LendingHome Disrupts The Market Of Private Lending

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The fact that the world of hard money lending is growing is readily apparent. Exactly how much it is growing, however, has been somewhat of a surprise to many. In fact, the HousingWire Tech100 List has recently announced that lending is the new tech.

Applicants include heavy hitters and innovative disruptors…. But make no mistake, the name of the game in tech, these days, is lending, lending, lending.

The HousingWire Tech100 List looks at tech companies that have innovated the housing industry in this country. Usually, they recognize companies that create things such as smart devices for the home and green technologies. But now, they have recognized LendingHome as well, as the fastest-growing and largest online marketplace lender for mortgages in the country.

LendingHome is reimagining the mortgage process from the ground up by combining innovative technology with an experienced team. Our goal is to create a seamless, transparent process for homebuyers, real estate professionals, and investors.

One of the reasons why the private lender was recognized was because of its innovative automation and customer experience. They have created a loan process that is easier than ever to complete. In fact, 80% of applicants do not have to speak to LendingHome in person to have their loan processed. This means that people can finally apply for a mortgage in a way that is convenient to them without any interruptions, telephone calls, or meetings.

The founder and CEO of LendingHome had set forth a vision in that people should be able to have a roof over their head and live in their dream home without any difficulties. He expressed particular pride in his team and engineers, who have created a platform that has made it possible for the company’s vision to be turned into a reality. Having been recognized for this has been described as the icing on the cake.

Last year, LendingHome, based in San Francisco, California was recognized in 2017 by LendIt, who awarded CEO Matt Humphrey the title of ‘Executive of the Year’.

Given to the senior executive who has demonstrated outstanding leadership, integrity, performance and team-building within his or her company, while at the same time contributing to advancement of the industry.

The LendIt Fintech Industry Awards is a yearly competition and it has recognized LendingHome as part of their Top Real Estate Platform. This award showcased the company’s unique combination of responsiveness to stakeholders, product diversity, growth, volume, and performance.

LendingHome is also committed to continuing to innovate the market. They regularly participate in events that teach people about the fix and flip market. Mainly, however, co-founder Josh Stech has recognized that there is currently a degree of vulnerability in the world of private lending, and their company aimed to change this, something they have been committed to since 2013. Stech recognized that there is still a huge degree of fragmentation in the market and that the borrower experience, due to hidden fees and uncertain terms, is quite poor. Hence, LendingHome has developed a process in which technology and people are brought together to ensure borrowers have a more streamlined, secure, and user-friendly experience. Doing so has literally transformed the market as a whole.

LendingHome issued its first loan in the middle of 2014. Since then, they have funded over $2 billion mortgages. Their goal is to simplify the process and it seems they have been successful in doing this.

We’re on a mission to revolutionize the world of mortgages and put the power, and the keys, where they belong – in your hands.

The company uses a purpose-built, from scratch platform that no other lender in the country is currently able to offer.

Becoming A Hard Money Lender

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A hard money lender will never run out of fashion in spite of all the innovations in banking. Once in a while, people run into financial woes that their banks cannot sort as soon as they may need or their credit score does not just allow them to enjoy bank lending. When this happens, a hard money lender becomes the best option to work with.

Find a Borrower & Evaluate the Deal

You must have a way of reaching out to clients for your business. If you have enough money, go into advertising. If not, reach out to your investors and business people for leads on a deal you can fund. You have an upper hand if you belong to a local Real Investment Club. You can start pitching here. Talk to the club manager to allow you access to the members.

Size up the deal. Consider the money required and the collateral in question. Evaluate whether it makes financial sense to you.

Establish Equity

Once you have discussed the collateral, determine the borrower’s equity in the property. A hard money lender should be looking for at least 30% of the equity as a rule. So the borrower should not borrow more than 70% of the property value after repair.

Assume the purchase price of the property is $100,000.

$10,000 in repairs

$185,000 after repair value

So to give the borrower $100

Loan for $100,000 = LTV (loan to value) of 67%

Assess Borrower’s Credit

While you have been chosen because the customer does not want to deal with formal bank credit red tape, this does not stop you from checking the borrower’s moral standing. Check the reputation when it comes to making business deals. Have they ever been declared bankrupt? Is the first private lending deal? Do they make timely payments?

Remember you are interested in the borrower’s reputation. As for credit history, you do not have to worry, you have the property.

Negotiate

Ask the borrower about their expectations. Hard money loans take a short period between 6 months or a year. Some borrowers though may opt for multi-year loans such as 3 or 5 years. In this case, ask them to refinance or pay off your note prompt.

