Real Estate Assets Are Interesting Investments For Private Hard Money Lenders

The standards for mortgage qualifications are becoming increasingly tight. While this makes life difficult for some, it also means there are new opportunities for private hard money lenders out there. Indeed, anyone who has some money could consider becoming involved in this, particularly because they are backed by the security of always having a buffer of between 25% and 30% since that is the maximum loan to value. Naturally, it is important to exert due diligence in this.

Crowdfunding and Self-Directed Investment Opportunities

Numerous experts agree that there are more and more opportunities out there for private hard money lenders. They are there to fill the gap left by the institutional lenders stepping away from mortgages as a result of the Dodd Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank Wall Street Reform Act is a law that regulates the financial markets and protects consumers. Its eight components help prevent a repeat of the 2008 financial crisis.

Traditionally, private investors would opt for an IRA or 401k with a focus on real estate investments. Doing this conservatively means that no more than 20% of the retirement account is invested in this, which means another 80% can be invested in a range of other assets, including crowdfunding. The added benefit is that crowdfunding investing can be done outside of the retirement accounts as well. Indeed, again and again, this has been shown to be very secure.

Over the last several years, there has been extraordinary interest in private lending, as it has proven to be both profitable and—on a risk-adjusted basis with proper underwriting and due diligence—secure.

Property Valuations Are Conservative

One of the things that set private hard money lenders apart from banks is that they use a very different underwriting process. Traditional mortgages are limited to 90% for 30-year mortgages. Hard money lenders don’t focus on an applicant’s credit history, instead of looking at the value of the property. They then provide a loan for no more than two years. Additionally, hard money lenders offer much higher interest rates than traditional lenders. Lastly, hard money focuses strongly on distressed properties, rather than traditional homes.

The security of a hard money loan lies in the property itself. This means the valuation methods used have to be more conservative. The professional appraisal is important, but other tools are used as well. This is because appraisals are geared towards traditional mortgages, are based on the opinion of just one individual, are often wholly different to the agreed purchase price, and don’t consider the potential in distressed properties.

Hard money lenders take all the information available to them and make a decision based on that. They simply want to know whether they can get their money back and whether they can make a profit, even if this means taking the property back. This is also why they will only offer a 75% loan to value as a maximum, which gives them that protection. Additionally, they look at properties as if they are the fixer and flipper themselves.

With their singular focus on turning a quick profit, real estate investors are often regarded about as warmly as used-car salesmen. But experts say they’ve played a major role in spurring the housing market’s recovery. By targeting distressed properties, they’ve reduced neighborhood blight and increased the supply of homes in a region where inventory has been very tight.

Clearly, those who have money to invest, and who have at least a baseline of understanding of the housing market, should consider becoming hard money lenders. In so doing, they not only help themselves, but they also help assure economic recovery.

California’s Barrett Financial Group Now Offers Hard Money Loans

In California, both the commercial and residential real estate markets are booming. As a result, people are looking for new methods to finance real estate purchases. It has recently been announced that Barrett Financial Group has developed a number of hard money loans for a range of different types of properties.

Extremely trustworthy, reliable, fast and experienced hard money lenders in California. We provide local hard money for your next new construction project, commercial property acquisition, fix and flip, rehab or buy and hold. Give us a call today to submit your request for your next hard money loan.

Barrett Financial Group will be offering hard money loans for non-owner occupied and residential occupied properties, rehab loans, fix and flips, trustee sales, short sales, cash out refinances, REO finances, commercial loans, business investment properties, land loans, and construction loans. These products will also be available across the state, in all of its major markets.

Barrett Financial Group is a private funder that has many years of experience in every element of real estate lending. This ranges from fix and flip loans to refinancing to bridge loans.

Bridge loans are temporary loans that bridge the gap between the sales price of a new home and a home buyer’s new mortgage, in the event the buyer’s home has not yet sold. The bridge loan is secured to the buyer’s existing home. The funds from the bridge loan are then used as a down payment for the move-up home.

The group focuses strongly on the needs of customers, ensuring that they are efficiently and rapidly provided with the money they need for their real estate projects. Of particular importance is that Barrett Financial Group is very well-known and trusted in the industry.

