Hard Money Loans: Cracking the Hard Situations

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When you’re dealing with hard situations and need help fast, a hard money bridge loan is the type of loan you may need. Many people are unaware of what a hard money bridge loan (1) is or how a hard money lender works. In its most basic terms, a hard money loan is a short-term loan secured by real estate. When you are racing against the clock to obtain a loan, hard money loans for your hard situations you can be approved sometimes in as little as 48 hours.

Length of Your Hard Money Loan

The length of your loan typically runs about twelve months, but lenders can extend it for two-five years in special cases. Significantly, using hard money loans for hard situations help crack difficult financial times.  The hard money loans are considered temporary and beneficial answers because you don’t have to pay the principal off throughout the life of the loan. You’re only paying the interest or the interest with limited principal through the loan’s life. When the loan term is over, you have a balloon payment due which includes whatever you have left on the hard money bridge loan to pay.

What makes hard money loans work, and be approved quickly, has everything to do with your property’s value. Hard money lenders may check your credit score, but they’re primarily concerned with the real estate property you’re putting up. Many hard money lenders use what’s called the loan-to-value ratio (LTV) to determine how much they will lend you.

How Fast are Hard Money Loan Lenders Growing?

It’s the LTV ratio that helps hard money lenders evaluate your loan risk. The more money they are going to lend you, the higher the hard lender’s risk. When you have assessed a higher risk based on your LTV ratio you will have to:

  • Pay a higher interest rate on your loan
  • You may be assessed additional costs, like fees or the lender may  need you to get mortgage insurance

But you won’t have any problem find a hard money loan lender. Hard money loan lenders are up 40% since 2016. There’s a lot of activity in the hard money loan markets. A hard money commercial loan lender knows each hard money loan will have different percentage rates based on how much the loan is and what their real estate property value is.

Crowdfunding companies are jumping on board to become hard money loan lenders too. They are loaning out millions of dollars at very high-interest rates which makes them a fortune. But that’s not the way the real hard money lenders like to do business. Most ethical, hard money lenders are in the business to help those who need quick loan approvals while making a reasonable profit for their business. Those hard money lenders approve their loans with a sense of fair play.

What are Hard Money Loans Used For?

Business is better than ever for hard loan lenders, but they try to “work with those who need them most.” This is usually in the low to middle housing and commercial markets. That’s the market where people who are hit with unexpected bills or events, don’t have the cushions of large savings accounts. Private money or hard money lending is also always good for certain populations or targeted groups like those who flip and flop houses. Hard money loans can be great for short-term or long-term investors who need their financing fast.

Many buy and hold investors will use hard money lending to buy and renovate properties before they refinance the homes through conventional loans. Another common hard money loan need is when long-term investors need to season their property. There are as many reasons as there are dollars to lend through hard money loans. But cracking the hard situations is done on a one-on-one case basis.

It’s not uncommon for your loan to be approved through a hard loan lender before you walk out the door. A prequalification can be faster than that. You can be prequalified in as little as three minutes. More importantly, you can get your funding, cash in hand in as quick as 10-15 days. It is the quick turnaround time, and the ability to take care of whatever emergency you’re dealing with that makes hard money loans so popular.

When You’re Ready

When your ready for your private money lender experience reach out to us. Find a hard money lender who has the expertise you need, with the interest rates and costs you can afford. You want your hard money lender to have the real estate knowledge needed to value your property fairly. Get a hard money loan with terms that help you deal with your hard situations. You can now take your first financial breath in a long time.

(1) https://www.fdic.gov/regulations/safety/manual/section3-2.pdf

Private Hard Money Lender Means Quick Loan Approval

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When you need money quickly for your business, navigating your way through the mountains of paperwork can be hard. What a traditional lender demands can make a quick loan approval deal untenable.

In this instance, more often than not, your best option is a private hard money lender. You can attempt to go the traditional route, but if your application has been rejected then you should consider a private hard money lender.

Why is it Quicker?

Private hard money lenders don’t have the same regulations as normal lending institutions. Many banks were bailed out during the crash in 2008 and new laws have rightfully ensured that they can’t simply give out loans without fulfilling some strict criteria.

This does protect consumers as well as the banks, however, it can make getting a loan quite difficult. Getting approval from a private hard money lender can be easier as they look at the information available to them on a case by case basis. Your credit score is not much interest to them, your assets are.

