Private Money Loans What It Takes To Secure One

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Are you thinking about starting a new business? Lacking the funds or having a bad credit score can impede your ability to start flipping houses or opening up a five-star restaurant. You might consider private money loans. Most people new to developing their own business might not know how to get a private money loan. Read on to learn more about how getting this loan can help make your business dreams possible.

What is a Private Money Loan?

You might wonder: what a private money loan entails? A private money loan is when you borrow money from your family, a friend, or any other acquaintance that rarely lends their money for business purposes. Having a thorough business plan will not get you anywhere without the cash to do it. No matter how great the idea is, you will always need money to get it going. Private loans can be excellent for those who are trying to build their own business but lack the funds to do it.

So, how do you find these investors that aren’t family? You might network to get money from those who can afford it. Spreading the word around that you are seeking monetary assistance can draw in investors who think your business idea can make them money too. Searching social media and Googling “private money lenders” might be something that could pop up some leads for you to follow. There’s always a way to make your business happen and make money for all those financially involved.

Professional Private Lending Businesses

A professional private lending business might be another option. They can lend out these loans to you if you give them a good reason to do so. Using this avenue can be a little more tricky since they won’t have that initial trust in place. This means you might need extra reassurances than going through investors you know more personally. As stated by FortuneBuilders, these businesses or individual investors will need:

  • An outline plan of the expenses on the money they loan you
  • Expected profit
  • The deed of trust
  • Proof of your identity

They won’t automatically trust you. But, being one step ahead of them by having all this before seeking them out can mean the difference between denying you or not. Also, having the confidence and portraying your business in the right light can have them wanting you more. Therefore, try to perfect your angle and show them how your unique idea will work despite all the odds against you. Make sure you have everything in order, so you look professional and organized as possible.  Otherwise, being unprofessional might have you sent home with no lender in sight.

 Benefits of Private Loans

Do you have bad credit? Bank loans or lenders will look at your credit history to ensure you have the experience in paying your bills on time.  As reported by Berkeley Haas, “your credit score is a big part of whether you’re able to borrow money…And maybe more important, the terms of the loan you get depend[s] upon your credit score.” So, having bad credit might make you feel hopeless in building the dream business you’ve always wanted. But, this is where private money loans can benefit you even with a bad credit history.

Your family and friends won’t bother too much with your bad credit history since they trust you. Then, if you get a loan from a professional private lender, they will still give you the loan, especially when you give them an excellent business proposal. They are investing their money into your business venture to get make money off your business. No one will want to buy into your business idea if you don’t have a significant proposal to back up all your ideas.

You also won’t have to wait for approval. Most money lenders or banks will make you wait a while before approval. With a private money loan, you can almost instantly receive the money depending on who you borrow it from.

Drawbacks to Private Money Loans

While private money loans have its advantages, that doesn’t mean it doesn’t come with some drawbacks. Before you ask a professional or relative for money, you need to prepare for every dead-end or tough situation. Getting a private money loan is possible even when you have bad credit, but there are negative consequences of using this path to start your business.

According to FortuneBuilders, private loans usually have higher interest rates that could have you paying 15% to 20% on interest rates. When you borrow money from a professional investor, those who have bad credit scores or are taking a risk with buying a risky property might get stuck with a high-interest rate. Receiving these private loans can be useful initially, but getting stuck with high-interest rates might be your downfall. You might have to improve your credit score and find another type of loan for your business.

Although, if you borrow money from family or friends, there can be detrimental consequences you might not have thought of. When you borrow money off those close to you, you might think it’s the best alternative than dealing with professional lenders or banks. However, paying them back can be crucial to your overall relationship.

Not paying them back on time or waiting too long can affect your relationship. When you mix money and family, you might become lax in repayment plans. Don’t allow that to happen to you or those you borrow from. Therefore, always pay them back on time so that resentment doesn’t affect how you get along with one another.

Conclusion

Are you serious about making your dream business a reality? Don’t allow your ambitions to fall through at the first sign of hardship. Instead, dig deep and find the courage and motivation to continue searching for private money loans to help finance your business. You won’t regret taking risks when you got a fantastic business idea organized and polished for a professional lender.

Sources:

 https://www.fortunebuilders.com/private-money-lending/, https://faculty.haas.berkeley.edu/odean/Video%20Transcripts/Credit%20scores.pdf

 

 

Could UK Hard Money Lenders Be Moving Into The USA?

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There are numerous hard money lenders in this country and their services are highly appreciated. One of the reasons for that is that there are still a lot of distressed and foreclosed properties for which traditional lenders are reluctant to provide financing. Because of the fact that there is a demand for hard money, the US market is particularly interesting for foreign investors as well. A recent report, the EY 2018 UK Bridging Market Study showed that our market could be particularly interesting for investors from the United Kingdom.