Barrett Financial Group is outstanding. I have used Trevor and his team twice in the last two years. They are fast, friendly and focused on getting you a great loan/rate. Each time I have found Trevor to be very attentive, he’s always available, approachable and someone you can trust. I highly recommend Barrett Financial.

The organization has built its reputation in Phoenix, AZ, where their hard money lending programs have long been established. For a long time, the company has wanted to expand into California, particularly since they have experienced significant growth over the past three years. The goal for the organization is to assist people who have ambitious real estate projects, ensuring they can turn those into realities. The group works in partnership with a number of highly reputable partners, and they always look for other investment sources to join them.

Naturally, the organization does have acceptance criteria for those who want to apply for a hard money loan. That said, they have numerous criteria that people could fall back on, making their acceptance rate substantially higher than that of many other loans of their kind. The criteria include the ability to provide property collateral, insurability, and credit history. However, as it is a hard money loan, the latter criteria is of the least importance. Indeed, traditional lenders are failing borrowers by placing so much importance on credit score alone.

Traditional lenders provide funding for the majority of financed real estate transactions out there. They loan up to 80% of the home’s purchase price, and with certain types of loans, well over 90%. When it comes to hard money lenders, however, they follow different criteria for underwriting loans. Sure, they do take credit score into consideration, but they also look at a number of other factors.

Essentially, the Barrett Financial Group believes that if people have a poor credit score, the should not be excluded from receiving financing or loans, particularly for businesses or real estate purposes. This is a mentality that they have instilled in all specialists that work for them. Together, they ensure that clients and customers are able to build their own knowledge and find the best loan programs for their customers.

California has welcomed the news that Barrett Financial Group will be offering these loans, not in the least because there is now a flourishing fix and flip market.

California’s real estate markets have performed impressively in 2016. Home sales in most markets are robust and home selling prices continue to rise. California’s performance shows the resiliency of its huge economy, which has regained over 2.2 million jobs since 2010, which more than replaces the 1.3 million jobs lost during the Great Recession. Tight housing inventories, strong buyer demand, and appreciating home prices make California an attractive market for fix-and-flip investing. Here is a closer look at California markets that offer outstanding investment opportunities.

Fix and flip properties are notoriously difficult to receive a normal mortgage on, simply because the intention is to only own them for a short period of time. Most traditional mortgage lenders will only provide loans for at least ten years. With great difficulty, people may be able to find a five-year mortgage, but the early repayment penalties are very high on these. Hard money loans, by contrast, are designed to only be in place for a short period of time, usually for no more than two years, which makes them ideal for fix and flip properties.

Barrett Financial Group brings with it substantial years of experience. They are a trusted partner both for those looking for funding opportunities and loans for fix and flip or other real estate projects, but equally for those who have investments to make and want to ensure that this is managed the right way. It is expected, therefore, that the group will do exceptionally well in this state, particularly if their success in Arizona is anything to go by. The overall impact this will have on the real estate market in California will also be very interesting to keep track up, as it could potentially give more people the opportunity to fix and flip and, eventually, to invest in and become landlords or property managers, to name but a few.

Getting a Hard Money Loan with a Bad Credit Standing

One of the questions people often ask about hard money lending is whether or not it is possible to get such a loan if the applicant has bad credit. Credit standing certainly does play a role in determining whether or not someone can be approved for such a loan, but it is certainly not the only thing, nor is it the thing that matters most to lenders. Instead, a hard money loan is a type of investment, and the providers of these loans are interested in various other issues first.

Traditional Lenders Continue to Fail the Market

Almost all real estate transactions are funded by traditional lenders. Those will always need a down payment, usually of around 20%.

The amount of minimum down payment required will depend on the type of loan that you choose. Each mortgage loan type carries its own guidelines. Gone are the days of 80 / 20 combo loans and liar loans, also known as stated income loans. Today, underwriters closely scrutinize a borrower’s ability to repay the loan. They don’t want borrowers to overextend themselves and end up in foreclosure or a short sale down the road.

