

So say the property is really worth $2,000,000 but the seller has agreed to $1,500,000 a $500,000 discount. The buyer would get a commercial hard money loan at 60% of the purchase price or a loan amount of $900,000 and pay say 5% or $45,000 in fees to the commercial hard money lender. So the borrower would save $455,000 by taking advantage of the opportunity. In this case most borrower wouldn’t care (at least that much) about paying the commercial hard money lender their points because of the amount of money they make off the deal.

In general these type of scenario are much easier to close than the bankruptcy/company turn around/debt consolidation type situation. Many commercial hard money lenders no longer look at deals like this.

Author: Jeff Rauth
Article Source: EzineArticles.com
Provided by: Canada duty tariff

Hard Money is Private Money Lending

Who knows the term hard money?

Hard money is private money lending, money you will receive from individuals that will loan you their money against your real estate, hard money lender is the bank and the bank will Loan you their money and put a lien against your real estate, the same with hard money lenders.

What is the difference between the hard money lender’s programs and the bank across the street?

1. Hard money lenders can help investors with large loan amounts, while banks will make it very difficult on the borrower to loan these large amount, so the loan would probably end up with an insurance company to loan the money and the requirements are high.

2. Hard money lenders can fund any hard money loan within a week, while for the banks it will take at least a month or even more.

3. Hard money lenders will ask for very little documentation, while the banks would ask for almost everything you have, taxes, income, assets, history of the property before and plans for after the purchase, business license, basically they will definitely want to see more from you to loan you some money.

4. Hard money lenders have guidelines but they can make exceptions without processing it through a whole underwriting team- while the bank need to go through different departments and underwriters and processors just to make an exception, and then the exception will not get excepted.

As you see to get a hard money loan is much easier then to get a loan from a bank because of the whole process, the banks are big companies and big companies have many different rules inside their companies, and to get an exception for these rules is almost impossible, and that is why many investors would rather go with a hard money lender.

So now you’re probably thinking what is the catch with the hard money lenders? OK, so let’s talk about all the reasons why you should not consider applying for a hard money loan:

1. Hard money lenders for their services will charge you 4 to 9 points on the loan- while the banks will charge you only 1 to 2 points. Example: If you have a loan amount of $1,000,000 and your hard money lender will charge you 5 points up front then you will pay $50,000- while the bank will charge you 2 percent which is $20,000, that is a bit difference but under different circumstances for some people it’s still a great deal.

2. Hard money lenders because of the fact that they will loan you money without showing your credit history and your income they will set the loans interest rate 9 percent-15 percent- while the banks will set your loans interest rate to 7 percent- 10 percent, again that is a huge difference if you’re thinking about it but for these people that want the hard money loans it’s still a great deal.

You have to understand that most investors or home buyers can not qualified today with banks for any type of Loan, hard money lenders can get you the deals you want (foreclosures, reo’s) without even thinking about showing all the unnecessary documentation, all you need to have is some money in your pocket if you’re purchasing, and if you’re refinancing then you need enough equity since the hard money lenders will probably go up to 65 percent at the most, also to find good hard money lenders it’s not so hard, it’s actually very easy because there are many private hard money lenders that are looking for real estate properties and notes to buy so they can make their points up frond and of course the high interest rate, if you will think about it, it’s much better then put the money in the bank.

Example: If a hard money lender put $1,000,000 in the bank and the bank will pay him 5 percent a year- while if he will loan the money to an investor that want to purchase a property or to refinance a property, he will charge his 5 points and he will get 15 percent interest rate on his money, that’s a big difference. Good luck to you all investors out there.

Author: Yanni A Raz
Article Source: EzineArticles.com
Provided by: Netbook, Tablets and Mobile Computing

How Hard Money “Private” Loans Work – How to Get Them

Private lending is a world unto itself. Completely different from the snobby banking process we’re all used to. Fact is, using this fast and easy money to solve debt problems is a true “God send” if and when you need it.

While it can come with slightly higher costs, the benefits are through the roof. I’ll even show you how to use them to flip real estate for instant profits.

What exactly is a hard money lender?

First off, they’re people — with lots of money. They lend their money to people and businesses in return for a rate of interest. They always lend in the form of a mortgage against some type of residential or commercial property or raw land.

They are also called “hard equity investors” or “hard money lenders” or just “private investors”. The interest rate varies but is always higher than “banking” rates. But it’s also without “banking hassles”!

When you want a “hard money loan” you won’t care about the rate. You’ll only care about the money and the problems it solves.

Which is also what makes them unique. They solve problems.

How ugly-of-a-situation will they lend on?

high debts,

bad credit,

hard to prove income,

no credit,

unique property,

bankruptcy,

foreclosure,

commercial purchase or refinance loans,

consolidate bills,

bank turned you down, etc.

raw land

Need lots of money in three days? No problem.

They’ll lend to you when nobody else will. They’ll stop foreclosures and bankruptcies and they’ll give you money even if you have the worst credit score on the planet.

What’s unique about these “hard money lenders” is this.

1) They don’t ask for two dozen forms of ID, your DNA and the rights to your children. They only look at the value of the property or business they are lending money on. The property is the most important part of their decision. You, as a borrower, are not scrutinized. In short there has never been an easier loan to get approved. No tax returns, no bank statements no letters of explanation. No nit picking “stipulations”.

2) They, alone, make the decision to lend or not to lend. They don’t have to “run everything by” some wicked hook-nose underwriter. It’s usually just one person making the decision. And they make that decision quickly. Usually within a day or two.