If they were to consider international expansion, the US market appeals to many bridging lenders, as they can offer a similar product proposition and there is capacity to grow quickly.

One of the reasons why this country is so interesting for foreign bridge lenders is because the regulatory environment is quite easy. Each state has its own Department of Real Estate, which mandates only that there has to be at least one person with a valid real estate broker license. The exact requirements for that license also vary, with the requirements in Georgia being wholly different from those in Arkansas, for instance.

Why this Country Is So Appealing to UK Lenders

One of the main reasons why UK hard money lenders are so interested in this country is because of the size of the market itself. The UK market, while sizable, is quite limited, particularly since the Brexit vote.

Mat Oakley, head of European commercial research at Savills, says that deals were now taking longer to sign and investors were seeking clarity over Britain’s future status.

The US market, on the other hand, is both incredibly large and highly secure. Furthermore, compared to other countries, including England and Wales, the US is a lot more creditor-friendly. The result is that, for hard money lenders at least, the market is incredibly attractive. An added element is that many hard money lenders in the UK are growing very rapidly, which means international expansion will soon be an absolute requirement.

The Great Recession was terrible and its social, political, and economic impact will long be felt. However, out of the doom and gloom, a number of positive developments have also been noted.

The Great Recession caused many businesses to close their doors or file for bankruptcy protection, but the rapid rise in unemployment also drove an increase in entrepreneurship. For many people across the U.S., the potential opportunities from opening a new business outweighed the alternatives, despite slumping demand and tight credit.

Of particular interest is the fact that one of the areas in which entrepreneurship was seen more than in others was in construction and real estate. The opportunities to make a huge profit from the property market in the US, particularly with house prices rising again, are significant. So much so, in fact, that it would be financial suicide for any investor not to consider it. If partnered correctly, the environment is near-perfect for lenders from the UK.

Problems Facing UK Lenders in This Country

While it is undeniable that the opportunity is there and that it promises lucrative returns and particularly due to the fact that the two countries use the same language and that there are few legal barriers in place, there are some obstacles to be aware of as well. The UK market is shrinking rapidly and this has made competition much tighter. The result is that many look at US and presume that, due to the size, there is room for more lenders. However, the reality is that, while the country may be large, there are already many hard money lenders in the US. Indeed, within this country, it can be difficult for a prospective new lender to determine market share.

Do you know your organization’s local, regional and national market share? Accurate volume data about the private lending market can be hard to come by. Yet it’s critical to know the size of your market if you want to raise capital, measure success or grow your business.

While there is certainly a demand for private lenders in this country, there certainly isn’t a shortage in supply. Meanwhile, the infrastructure, regulatory framework, and legal system is not as stringent as what it is in the UK, meaning that lenders may feel somewhat unprotected. Indeed, many private lenders from this country were looking at investing in the UK before the Brexit vote happened.

If UK lenders want to move into this country, they will require very significant resources. Naturally, a capital resource will be essential in order to provide the loans in the first place. But they will also have to conduct significant research and have the funds available to build a recognizable brand that outshines that of the lenders that are already here. Hence, it seems that most financial experts would now suggest that UK hard money lenders should not set themselves up as separate entities on this market, but rather that they partner with a firm that is already here.

In order to complete an international expansion, and certainly one as far in distance as between the UK and this country, will require significant due diligence and a lot of research. Additionally, it means the lenders must start to build a local professional network, which takes time. For many existing private lenders, this is too big of a hurdle to overcome.

Another potential issue is the fragmentation of the market. Each state has different rules in relation to the recovery of hard money loans. For instance, it is very easy to achieve foreclosure in California, but much more difficult in New Jersey, Florida, and New York. This disparity is something that foreign lenders find hard to work with.

Texas processes foreclosures fastest, with an average of 90 days. At the other end is New York, with an average of 1,019 days. Experts say there are pros and cons to getting through them both too fast and too slow. The national average is 348 days to complete a foreclosure.

At the same time, the market for financial services in this country is one of the most sophisticated in the world. This means that those looking for bridging opportunities often already have somewhere to go. It would be nearly impossible for a foreign investor to be able to compete with this.

Nevertheless, throughout its history, this country has been the land of opportunity. From the gold rush to oil to real estate, it is where people can obtain untold riches if they can conquer the market. That is a dangling carrot that some investors simply find too hard to resist.