Interest rates will vary based on the risks, market rates, and duration of the loan. Be conversant with your local rates. Consider offering a small discount until you become an established hard money lender.

At this point, the borrower should have handed over the necessary documents. Understand why they chose you. Get a list of repairs needed alongside an inspection report including a termite and oil tank inspection.

Get a professional appraiser to do After Repair Value appraisal. Inspect the property to see the repairs for yourself. Ask for repair bids. The borrower must get a title and home insurance with your names.

Close the Deal

If this is your first transaction, use an experienced lawyer. Go through the loan documents and wire the hard cash to an escrow agent. Ensure that the terms are well stipulated and all exemption clauses are captured.

There are a number of ways that you can use to service the loan. You can either opt for a simple-interest loan only or hire a servicing agent if it is a complex loan. “Do a thorough research on the method that allows you maximum returns from the lending or the property.”

Secret Success Tips for A Hard Money Lender

Hard money lending business was innovated for convenience and faster access to cash. The protection of the lender is in the property offered as collateral. It is really important to ensure the documentation is clean, the title is valid and insurance is valid. To succeed in the business, you need these tips to ensure you take advantage of every good deal that comes your way.

– Liquidity

– Valuation of Collateral

– Borrowers Credit Valuation

– Proper documentation to ensure availability and authenticity of collateral such as insurance and private lender insurance

– Take Care of your Personal Wealth: do not put up everything up for borrowing.

Succeeding in this business is easy with good planning. Be careful about valuation and documentation. Ensure you stay liquid and do not jeopardize personal wealth while at it. If you need help on how to navigate the business, talk to us.

Source

Mckenna, Francine. How can you monitor a borrower without financial statements? https://review.chicagobooth.edu/magazine/summer-2014/how-can-you-monitor-a-borrower-without-financial-statements

 

 

Commercial Hard Money Loans, Sign Over Your Real estate

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Money… There just doesn’t seem to be enough of it. How many people in the U.S. have absolutely zero debt? It would only be fair to guess not that many because if you think about it, isn’t all money kind of borrowing? The US is currently 22 trillion dollars in debt, and it doesn’t look to be going down any time soon. Now, with all this said, unfortunately, according to society and laws and such, money is not endless and even though it is great to be able to borrow it, the day WILL come where it has to be returned. So where does that leave us? Maybe time to start looking into commercial hard money loans.

What is a Commercial Loan?

If you have bad credit, getting a loan can be almost impossible. That’s where this brilliant solution of a commercial hard money loan may be your new best friend. Okay, but what is a commercial hard money loan? Right. Basically, if you own any real estate that is worth a decent amount of money, the bank can decide that its enough to allow you to borrow some more money.

This can be a savior for people to get back on their feet by catching up on their bills. It works because the loan allows for one larger payment, lowering the amount of interest paid, and therefore saving money!

“For a commercial hard money loan, the lending decision is based on the “commercial asset” (Property) as opposed to relying heavily on a borrowers credit, financials, etc…  The loan is secured by a first mortgage.” (Fairview Lending)

What are the Drawbacks?

Now as great as this sounds, and as simple as it may be seeming thus far, there are drawbacks. This solution can be known as a last resort effort because it is very drastic. This works when you need money quickly, but don’t want to give up your real estate…understandable. It is borrowing based on the value of the real estate BUT a risk of losing it if the loan cannot be paid back in the set period of time.

Another reason this is risky is because of the market. Think back to 2008 when everything was crashing and burning and the economy was terrible. If this happens to happen while on a commercial hard money loan, and the value of your real estate plummets, it can be hard to recover.

What’s the Difference From a Regular Loan?

According to Fairview Lending, there are very specific ways that a commercial loan is different than a bank loan. For example, a bank loan requires you to have a credit score of at least 700 whereas a commercial loan requires no credit score.

A bank loan can take up to 2-3 months for it to be put through the entire process and improved for you to get the money. Commercial loans take up to 10 days! The only thing you need to be eligible for a commercial loan is real estate. Banks require much more documentation including income, credit scores, tax returns, and financials.

Where Do They Come From?

Hard money loans are typically issued through companies or private investors and interest rates tend to be somewhat higher starting at around 7%. This is because of a shorter loan duration and a much higher risk. Clearly, there are many pluses to a commercial hard money loan, but also some factors that must be taken into account as well!

If you are trying to decide if a commercial loan is the right direction for you, it is important to weigh all of your options and really evaluate how it will help improve the situation, not just put it off for longer.