That being said, there are numerous other loan constructions out there. VA mortgages, for instance, are available for veterans and no deposit is required at all. However, if an investor wants to purchase a property and get a mortgage for this, they will face three significant problems first:

  1. A traditional lender looks solely at how much a property is being sold for, which is often not its actual value.
  2. A traditional lender will not agree to provide a mortgage for properties that are in disrepair, as they would need to invest in improvements should they decide to liquidate the property.
  3. A traditional lender places the focus on the credit score of the applicant. This means that if someone has perfect credit, and happens to come across an undervalued property that is also in perfect condition, he or she will be able to flip it with ease. In reality, however, finding that applicant and that property is like finding a needle in a haystack.

The housing bubble collapse of 2008 clearly still has repercussions.

Investors and consumers are likely to live with the repercussions of the financial crisis for years to come. In many countries, including the U.S., consumers remain heavily leveraged and many homeowners are “underwater,” owing more than their homes are worth. As consumers continue to deleverage and repair their finances, their purchasing patterns may be permanently altered.

Acceptance Criteria for Hard Money Loans

Hard money lenders are completely different from traditional lenders. They have their own criteria that will determine whether or not they agree to underwrite a loan. One of those criteria is the credit score, but that is certainly not the only one, nor is it the deciding factor. Rather, hard money lenders are interested in things such as:

  1. How much a property will be worth after it has been repaired.
  2.  Whether the applicant already has experience in investing in real estate.
  3. Whether the applicant is happy to invest money into the property as well.

Naturally, someone with good credit will be more likely to be accepted for a hard money loan. However, someone with bad credit is not automatically dismissed as a possibility either. For a hard money lender, what matters is the bigger picture, and not a singular metric image, which is what traditional lenders tend to look for.

Tips for Getting Approved for a Hard Money Loan If You Have Bad Credit

If you have bad credit, it is important that you think of ways to increase your chances of being approved for your hard money loans. There are three key things that you should focus on:

1. Make sure you have been fully thorough in your due diligence. The greatest priority for the hard money lenders, is that there is an investment opportunity. You are their investment, so you need to make sure that you have a proposition that sells yourself. This means performing due diligence right from the start.

The due diligence period in a real estate means embarking on the necessary steps to perform calculations, review documents, research the company and essentially do your homework for the investment BEFORE you actually make the commitment.

You need to be able to show, in your proposition, that you have covered every angle. This also means being able to explain each element to the lender.

2. Make sure that you can explain why you have bad credit. Credit history is important to a certain degree, but lenders are far more understanding of the fact that things can go wrong in your personal finances. If there are any extenuating circumstances that caused you to have these problems, and you can explain that there is no reason for those problems to return, then it is likely that the lender will be very lenient and understanding.

3. Make sure that you give the lender peace of mind. Hard money lenders are private investors so you need to approach them in that manner, showing them that you are serious. Contribute as much money as you possible can yourself, have an excellent exit strategy in place, demonstrate your ability to make the necessary monthly payments and the final payment, and so on.

Regardless of your credit score, the above three steps should help you to have a greater chance at getting approved for a hard money loan. What these lenders want to see is that their money will be returned to them, with interest. That means having a solid, well-researched proposition in place.

As you can see, it is possible to receive a hard money loan even if you have bad credit. This does not mean that your credit score doesn’t matter, but rather that it doesn’t matter as much as what it does to a traditional lender. You are far more likely to be able to receive a hard money loan if you have a solid investment proposition in place that is viable and likely to succeed, regardless of your credit history.

Hard Money Lenders are Here to Help

Hard Money Private Lenders Are Here To Help

A hard money private lender will give you a loan that many inflexible lending institutions won’t approve. If a hard money loan is the best way for you to finance a project, start a business, buy a house, or a host of other things, this is for you. Read on to discover how hard money lenders are here to help you.

Why Hard Money Lenders Help Others

Private hard money lenders are real estate investors who want to fund certain kinds of purchases. These borrowers are often real estate flippers, small business owners, and people trying to complete a project. The liquidity of private hard money lenders is their best asset. It’s the private lender’s liquidity that allows them to diversify their portfolios by lending money to unique business opportunities.

There are even crowdfunding companies, like Groundfloor Finance out of Atlanta, that are joining the movement. Groundfloor Finance combines the funds offered by smaller investors in the industry. In 2019, the average amount of hard money loans combined came to $12 million a month.