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The Real Deal With Hard Money Lenders

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A lot of people who want to move into the property investment market will soon find that they would like to know about hard money lenders. They don’t really know who they are, where to find them, whether the conditions of their loans are suitable, and so on. If this you, it’s important to learn to understand all you can before making important financial decisions.

What Is Hard Money?

The first thing to understand is the concept of hard money.

Hard money lenders (HMLs) are typically private individuals or small groups that lend money (Hard money) based on the property you are buying, and not on your credit score.

Soft money is often hard to be accepted for, but it has flexible terms and it is very affordable. Hard money, on the other hand, is easy to obtain but it comes with restrictive rules and is more expensive because it has higher interest rates. Furthermore, soft money usually comes from financial institutions, whereas hard money comes from private investors. This is also why the hard money loan is more expensive and restrictive because people are investing their own capital.

Hard Money Lending Terms and Conditions

Because hard money lenders are often private individuals, they can set their own terms and conditions for the loan. In the past, it was based solely on the fair market value of the property, but many now also want additional equity. Hence, while they have different acceptance criteria when compared to banks, they do have very strict criteria as well.

It’s therefore common for private lenders such as hard money lenders to issue loans based on LTV for a property in good condition and loans based on ARV for a property in poor condition. Purchase hard money loans are based on LTV while rehab loans are based on ARV.

The ARV is the After Repair Value and hard money lenders usually loan no more than 70% of that. What this means is that, in some cases, you may be able to borrow more than the purchase price of the property as well as additional money to repair it, because the ARV is so much higher than the purchase price.

In return for this, however, you can expect to pay a higher interest rate. Usually, the interest rate is between 12% and 20% per year and you can take out these loans for a duration of six months to five years. The interest rate will usually depend on your experience as a home investor and on your credit score. Additionally, you will have to pay a number of fees and closing costs, generally from two to 10 points, in order to be able to access this type of money.

The Pros and Cons of Hard Money Lenders

One of the key benefits of a hard money loan is that the decision-making process is incredibly quick. When an investment opportunity arises, it is vital that you move fast, or someone else will snap it up. This is why you have to build relationships with hard money lenders so that you never miss out.

A big disadvantage, however, is that most hard money loans come with a pre-payment penalty.

If the borrower decides to prepay the loan, the lender will issue a prepayment quote based on this principal sum. The sum may be as large as the entire initial loan. Despite years of payments toward the debt, the borrower has paid off only the interest and failed to actually gain equity in the property.

Applying for a Hard Money Loan

When you apply for your first hard money loan, you will usually have to supply quite a bit of information. This includes your income tax returns, your W-2s, your pay stubs, bank statements, and more. This is because lenders want to make sure that their assets are properly protected. That being said, there are still hard money lenders out there who care little about your financial background and are interested solely in the ARV of the property you want to invest in.

Is a Hard Money Loan Right for You?

A key question to ask is whether or not a hard money loan is right for you. If you are a new investor and you don’t have a lot of money behind you yet, or if you have a poor credit rating, you may not qualify for traditional loans. If you need money in a hurry, then private loans are also much more appropriate. Even if you have a good credit score and a high down payment, it will still take at least 30 days for a bank to accept your application, in which time the deal could have gone to someone else.

Hard money is incredibly creative. While you are technically restricted by how much you can borrow and how that relates to the value of the property, the fact that lenders are happy to consider the ARV of the property means that you can often borrow without having to put anything down.

Finding Hard Money Lenders

Last but not least, you need to know where to find these lenders. They can be found in various states across the country. Indeed, it could be that someone in your immediate social circle is a hard money lender. Real estate agencies and title companies can often refer to you as well. Make sure that you compare the different options that are out there until you find a lender that meets your needs. Because a hard money loan is a very serious financial commitment, you should make sure that you get the best deal available. Hence, make sure to consider interest rates and prepayment penalties.

The above provides an overview of what a hard money loan is and how it works. This should empower you to make educated decisions in terms of whether or not the solution is right for you. Once you have worked with a hard money lender and you have both been happy with the transactions, then you may have a lending partner for life, meaning you can move on to other investments over time.

Hard Money Commercial Lenders Don’t Come Looking For You

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In the world of financing, traditional mortgage companies run like the fast and loose crowd at a high school dance. Hard commercial money lenders are the hard-to-get ones, those who were too cool to even come to the dance.

If you need to find hard money commercial lenders, just know: they will not come looking for you.

Hard money commercial lenders typically are in a great financial position. They have deep pockets and vast reserves, and they do not need you to stay in business. They will not court you or coerce you.

However, you may need them.

Plainly put according to retipster.com, a hard money loan is a “short-term loan secured by real estate” and “funded by private investors as opposed to conventional lenders such as banks or credit unions.”

