Hard Money Lending — What Exactly is it?
Photo: © iStockphoto.com/alexslHard money lenders are a great resource for real estate investors. Especially for the beginner investor with limited resources of cash and credit. Having a hard money lender on your team you can confidently go out and make offers on properties, close on the house and have repair funds to do the job!
Hard money lenders are private individuals with money available for investment purposes. These individuals could have deep pockets or other resources of funds. They lend money based on their own personal criteria on a short-term basis, to real estate investors for acquisition and repairing of distressed properties.
The term “hard money” is a bit confusing. When you first hear this term, one might think that the money id difficult or hard to obtain. But, quite the opposite, it is the easiest money to procure. Just like in other areas of business the terms “hard” and “soft” come into play. Hard money has strict terms and repayment schedule. Soft money has easier terms a flexible repayment schedule.
The terms for hard money loans generally have very low loan to value (LTV’S), higher than market interest rates, points and prepayment penalty. The typical lender will provide a loan for 50-75% of the after repaired value (ARV) of a house. The interest rate could be 12-18% for 6 months to 2 years. They may charge 2-5 points of the loan for financing fees. These terms vary from lender to lender.
Some lenders charge interest only and others will amortize the loan. Some lend repair money on a draw schedule. Some will lend closing cost. All of these terms will vary form lender to lender and will depend on the experience level of an investor as well as the length of the investor’s relationship with the lender. When finding a hard money lender, you will ultimately need to determine their terms and how they might fit into your plans as a wholesale real estate investor.
Each hard money lender has their own criteria and it varies form lender to lender. Each could have their own preferences with regard to areas and types of properties in which they will and will not lend.
Some of the lenders will check your credit and other will not. Some will require an appraisal, others have their own in house appraiser. An inspection fee for each draw from the repair escrow is often charged.
Hard money lenders are concerned primarily with the value of the property. Their primary concern is that if the investor defaults they will have an asset form which they can recover their original investment and more. They have not desire to experience the hassle and expense of taking a property back then to finish the rehab and resell the property. They want to be secure in the loan in case that scenario does happen.
If you are pursuing properties, you will need a pre-qualification letter to submit with your offers and you can obtain this from a hard money lender. This is a good way to start establishing a relationship with a lender. Your offers will also carry more weight when submitted with that letter.
Hard money lenders are private people lending their own funds. They are not institutional investors who have a standard set of guidelines dictated by the Federal Reserve. Hard money lenders can be flexible or can be tough. They are people like you and me. You can talk to them and be their friends!
On September 3rd, inside the Rio Hotel – Las Vegas we are hosting the largest hard money lenders event this year.
Here are some of the topics discussed:
How to create an investor mortgage pool
How to position your business #1 on Google search engine How to create a residual income from your mortgage pool How to underwrite and fund your own deals How to lend and broker hard money deals How to take advantage of the REO market
Go to HardMoney or call 858 736 7788
On September 3rd, inside the Rio Hotel – Las Vegas we are hosting the largest hard money lenders event this year.
Here are some of the topics discussed:
How to create an investor mortgage pool
How to position your business #1 on Google search engine How to create a residual income from your mortgage pool How to underwrite and fund your own deals How to lend and broker hard money deals How to take advantage of the REO market
Go to HardMoney or call 858 736 7788
Many people confuse Hard Money Lenders with private lenders… A private lender is an individual lending his or her own money. Lately many private lenders and a lot of the smaller, local and less professional hard money lenders have gone out of business. In part because they made loans based solely on the value of a property and in todays market if a borrower could not sell the property the lender had to take it back because many borrowers did not have the credit to or the cash to be able to refinance.
Equity Development Corporation is a different kind of rehab lender… we set our borrowers up to succeed. We help you through the whole process from picking the right property to doing the right repairs and upgrades to making sure you can find a buyer or we help you refinance into a permanent loan.
Visit our website http://www.equitydevelopmentcorp.com or call for more information.
Jeff Ringnald
214-718-9876
Bay Mountain Capital is a Hard Money Lender specializing in the DFW area. We are familiar with the local market and can underwrite quickly.
You can find information on our lending programs at http://www.baymountaincapital.com/index.php?pid=2&spid=2 and our main website is http://www.baymountaincapital.com.
Or please call with any questions.
Wayne Corley
214-953-3188 ext 4
need a rehab loan in ky
You can create Hard Money Loans out of your IRA as well. I am wondering why this great website doens’t have any resource links for self-directed IRAs companies like Entrust Retirement Services, Inc. We have great FREE education and would love to partner with this website to help anyone interested in Sel-Directed IRAs & Qualified Plans to truely understand this misrepresented industry.
Ryan,
Can you send us more details on using our IRA to lend Hard Money?
Thanks So Much
David M. Wethy
David,
You are welcome to drop by http://www.dfwreiclub.com/ and check out our postings and videos on using hard money, private money, and self-directed IRAs. As I think you know, we meet every Saturday from 11 am – 1 PM at the Hotel Trinity at Beach & I-30. Sign-up for the site is free. Looking forward to seeing you soon!
-Greg
Ryan asked: “I am wondering why this great website doens’t have any resource links for self-directed IRAs companies like Entrust Retirement Services, Inc.”
Maybe it is not such a great web site. Give me your links and I’ll add them to the resources box.
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