Jeffrey Tesch manages another hard lender company out of Connecticut called RCN Capital. “RCN should loan out $500 million this year. Business is better than ever, but it’s in the workforce segment,” he says.

The Concrete Tangibles in Hard Money Private Lenders

In the simplest definition, private hard money lenders are people who have large amounts of money to invest. These lenders have the intent to loan money to people with ascertainable financial projects. Hard money lenders will decide on your loan application in as little as one day, although many can take seven to ten days. That’s far less than traditional financial institutions can offer.

The hard money private lender is interested in projects, businesses, or people with solid plans and an attainable goal. They do require collateral, which can be anything from your car or boat to your home or property. They will look at your credit and job history, but they’re more interested in your collateral for the loan.

Hard Money Private Lender: Follow the Rules

The best hard money private lenders want to build a long-term relationship with you. They’re somewhat flexible with people they know they can trust. If you establish a good relationship with them, they’re more likely to partner with you on your next project or business idea.

If you used your home as hard collateral, private money lenders are bound by the Dodd-Frank Wall Street Reform and Consumer Protection Act law. This law encourages hard money private lenders to extend loans to borrowers in real estate.

The Dodd-Frank law regulates what most private lenders can loan you with your home as collateral. The hard money private lender can loan you up to 70% of the fair market value of your home. On average in the U.S., Americans have over $15.2 trillion in home equity. That can make for some great hard money private loans.

Example

Typically, the hard money lender will give you a loan of up to 70% ARV (after repaired value) of your home. For example, say you have a home worth $45,000 that needs $20,000 in repairs. You expect the home to be worth $100,000 after the repairs are complete. That means, the hard money loan may be for up to 70 percent of $100,000, or $70.000. The $70,000 covers your house and repairs.

If you don’t pay back the loan on time, the hard money private lender has the option of taking your property and selling it. It’s prudent to be honest with your hard money lender. Let them know the true value of your property or other collateral you’re using. Give the private lender a financial or business plan on what you want to do, and how you’re going to do it. Let them know how you’re going to come up with the rest of the money you may need.

Final Thoughts

No matter the amount of the private hard money loan, have a lawyer review the terms for peace of mind. If you’re comfortable with the loan terms and are confident that you can pay it back on time, a hard money loan may be right for you.

Sources

https://www.bloomberg.com/news/articles/2019-06-12/high-interest-lenders-up-40-even-as-home-flipping-trend-weakens

https://www.congress.gov/bill/111th-congress/house-bill/4173

https://fisher.osu.edu/academic-departments/department-finance/dice-center/working-papers

Bad Credit Not A Barrier Towards Getting A Hard Money Loan

A lot of people think that, if they have bad credit, there are no finance options available to them at all anymore. However, it is interesting to note that hard money loans are less interested in credit scores and more interested in a number of other things. While there certainly are significant disadvantages to taking out a hard money loan, the fact that they are available for people with bad credit makes them very interesting.

The Problem with Institutional Lenders

A lot of people think that the world of mortgages is dominated by banks and other forms of traditional and institutional lenders. In reality, this is no longer the case as non-traditional lenders begin to take over the financial system.

In 2011, 50 percent of all new mortgage money was loaned by the three biggest banks in the United States. At the same time, six of the top 10 largest lenders by volume were non-banks.

Traditional lenders usually lend between 80% and 90% of the value of a property. However:

They only look at a property’s purchase price, not its potential.

They don’t provide mortgages for distressed or vacant properties.

They care mainly about the credit score of the applicant, rather than the money to be made on the property.

The Hard Money Lender Experience

Hard money lenders also care about credit score, but not much. Their underwriting process is very different, however.

Hard money lenders are primarily concerned with the amount of equity the borrower has invested in the property that will be used as collateral. They are less concerned with the borrower’s credit rating. Issues on a borrower’s record such as a foreclosure or short sale can be overlooked if the borrower has the capital to pay the interest on the loan.

What a private lender is interested in is what a property will be worth after repairs. They are also more interested in whether a borrower has any real estate investing experience. Finally, they want to see people who are happy to put their own money into the pot. Naturally, a good credit rating helps in all of that, but it is not the be all and end all of the process.