Slow and Tedious

Traditional lenders will require stacks of paperwork and documentation. They base their decision on how much to lend you based on your risk. What’s your credit score? What is your income? Your assets?

Because of the amount of data a traditional loan company requires, they take a painfully long time to decide if they will approve your loan.

Fast and Furious

Hard money commercial lenders work in a completely different way.

They gauge their decision to lend based on your assets, on the property that you’re putting up for collateral. This means if you default on the loan, you will lose your property unless you can sell it and pay back the lender.

Because they do not require documentation paperwork, or the research that involves your income, hard money commercial lenders approve or reject loans quickly.

Who Needs a Hard Money Commercial Loan?

If you have any amount of credit problems from the past including foreclosures and bankruptcies, you’re a candidate for a hard money commercial loan.

Bankruptcy and foreclosures are red flags for traditional lenders, warning signals that will put the reject stamp on your application almost immediately.

With commercial lenders, if you have the assets or property to make up for the loan you’re asking for, they will usually approve the loan because they know that one way or another, you must pay them.

With a typical loan, if you default, you can, in the worst-case scenario, file for bankruptcy. When you file for bankruptcy, your lender may or may not get paid.

Be aware though, that if you’ve filed for bankruptcy in the past, you cannot do this again if you cannot make your payments. The hard money commercial lender will foreclose on your property, and you will lose the asset.

Why Get a Hard Money Loan?

If you want a short term loan,  a hard money loan makes sense. House flippers, those who fix and flip homes, and thus own property for a short time, are great candidates for a hard money loan.

People who cannot obtain a loan through traditional means because of poor financial decisions in the past are also great candidates. Perhaps you’ve made decisions that have followed you for decades. You have your act together now, and you can make your payments, but still, no one will lend to you.

Meet the hard money commercial lender, the one at home playing hard to get.

However, hard money loans are expensive. Their interest rates typically range from 10 to 15 percent, depending on the lender and his location.  Current mortgage rates, however, rise no more than six percent.

Because of the interest rate, a hard money commercial loan works well in the short term. If you plan on needing a long-term mortgage but cannot secure it at this time, then use the hard money commercial loan, but consider refinancing once your credit score goes back up and you’re a good risk

Where Can I Find Hard Money Commercial Lenders?

If the hard commercial lender is playing hard to get, how can you find them?

Networks dedicated to connecting apt candidates to these elusive lenders can connect you to a variety of potential lenders in multiple states in the United States. So whether you live in Alaska or Texas, if you look, you’ll find the lender you’re looking for.

To learn more about hard money commercial lenders and their services, check out our blog.

Sources:

https://retipster.com/hard-money-101-everything-need-know-getting-started-hard-money-loans/

https://www.thebalance.com/hard-money-basics-315413

https://www.mortgagecalculator.org/mortgage-rates/current.php

Choosing a Commercial Hard Money Lender

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Being able to gain access to large amounts of money quickly is essential in the real estate market. There are often numerous buyers trying to get the same property if it is priced well. With more than 600,000 houses selling in May of 2019 alone, the market is very competitive and can be quite lucrative. This means you need to be able to get the money to buy properties quickly and this is where a hard money lender can come into play.

Traditional bank loans can take weeks or even months for approval and have stipulations that can be difficult to meet. Many real estate investors turn to a hard money lender as a way to get the money they need quickly. Hard money loans are sometimes easier to get than traditional bank loans because they don’t have as many stipulations. You don’t need a high credit score, a large down payment and can often get the money in a very short period of time.

When it’s time to get a hard money loan, you need to be sure you use the right hard money lender. With so many lenders on the market, it can be difficult to know which one to use though. The following guide walks you through a few tips you can use to ensure you work with the best hard money lender possible.

Word of Mouth Can Be Your Best Friend

The first thing you need to realize is that other real estate investors in the area can be an asset to you. You don’t want to look at them as strictly competition because there is a good chance that they can provide you with valuable information. Talk to other investors about the hard money lenders they have used. Find out why they recommend them and which lenders they suggest you avoid. Talking to a few different investors allows you to compare the information to ensure that people are giving you valuable advice.

Do Your Own Research About the Hard Money Lender

While it can seem like you need to rush to get a loan when a house comes on the market, doing research ahead of time can be really helpful. If you know that you want to invest in properties in the near future, do research on the hard money lenders that other investors suggested before you actually need to buy a property.

Look for information about the company with the Better Business Bureau. Unsatisfied borrowers can file complaints with the bureau that you can read. According to the Better Business Bureau, trusted lenders never ask you to pay fees upfront for a loan. “A real lender will post those fees prominently and collect them from the money they are lending you, but a scam lender may try to collect them as a condition for you getting money. ”  If you see that the lender has numerous complaints against them, they may not be the right hard money lender for you.