“Small- and medium-sized businesses need access to a diverse range of finance options, including non-bank lending. These new forms of finance are still small in scale today but they should, over time, bring additional choice and greater competition to the lending market.” Vince Cable, formerly of Shell Oil

A decent private hard money lender will look at what you want the money for, whether they are satisfied that you will be able to repay that debt on their terms and the possibility of a future relationship. Private lenders comprehend the need for quick loan approval. They are usually astute investors who know that time is of the essence in making a good deal, so they will assess your situation quickly.

How Does Quick Loan Approval Work?

Private money lenders can offer you more flexibility in terms than traditional lending institutions. However, in the majority of cases, the length of the loan will be much shorter than normal loans or mortgages. Usually, the terms are around 2 – 5 years maximum, and their interest will be higher. However, they won’t have to refer to a list of stringent conditions or board members who are imposing regulations, and not having to do this speeds up the process.

It is pretty simple to apply for a private hard money loan. First, you will need to present them with your financial data – if that is for your business that you are taking the loan against, or if it is your own personal net worth.

You also have to offer collateral. This is one of the big differences between a traditional loan and a hard money loan. In this case, the collateral is usually the property or asset that you are actually using the loan to acquire. In business, it could be against your premises as you hope to extend or pour money into a new product.

If it’s to flip a property, which many hard money loans are for, then you need to provide information on the property, the area and the potential for profit. You still have to do your homework, they just won’t spend as long scrutinizing it as a bank would. Many private hard money lenders now let you apply online, and some promise approval in up to 36 hours.

Where to Find a Private Hard Money Lender?

Over the past few years, the number of private hard money lenders has jumped. According to the American Association of Private Lenders, there are now almost 40% more since 2016.  So, it’s easy to find one, but make sure you go for a private money lender with a good reputation. You can find a host of both large and small private hard money lenders online. Don’t ignore local ones, but do try and get some referrals.

Private hard money lenders used to be viewed quite cautiously, but times evolve. In a business environment, working capital is required and often a traditional loan process won’t let you access the money in time. It can be beneficial to build a relationship with a private hard money lender to finance deals and grow your business.

Resources:

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

 

 

What Do Hard Money Lenders Look For?

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For individuals seeking capital to purchase a new home, avoid foreclosure, or make renovations, a traditional bank loan doesn’t always work out. Things like a poor credit score or little equity can quickly lead to rejection. However, in recent years, hard money lenders have provided people with a way to get the money they need for real estate projects or to keep their homes.

Unlike banks who look at a borrower’s financial history when considering whether to approve a loan, a hard money lender uses the property as collateral. This means applicants have a much higher chance of getting approved for quick cash. House flippers often turn to these private lenders to secure a new investment before it’s sold. They’re great resources for real estate investors, especially when home sales are up as they are right now. According to the Department of Housing and Urban Development, sales for single-family homes saw a 2.5% increase from June to July in 2019.

However, even though hard money lenders are concerned with credit scores, borrowers should still know what they’ll be considering when evaluating their loan application. That’s why we’re going over some of the top things these lenders keep their eye on.

The Value of the Property Used as Collateral

Because the house in question will be used as collateral against the loan, one of the lender’s primary concerns is the total value of the property.  They need to know that if the loan isn’t repaid, they can recoup their losses. To do this, they’ll need to determine the loan to value ratio. This may require having an appraiser look at the property or having a real estate agent run a broker price opinion that will analyze the value.

If the borrower is seeking a loan to complete renovations on a home they own, the lender will determine how much the property will be worth after the upgrades are made. This is why house flippers often go after hard money loans. Lenders may also include land in the appraisal of the property as well.

It’s important to keep in mind that many hard money lenders won’t give loans for properties occupied by tenants. Potential legal issues could make the loan too risky.

The Borrower’s Commitment to the Property

The last thing a hard money lender wants is for the borrower to default on the loan. This is why they look at how committed the individual is to the property before approving the loan. Yes, the lender doesn’t care about a borrower’s credit score, but they still need to have confidence that the repayment terms can be met.

If a borrower needs the loan to secure the purchase of a home, the lender may want to know if they’ve put any type of down payment towards the property. If they have, the lender knows the borrower has something to lose if they don’t make their mortgage payments. This added reassurance goes a long way.