How to Get a Hard Money Loan Approved if You Have Bad Credit

If you do have bad credit, then the following tips may be of benefit to you in order to increase your chances of approval:

  1. Focus on due diligence. Make sure that you write a stellar proposition that they simply cannot say no to, by covering every angle.
  2. Provide an explanation as to why your credit score is less than perfect. Explain the things that have gone wrong in the past and what you have done to ameliorate the situation.
  3. Try to give the private lender peace of mind. You need to showcase that it is also in your interest to have a successful project. To prove that you believe in your proposal, you should put as much of your own money towards it as you can. You also need to write an exit strategy and explain how you intend to repay the loan.

As you can see, it is possible to get a hard money loan even if you have bad credit. While that doesn’t mean your credit score doesn’t matter, it is more a case of other things being far more important. That is one of the main things that set private lenders apart from traditional institutions. A hard money lender wants to invest in projects that look profitable and likely to succeed. Hence, they will look at each proposal individually, rather than having a tick box exercise like traditional lenders generally do.

Invest Money in You

Private Money Lenders Want To Invest Money In You

Do you want to flip houses or invest in real estate? If you don’t have the money, getting a loan can be the next best thing. However, traditional loans from banks and credit unions often take too long and require good credit. Consider private money lenders if you are serious about starting your new business in real estate. Read on to learn more about how these lenders can help you and why lenders want to invest money in you.

Who Are Private Money Lenders?

Who are private money lenders? According to Financing Strategies For Real Estate Investments, a private money lender is “a noninstitutional (non-bank) individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction.” Most private money lenders come from strangers who are interested in investing their money in real estate.
However, friends and family are another alternative lender to consider. If your friends and family have extra money to help you, then it can be convenient to ask them for the loan. They know they can trust you, so you don’t need good credit to get a loan from them.
You can also ask co-workers or other people you have connections with for a loan. However, some people usually have to resort to finding private money lenders online.

Why Lenders Want to Invest Money in You

Why do private money lenders want to invest money in you? Most of them want to do something with the vast amount of money they already have. However, some want to invest so they have enough after retirement. As stated by Financing Strategies For Real Estate Investments, a study showed about 22% of American workers have at least $100,000 saved up for their retirement. Not everyone who retires will leave the money in the bank where it won’t do much good.
Instead, those in retirement, or close to it, want to invest their money to earn more for their future. They commonly profit from the interest they make on the loans they extend to borrowers for flipping houses or investing in real estate. For that reason, there’s always money out there for you to borrow for your new real estate business. All you have to do is look for people willing to invest in your idea.

Getting an Approval

You don’t need good credit to get a private money loan. That’s because these lenders have less restrictive borrowing parameters than traditional lenders. Instead, they look for an excellent plan for the money they’re investing. Creating a mutually beneficial plan for profit will only make a stronger case for them to approve you.
You should also prepare for the unexpected when you are flipping houses or investing in real estate. You might find asbestos in the attic or too much mold in a wall that will cost you more money than you planned on spending. That can create problems if you don’t have a backup plan for how you will pay for it.
For example, you may not be able to stay on schedule to sell. Or worse, you risk losing the property to the lender altogether when you can’t repay the loan. However, if you have a backup plan, then lenders are often more willing to approve you for a loan. That’s because backup plans give the lender faith that you’ll be able to repay the loan on time, despite these kinds of surprises.

The Downside of Using Private Money Lenders

There are several reasons why using private money lending can be a good thing for getting your business up and running. However, always consider the pitfalls of using these lenders before applying for a loan.
Getting a loan from family and friends can be another option for you. But should you do it? Hiccups in repaying those closest to you can deteriorate otherwise healthy relationships, especially when payments are late or behind.
You will also have to deal with higher interest rates with private money loans than you would with traditional ones. So, consider whether building your real estate business is worth the extra money you have to pay these lenders.
If you want a private money lender to invest in you, then research online to find the right one right for you. Get a few offers before deciding on one, so that you know you’re choosing the best loan available to you. Lenders want to invest money in you, so get started today and make your dream business a reality!

Sources