Find Lenders Who Charge Reasonable Fees

There are fees associated with any loan, you get. This is the way that the hard money lender is able to make a profit off of the loan to make it worth their while in the end. It’s important to know that there is no flat fee that all lenders charge for their loan. You need to compare the fees of a few lenders before choosing which one you will use for your lending needs. This allows you to be sure that you don’t overpay for the loan when things are said and done.

Ensure Commercial Hard Money Lenders are Licensed

A real estate broker license is required in order for lenders to be able to legally lend money to real estate investors. Ask for the license ID number for any hard money lender you think you may want to work with and run the numbers through the real estate bureau within your state. You want to be sure that they really are licensed and that they have been in business for an extended period of time.

Meeting with hard money lenders can be a bit intimidating at first. Ensure that you work with a lender who makes you feel comfortable, not pressured to sign paperwork for a loan right away. Reputable lenders will want you to take time to consider your options to ensure you make an informed decision regarding their hard money loans. Be sure that you read the details of any agreement closely so that you understand when payments are due, what the interest rates are and how long you have to pay back the loan. Hard money loans typically need to be paid back in a short period of time in comparison to traditional loans so make sure you understand the logistics of the agreement is essential.

References:

https://www.bbb.org/article/news-releases/16919-bbb-tip-advance-fee-loan-scams

https://www.census.gov/construction/nrs/pdf/newressales.pdf

 

What is a Hard Money Loan?

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The phrase hard money loan has a negative connotation for many people. Maybe that’s because it sounds too good to be true.

Hard money’s bad reputation is also due to predatory lenders who preyed on homeowners years ago in an attempt to recoup their properties when loans weren’t repaid. They offered very risky, even shady, loans and many people took the bait.

Fortunately, these lenders are no longer able to operate today. The truth of the matter is that this type of loan has and will continue to provide opportunities to homeowners and investors.

If you’ve heard of hard money loans, but aren’t exactly sure what they involve, keep reading. We’re going over what they are and how they can be beneficial.

The Basics of a Hard Money Loan

Also called bridge loans, hard money loans are meant to provide quick cash to real estate investors or homeowners. They’re typically issued by private lenders instead of large banks.

These are short-term loans that don’t require the borrower to have great credit. In fact, lenders typically don’t even pay attention to an applicant’s financial history. Instead, they use the value of the property as collateral against the loan.

Because a person’s credit score isn’t considered, hard money loans can be approved and issued very quickly. However, borrowers have much less time to pay back the loan. If they default, the lender can seize the property to recoup the money.

It’s important to understand that a hard money loan isn’t for everyone. However, if used correctly, they can be a great resource for people wanting to secure their financial situation or those needing capital to get a project off the ground.

Advantages Borrowers Enjoy

To quote Benjamin Franklin, “If you would know the value of money, go and try to borrow some; for he that goes a borrowing goes a sorrowing.” This seems like good advice, but it definitely doesn’t apply to many hard money borrowers.

Because a hard money loan is structured differently than a traditional bank loan, it carries several advantages. These benefits give borrowers much more freedom.

A primary benefit is the convenience surrounding the application and approval process. Because lenders aren’t looking at an applicant’s credit score, the loan can go through very quickly. With a traditional bank loan, it could take months.

Another huge benefit is flexibility concerning repayment terms. Remember, these are private investors, which means you have more wiggle room to negotiate.

Finally, many lenders will sometimes allow borrowers to use other personal assets as collateral instead of the property. This is great if your home is in disrepair and you need money to fix it up.

Interest Rates

The primary downside of hard money loans is interest rates. They’re typically higher than those attached to a traditional bank loan.

This is due to the fact that lenders must take on more risk. As a way of protecting themselves, they need to increase rates. They’re usually between 10% and 15%. This will change based on the lender and the value of the property in question.

It’s important to keep in mind that hard money loan interest rates will vary based on where you live. States with a large number of hard money lenders will have lower interest rates due to tougher competition.

Situations Where Hard Money Lending Can Help

Home prices have been trending up. According to the U.S. Census Bureau, the median price of a new house sold in May 2019 was $308,000. This means people will need more money to cover down payments.

Home flippers who buy homes, refurbish them, and then sell them for a profit must have quick capital when a home they want comes on the market. It simply doesn’t make sense for them to jump through the hoops required to get a traditional bank loan. Instead, they can use hard money loans to make quick purchases, sell the home, and repay the loan.