You’re Not Alone

One of the worst things to do when it comes to money management is put off paying loans or debts. This only ruins chances of getting more loans and hurts you from being able to even begin to pay off what’s needed. It is an easy trap to fall into, but the best solution available to you is to figure out what will help you pay off the most money, in the shortest amount of time.

Like mentioned at the beginning, most of us have debts because they come so easily…college, a car payment, buying a house, starting a business, etc. There is no reason to feel bad about it, just be smart and don’t think you can act like it doesn’t exist forever.

Sources

https://www.npr.org/2019/02/13/694199256/u-s-national-debt-hits-22-trillion-a-new-record-thats-predicted-to-fall

https://en.wikipedia.org/wiki/Hard_money_loan

 

 

A Projection For Commercial Lending In 2019

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Commercial lenders have to look at what the future holds and how their business will continue. While it is important to be optimistic, it is equally important to be realistic and be ready for any worst-case scenario. Private lending companies such as Arixa Capital are currently in the process of releasing their projections for this year and how they will be able to continue their work.

“We were established to invest in niche asset classes and private markets such as short-term real estate loans. We strive to minimize risk, preserve principal, and generate strong returns and current cash flow to our investors. Arixa Capital specializes in private lending secured by real estate, and we have built a full-service lending and loan servicing platform to ensure a steady flow of investments for our funds.”

Projected Downturn in California

Arixa Capital is one of the first to have completed their assessment. They fear that there will be a significant downturn on California’s West Coast, in particular, for multifamily properties. Prices have become unaffordable even though the West Coast is known for its strong job market and high wages.

Companies like Arixa Capital try to find conservative borrowers whenever possible, which means they don’t have to leverage as much risk. However, if a downturn does happen, it could mean that there will suddenly be a massive influx of investors, particularly those interested in investing in apartments. The result is that hard money lenders are now preparing themselves for an influx of opportunistic investments, so that financing is available should there be a downturn. The verdict is still out, however, on whether and when the next recession will hit.

A decade after the global financial crisis, the United States is expanding at its fastest pace in more than two years, having experienced growth of 3 percent or more for two consecutive quarters. But a long period of U.S. economic growth could be interrupted in the coming years.

Characteristics of the West Coast

California’s West Coast is quite a unique area, however, and this is why experts believe that a downturn is more than likely to happen soon for this particular area. First of all, there has been a huge increase in rental rates. So much so, in fact, that these could become unsustainable. Secondly, lenders are competing to offer better loans, which means they are more than willing to take on higher risks. Should there be a downturn, this would put many borrowers at extreme risk.

The Mortgage Bankers Association (MBA) has recently released its forecasts for 2018, which appear to be strong.

MBA forecasts mortgage banker originations of just multifamily mortgages at $248 billion in 2018, with total multifamily lending at $271 billion. After strong growth in recent years, multifamily lending is expected to hold roughly steady in 2019.

MBA Forecasts

As the largest trade group for mortgages in the country, they surveyed some of the country’s greatest commercial lenders and found that:

  • 80% believe that commercial origination volume will rise in 2018.
  • 50% believe that there will be a 5% or more jump in their own origination volume.
  • 25% believe that there will be at least a 5% increase in origination volume over the market as a whole.

The MBA also released a forecast about multifamily and commercial origination volume, stating that there was a 5% increase between 2016 and 2017, ending at $515 billion. They feel that 2018 will see those levels hold. The analysts at the MBA are optimistic, therefore, and believe that this year will be an excellent year for the commercial real estate (CRE) market due to various fundamentals (delinquency, occupancy, and rental rates) that are strong in virtually every sector.

However, the CRE market is quite far within the cycle and that is a concern. Prices of assets have been rising throughout 2017 and they are now above their past peaks in some classes. This includes the multifamily assets and the office buildings. Yet, the volume of transactions is now not as high anymore.

Western Development

While Arixa Capital is preparing for the worst, Western Development, a different hard money lender, is somewhat more optimistic, while also being realistic about the future.

Western Development is your premier choice for hard money lending. Our company specializes in lending on land, residential and small commercial properties or other collateral. Currently, we fund loan requests in Maryland, Virginia, the District of Columbia and Delaware.

Based in Virginia, they have seen a significant number of people starting to work from home. They are realistic about the fact that this could cause some degree of difficulty for office properties. Additionally, there are some serious issues in the retail industry, shown, for instance, by the difficulties experienced by giants such as Sears.