So how much will they lend you?

Usually it’s about 65% of the property’s value. So if a home is worth $200,000 they’ll lend about $130,000. The loans are usually interest only mortgages (which keeps the payment lower) and they can close in about 3-14 days! That’s fast in mortgage lending.

So let’s say you lost your job and you’re behind on your mortgage by 4 months. You just got a “notice of default” in the mail and the lender is going to foreclose on your home. You have to save your home. No bank will touch this type of loan.

So, if you have enough “equity” a private lender will pay off your old loan – catching your payments up – giving you a chance to get back on your feet. Then when you’ve made a 12 or so payments on time with the private, you might qualify to go back to a lower rate mortgage lender for refinancing.

Here’s another example. Let’s say you have a credit score in the 400 range. Institutional banks won’t even talk to you, no matter how much equity you have. So you get a “hard equity loan” make some payments, get your credit cleaned up in the mean time, and then you refinance the loan to better rates. But the point is you get your money now! Not later.

Example #3. You just started a brand new business. Banks want 2 years of tax returns or proof you’ve been in business for 2 years. But you just started 6 months ago! No problem. A “hard money loan” will get you the cash you need to do whatever: fund your business, pay off debts, or anything you want.

With all of the crazy talk about a “mortgage meltdown” and foreclosures today, private money can be a true life saver for those in need.

Can you buy investment property with a hard money loan?

Yes. One client of mine, with great credit, only had to bring about $1,500 to closing and the private lender gave him enough money to buy the “fixer upper” and lent him the money to fix it up! The house has since tripled in value. That’s pure cold cash in the bank.

Everyone needs to know somebody with good access to private or “hard money” lenders. You never know when you’ll need one. Find a great deal on a house you want to flip? No problem, private investors. Buying a commercial building that’s worth double what you are paying for it? No problem: private investors.

What makes my hard money unique?

If there is one problem with private investors it is that they are very difficult to find. I’m not talking about the institutional lenders that “say” they are private hard money lenders. But the real private ‘hard money’ investors.

If you do a search on Google you’ll see tons of people claiming to be hard equity investors, but they are really just institutional banks looking to charge high rates to really good customers. And those sharks turn down more stuff than they approve, or the lend you so little money you can’t make the deal work. And some are really just looking to steal great deals right out from under unwary clients. They could care less about lending. It’s scary, but true.

The real private hard money lenders can’t be found online, yellow pages, or the newspaper. Most of them are reclusive, and to be blunt, a little eccentric. You just have to know them. You have to cultivate them. My private investors have taken me over 12 years to find.

When you do find them, you have to guard them like a pit-bull. That means protection from competitors, and it also means you don’t burn them. Ever.

That’s where the trust comes in. I never B.S. them or sugar coat things when presenting a deal. They’re extremely wary people, but if you treat them right and shoot straight, they come to trust your word. What this does is gets deals done that otherwise would have been turned down.

On top of all that, hard money lenders will lend on properties which are unusual. They each have their preferences, but if the equity is there, someone will “pony up” and get your money to you.

When you need a private investor, you’ll be glad you know one.

Author: Dan Dowling
Article Source: EzineArticles.com
Provided by: Cellphone news

Real Estate Investing with Hard Money Loans

Most seasoned real estate investors face situations where they require more money than what the traditional lenders will lend, and here is where real estate investing with hard money loans given by the specialized lenders is useful.

The hard money lenders are actually private money lenders who provide money for a short term. These loans carry a strict repayment schedule. It is given the name as hard money on account of its strict nature. The rates of interest of such loans are also higher than the market rates, and the fees charged upfront, range between 4 to 10 points.

The money lenders of hard money give the investors the access to the capital that is asset based, wherein the loan amount is secured by way of a collateral security. The rate of interest ranges between 14 to 18 percent annually and the term of the loan is normally six to twelve months.

Along with the property as collateral security, the hard money lender requires can require credit reports and well as documented experience in previous deals you have done. The lenders indulge in inspecting the property and making appraisals, before approving the loans.

The lenders of hard money study the intent of the investment on part of the investors, the strategy of exit that is adopted, the information of the property that is provided such as the residential or commercial nature of the property and also check the credit ratio of the concerned borrower. The financial strengths of the borrowers play a vital role in securing the loan.

The fees that are charged are dependant on the risk factors and the quality of the real estate deal. The plans of using the money set by the investors are also carefully studied by the hard money lenders. Hence, it is recommended that the borrowers provide a proper business plan for securing the hard money loans. They need to convince the lenders about the low risk nature of the concerned investments.

The conditions and the terms of approving real estate investing with hard money loans, vary for different lenders. The investors have to find the perfect lenders suitable for them, and ensure that they keep a good relationship with them.

Such types of loans are useful for procuring or purchasing properties. They are also useful for the buyers having low finances, against those that are required for the project, but have good fixed incomes.

Some of the lenders of hard money have choices regarding the type of the real estate investments, such as rehabbing houses, purchasing houses and the options of lease purchasing.

It is easy to lose a potential deal for lack of finances and hence, maintaining proper relations with the hard money lenders is a priority for the investors. The support of such money lenders is very important for the investors if they want to complete the real estate project in a proper manner. Good relations with lenders are a blessing in disguise for the investors.

Author: Charles W. Moore
Article Source: EzineArticles.com
Provided by: Digital Camera Times

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