Hard money loans are also perfect for real estate investors looking to start a construction project. They can’t put the project on hold while they wait for a bank to complete the approval process. Working with a hard money lender means they get the capital they need right away.

Finally, these loans are helpful for individuals who want to own their own home but have bad credit. As long as they follow the repayment terms, they can enjoy living in a house they love without dealing with a bank.

Resources:

https://www.census.gov/construction/nrs/pdf/newressales.pdf

 

Hard Money Equity Loans Can Help In A Jam

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So, you are in a bind. Maybe money has become temporarily tight. You feel the stress of the unexpected and do not know what to do. Perhaps, you are trying to flip a house that needs a little more work than you originally planned. Now you need the funds to cover you until you can sell the property. Perhaps, you have thought about taking out a traditional type equity loan but, your credit score is not what it used to be. You apply for the loan with hopes that you will be funded.

They start by running your credit report and checking your loan to value. Then, the bank tells you that even though you have enough equity, you do not qualify for any type of traditional home equity loan through their financial institution because your credit is not to their qualifications.

The big banks base most if not all of their decisions around what your credit ranking is. You could have 200% equity and a low score and they may turn you down. You know you can afford the monthly payments once you have gotten out of this bind. But, if the big banks will not lend you the money what other choices do you have?

In another instance, maybe you have the credit score but need the money faster. Hard Money Equity loans are fast funded. This may you can get funded and take care of what you needed the money for.

How Hard Money Equity Loans Can Help

Hard money equity loans may be the right option for your situation. If you have the equity, but your credit score is not enough for the big banks then you can look into Hard Money Equity Loans. Well, what are hard money equity loans? Hard money equity loans are loans you take using the equity on property or properties.

These type of loans are really good when you know you will have a quick return. This way you get the money and pay it back fairly quickly.

Hard Money Equity Loans are done through private parties. With how hard it is to get a traditional loan through your typically big banking establishment, hard money equity loans may become a more sought out type of loan. According to Lending Tree, “One percent of American families applied for personal or family loans in 2017, and 24% of those received at least one denial for their requested loan amount.”

What are the risks of Hard Money Equity Loans

Hard money equity loans often have high-interest rates. These loans have been known to have interest rates ranging in the high 10-15%. This means a higher monthly payment. When taking out the loan make sure it fits your budget. If you are unable to pay it back, there is a lot on stake.

Another thing to keep in mind is that most of these hard money equity loan private lenders will want to be at the first loan position. Rarely will the lender allow their status to be the second on the property. This is their protection in the case that the receiver of the loan defaults on the loan or foreclose.

What are Hard Money Equity Loans good for?

Hard money loans are typically used for the following:

  • Construction; maybe you want to add another room, dig a pool, roof repair and so much more. y take out a hard money loan to put into the property they are going to sell.
  • Land loans; Buying extra land to build on. Or perhaps, to just widen your current land.
  • Quick money; you need the funds right away.
  • Bad credit;  bad credit makes loans harder to obtain.
  • Vacations; You know you have a big vacation coming up and want to make sure you have enough funds to spend and enjoy yourself.
  • Renovating; maybe you are not flipping a property but want to just improve the asthetic of your current home.

The Federal Reserve Board offers some great insight into Home Equity including HELOC (Home Equity Line of Credit).

Whatever your need for the extra funds, a hard money equity loan may be the right choice. The loans are quick, easy and readily available if you have the equity.

References:

https://www.federalreserve.gov/pubs/feds/2007/200720/200720pap.pdf

https://www.lendingtree.com/personal/personal-loans-statistics/

Commercial Loans

Hard Money Commercial Loans Deliver Fast Options

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The world of business can be extremely fast-paced, regardless of what industry you’re in. When a good opportunity arises, you may not always have the cash to hand to make the most of it. This is where hard money commercial loans come in.

A 2018 Federal Reserve survey found that 56% of businesses that applied for a loan or line of credit did so in order to acquire new business assets or pursue a new opportunity. Traditional banks offering approval rates of around 27% and lower depending on any outstanding debt or poor credit score. It can be difficult to take advantage of that good opportunity at the right moment. Also, traditional lenders can take too long with the approval process, preventing you from striking while the iron is hot. Hard money commercial loans are quicker and more suited to business than most traditional business loans.

What is a Hard Money Commercial Loan?

Hard money commercial loans are lines of credit extended to business owners, usually to expand their company. Hard money doesn’t come from a bank or traditional lender. It comes from a private investor or a group of investors who’ve formed a company to lend to businesses.

If you’re interested in buying a new commercial space to extend your business properties or if you’re planning to renovate for a re-brand or build an extension, these are all areas where hard money commercial loans can help out. Development and construction are the most common uses for hard money commercial loans.