The chain will shutter 64 Kmarts and 39 Sears stores across the U.S. by April. Sears has lost more than $10 billion in the past few years and weak earnings have caused executives to question the business’ sustainability.

At the same time, Western Development feels that there hasn’t yet been a bubble burst, with the market still favoring sellers in certain areas. While there is certainly a national trend going on, localities still have their own particularities. Hard money lenders that focus on specific geographical areas, therefore, may not struggle to remain in business so long as they are in positive localities.

Hard money lenders like Western Development emphasize smaller loans, which usually are required by risky borrowers. When a recession hits, banks stop agreeing to mortgages, which usually means hard money lenders do better. However, the current conditions are not as good for hard money lenders anymore. People seem to have unrealistic expectations in terms of the rates they can request from hard money lenders, not understanding that rates increase if they present a higher risk. What this means is that a lot of hard money lenders are currently standing by, watching people take on too much debt because the rates are low. History has shown that this inevitably leads to a recession, at which point everything will change once again.

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Hard Money Funding Is It Right for You

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Hard money funding is one of many financial aspects you should be aware of, as this form of funding may come in handy for you when you least expect it.

Before delving into hard money funding and whether or not it’s right for you, it’s important to understand what exactly hard money loans are and what they can do for you. This specific form of asset-based funding is when a borrower receives money secured by real estate and property. Usually issued by private investors or companies, hard money loans are typically short-term with higher interest rates.

As a businessman and financial guidance extraordinaire Dave Ramsey once said, “You must gain control over your money or the lack of it will forever control you.” This rings true for situations involving hard money funding. After all,  you have to be confident and in control of your finances in order to ensure this borrowing agreement benefits everyone. Here are some of the important things you should know about hard money funding and the borrowing basics. With this knowledge, you can decide whether or not this is a funding avenue you want to pursue.

Fast Flexibility with Hard Money Funding

Let’s start with how hard money loans offer a refreshing alternative to tight traditional funding methods. There’s plenty of people out there who unfortunately have been turned away from banks and mortgage lenders to do poor borrowing capacity. Data from a LendEDU study found that 76% of people who apply for a personal loan are rejected, with a low credit score being one of the main factors. The average FICO credit score of an approved applicant was up around 741, while the average American falls short with a credit score of just 687.

That’s where hard money funding comes into play. Borrowers who are turned away from traditional lenders often find success with hard money loans instead, as long as they have the real estate/property investment to back them up. The process of receiving a hard money loan is quite short compared to lengthy bank applications. Plus, the terms of the loan are often suited for a quick turnaround. The majority of hard money loans are used for real estate endeavors such as house flipping. These are cases where you purchase a property and are quite confident you’ll be selling it for a profit within a few years’ time.

If you’ve been looking long and hard for the perfect property, and you’ve finally found it but now you need the money to get it into your name, hard money financing could suit your needs. Whether traditional loans won’t work because you have a less-than-stellar financial history, or if the property you’re purchasing is in need of heavy repairs and won’t qualify for regular loans, hard money could save the day.

The Funding Process of Hard Money

Private investors or investor groups are fond of hard money funding, as they have greater flexibility and freedom to support individuals with their real estate goals. Essentially, private investors have more wiggle room to work with than a traditional funding provider. This means you can approach a hard money lender and pursue your loan options rather quickly. The main thing you have to remember is that hard money loans have higher interest rates than other loans. What’s great about it is you will likely be selling the property in the next few years for a profit that will allow you to pay off the loan as anticipated.

Real estate investors are intrigued by hard money loans because the loan value is actually based on the expected resale value of the property. This means you would be able to get a 100% loan for the purchase of the property and the cost of repairs. For owners who are falling into foreclosure, hard money funding can give them the chance to fix their credit rating or sell their property without the stress of the bank breathing down their backs. As with any lender, hard money lenders expect to earn a profit from your property. This means you want to ensure you can meet the loan obligations and that everything is written down accordingly. Working with a professional hard money lender with a proven track record is the right way to pursue your property goals in a trustworthy financial situation.

What’s Next?

If you’re ready to further explore your hard money funding opportunities, it’s time for you to get in touch with a reputable lender who could help you. Exploring this path of funding is something you won’t regret, and it will open up new doors for a bigger and brighter future for you.

Brown, Mike. “The State of Personal Loans in 2018.” LendEDU, 31 May 2019, lendedu.com/blog/state-of-personal-loans-in-2018/.

Sweatt, Lydia. “19 Wise Money Quotes.” SUCCESS, 22 Mar. 2019, www.success.com/19-wise-money-quotes/.