Hard money loans are usually options for certain business entities, such as a limited liability company or an s-corporation. These kinds of loans are not for individuals.

Why are Hard Money Commercial Loans Different?

Firstly, they deliver fast. They have much quicker approval times than the average bank. This is vital in business and the investors know this. They are business people themselves, not mortgage providers who have a checklist to go through before approving the loan.

Another way that hard money commercial loans are different is that each application is assessed differently. The main criteria they look at is property. Often you can take a loan out against the value of the property that you are buying. Their interest rates will be much higher though, and this is one of the things that can scare people off them. This is because the investor wants to protect the investment that he/she has made. If you default on paying them back, they will come for your property. It’s risky, but if you’re confident that your expansion will work, then it’s all to play for.

The length of the term in hard money commercial loans is also quite a bit shorter than traditional loans. Usually, they are around two-three years maximum, although you may find an investor willing to stretch to a five-year loan, under specific circumstances.

Hard money commercial loan investors like to build long-term relationships with those that they lend to, as they know it can be profitable in the long run. David Voxlin, the founder of Craved, a retailer of U.K. craft food and drink, talks about the importance of building those kinds of relationships: “First of all, you have to be really comfortable with your investors and trust them completely. These are people that you will almost certainly have a very long-term relationship with, and unlike employees, you don’t have the option of letting them go.”

Why You Should Consider A Hard Money Commercial Loan

If you are a start-up and confident that your product or service is going to do well (according to market research, not just a gut feeling) but you need an injection of capital, then hard money commercial loans can be the perfect match for you.

Big banks aren’t particularly interested in providing smaller loans – it’s a lot of paperwork for not much return, particularly when loans are under $250,000. When you need to get something off the ground quickly, approaching lender after lender and going through a lengthy process, only to receive a “no” is wasting time when your competitors could be getting a step ahead.

Building a relationship with a hard money lender could pave the way for some unexpected bonuses in the future. Hard money commercial loan providers know about business and if they have confidence in you, they may ask you to partner on other deals at a later date.

Put simply, hard money commercial loans are one of the most viable ways for a small or medium business to take it to the next level.

Resources:

https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf

https://www.simplybusiness.co.uk/knowledge/articles/2018/05/how-to-get-funding-for-a-business/

 

 

 

Hard Money Mortgage Lenders Can Help Stop A Foreclosure

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Foreclosure is a homeowner’s worst nightmare, especially if their family’s well-being is at stake. Unfortunately, they happen more often than you think. According to data collected by the Federal Deposit Insurance Corporation, 250,000 new families enter into foreclosure every three months. The good news is, hard money mortgage lenders can provide options to people facing the loss of their home.

Unlike transitional mortgage loans given out by banks, hard money lenders are typically private investors. Instead of looking at a borrower’s credit score and financial history, they use the value of the property as collateral against the loan. This makes the approval process both easier and quicker.

In short, a hard money loan gives a homeowner the ability to pay off a mortgage and refinance or enter into a short sale, which are both better options than a foreclosure. To get a better idea whether this type of loan is right for you, let’s look at some situations that lead to foreclose and how hard money mortgage lenders can help.

Understanding Foreclosure

A foreclosure happens when a lender forces the sale of a home after the borrower fails to make monthly payments. The money acquired in the sale will go towards repaying the mortgage. This is a legal process that puts the borrower at a huge disadvantage

Most of the time, foreclosures result when a family experiences an unexpected setback. Job loss, medical bills, divorce, and overwhelming credit card debt are some of the most common reasons for homeowners to default on mortgage payments. Although lenders will often work with you if you’re having trouble, you won’t have much time to get current.

J.P. Morgan saw the positive side of foreclosure when he said, “Giving debt relief to people who really need it, that’s what foreclosure is.” Unfortunately, there are a number of consequences associated with having your home foreclosed on. Some of the most damaging include:

  • The loss of your home along with equity you’ve built up.
  • Damage to your credit score.
  • You may still owe a balance, even after the foreclosure goes through.
  • The inability to acquire a mortgage or qualify for property leasing in the future.

These repercussions make it obvious why preventing foreclosure is absolutely necessary. However, when you’re already facing so many financial problems, where do you turn? This is where working with hard money mortgage lenders can be a great benefit.

How a Hard Money Lender Can Help Stop a Foreclosure

Many people opt for taking out a second mortgage or getting a home equity line of credit when they run into trouble with their original mortgage. However, if you already have poor credit, this isn’t an option.

By applying for a hard money loan, you’ll get quick cash without having your credit and financial situation scrutinized. Hard money mortgage lenders look at the property value of your home along with the current market and use this as collateral. They don’t care about your credit score.

Now, one disadvantage of a hard money loan is you’ll only get a percentage of the total value of your home. However, if you use the money properly, you’ll come out on top. For instance, you could pay off the delinquent amount you owe on your existing mortgage and then some. Or, you could opt to use the hard money loan to pay off debt or renovate your home in preparation for a short sale.

In addition to not having to worry about your credit score, the approval process is very fast when working with hard money mortgage lenders. The traditional bank loan process is much more complex, which may not work if you need money right away.

Find Out if a Hard Money Loan is Right for You

It’s important to understand that hard money loans are meant for short-term solutions and typically carry higher interest rates than traditional loans. Think of them as recovery loans. However, when facing foreclosure, they can be extremely effective tools for opening up opportunities.

These types of loans have become very popular in recent years due to the freedom they provide homeowners facing foreclosure. Speak to a hard money mortgage lender and find out what type of interest rates and repayment terms they can offer. There’s a good chance you’ll get the peace of mind you need during trying times.

Resources:

https://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf

 

 

The Hard Money Rehab Loan

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You’ve applied for a housing loan with your local bank. After waiting for a few business days, you find out that you’ve been denied. You’re not alone in this. Nearly 11 percent of all people were denied a home loan in 2017 alone according to the Customer Financial Protection Bureau. There is an easier way for you to get a home. It’s called the hard money rehab loan.

It will allow you to find a fixer upper, do some repairs, sell it, and pocket the money. You could then take that money and do whatever you want with it. Including putting a down payment on that home you were looking at.  Sound good to you? Keep reading for a complete guide on these types of loans including the requirements, rates, terms, where to find them, and what to do once you’re approved.

Interest Rates

The interest rates for hard money rehab loans can be high. They run anywhere between 7.5-12 percent. The reason why it’s so much higher than traditional mortgages is because of the risk with rehab projects and the short 12 to 36 month loan time. As far as the loan amount that you’ll receive, it’s determined by the lump sum of the purchase price and the credit line for the expected repair cost. This usually adds up to around 75 percent.

Pre-qualification Process

To get started you’ll go through the prequalification process. You’ll need to turn in two or three months’ worth of your personal bank statements. Your credit score will need to be at least 550 which is about average. Lastly, you’ll need to answer a few questions about yourself, the property, and your expected offer amount. Make sure you have your tax ID ready to go too.

Final Approval Steps

Once you’ve been prequalified for the loan, you’ll need to take a few steps to get that final approval. Gather the purchase contract for the property you’re looking at along with a list of past projects that you’ve done and turn them into the loan provider. The lender will send back an application for you to fill out. Keep in mind that there will be an application fee of a few hundred dollars. Give or take.

Your Financing

When you’re approved for financing the lender will go everything with you about interest rates, fees, and a closing date. Once you’ve signed on the dotted line, you’ll be in the clear to get your loan. It’s not very often that the lender will give you all of your rehab money upfront. For example, if you have a 5,000-dollar budget on redoing all the floors in the home, you’ll get half of it before you start the floors and half when they are done.

Titles

When your Rehab loan is in underwriting, your lender will run a title search. The title to the home that you’re flipping will be required by the lender. If you’re not sure what title company to go through, your lender can suggest a few. Once this is done, you’ll receive a commitment letter from your lender letting you know when the loan closing can happen. There will be a closing fee.

Do your Renovations

Finally, you own the property and have your loan. Now you can get to your renovations. These need to be done professionally because according to Daniel Bortz, writer and licensed realtor, “even small cosmetic flaws, like an ugly shade of carpet, can make some home buyers run” but they need to be done quickly. The longer it takes you to sell the property, the higher or carrying costs will be. This means less profit for you.

Now that you’ve finally got the property renovated, you’ll need to start your exit strategy. Most people do this by refinancing into a more permanent loan or selling the property for a short-term investor. Whatever you do, you’ll need to do it quickly to avoid extra holding fees.

Getting Your Hard Money Rehab Loan

If you can’t seem to get approval for your home loan, you can go forward with a hard money rehab loan. It’s a bit more work but at the end of things, you’ll have the money you need for another home. Talk to your lender today.

Sources:

5 Strange Things That Can Stop a Home From Ever Selling>Daniel Bortz – https://www.realtor.com/advice/sell/problems-home-sellers-had-to-change-to-sell/

7 Reasons Your Mortgage Application Was Deniedhttps://www.magnifymoney.com/blog/mortgage/7-reasons-your-mortgage-application-was-denied/