Lenders may also want to know what the borrower’s plans are for the home. If they plan on flipping it, what renovations do they intend to make? Once they sell the renovated home, what’s their plan for paying back the loan? Many house flippers have a portfolio of investments they’ve made. This is a good tool for securing hard money loans.

The Ability to Repay

The British economist John Maynard Keynes once said, “If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”  Hard money lenders must take this to heart. There’s certainly no surefire way to know a borrower will pay back the loan. However, lenders can look for at a few things that will help them determine whether the venture is a good idea.

Lenders often look at a borrower’s exit strategy for fulfilling the repayment terms. For example, if they’re using the loan to secure a piece of commercial property, the lender may want to know how they intend to start earning a profit. Lenders may also want to know how motivated the borrower is to pay back the loan. If a house flipper doesn’t intend to start renovations on the home anytime soon, a lender may be hesitant to approve the loan.

Hard money lenders are investors too. Because these loans have higher interest rates and shorter terms, lenders can use the repaid money for new loans. Looking at the items discussed above is the best way they can protect themselves.

Resources:

https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market-Indicators-Report-August-2019.pdf

Private Money Loan Primetime

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Real estate markets rise and fall. Different factors affect prices – from schools in the area to good transport links, to the overall economy. It seems that mortgages and loans are increasingly hard to get when dealing with traditional lenders. As with any market, it evolves. In this case, it has meant it’s primetime for private money loans, otherwise known as a hard money loan.

With one in every 370 homes in the U.S. filing for foreclosure in the first six months of last year, there is space for people to pick up bargains. It also means smaller real estate investors can start investing. This has created a situation where private money loans are king. Traditional lenders aren’t lending as much as they used to; their terms are becoming ever more stringent. Private money lenders are becoming more recognized and reputable and more people want to know how it works. It is prime time for private money loans.

What is a Private Money Loan?

A private money loan is a primetime loan that is usually made based on the value of the property. In this way, it is different from normal loans from banks and lending companies, as it isn’t based on the credit of the person buying the property. The property itself is used as collateral for the loan.

Private money loans have much shorter terms than traditional loans too and interest rates are higher. Most terms are between one and three years. Private money loans are risky – they should only be taken if the person has knowledge of the market in the area and more particularly the value of the property they are buying.

The main reason for getting a private money loan is to buy and flip a house. This way, both the lender and the buyer can make a profit. The buyer can get a bargain with homes that have been foreclosed on, or through a short sale. They carry out the work needed on the home and put it back on the market for a higher price, thus making them able to pay off the private money loan and hopefully take home some profit.

Why is it Primetime for Private Money Loans?

Private money loans can be used for any kind of short term financing. They are a great option when you don’t qualify for a normal loan and if you have equity in your property. If you can foresee a way out of your financial bind in the short term, then it can be a primetime to get money quickly.

Managing Director of Connecticut-based lender RCN Capital, Jeffrey Tesch, says that “business is better than ever” in the workforce housing segment.  More homes are now being bought up and flipped. He said that he expects his firm to loan around $500 million for real estate deals 2019.

Another reason why the private loan sector is booming is that companies want to diversify. They have assets but they don’t have hard cash. When they see an opportunity they want to jump on it quickly. Private money lenders don’t require borrowers to go through a lengthy process to apply, so the money can be received quicker, which is a serious advantage in a fast-moving world.

Private money lenders aren’t bound by the same regulations as banks and other traditional lending institutions. They draw up their own terms and the customer either agrees or goes elsewhere. This means that they can pour their money into investments that they believe in, and make a nice profit in the meantime.

Should I Get a Private Money Loan?

If you need an injection of cash for your business, then a private money loan may be a good option.  If you have spotted a property but you can’t fulfill traditional requirements, you could take advantage of a private money lender.

Most private money lenders won’t take on an investment that they don’t have faith in, even with the high-interest rates. Reputable private money lenders want to build relationships that are beneficial to both parties.

Resources:

https://www.attomdata.com/news/market-trends/foreclosures/midyear-2018-u-s-foreclosure-market-report/

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

 

 

Hard Money Brokers

Hard Money Brokers and Hard Money Lenders

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When you need money quickly, traditional loans are often not the best option because getting approval can be difficult. Many people who are looking to start investing in real estate turn to hard money lenders. Understanding hard money loans is important. This guide walks you through a few things you need to know before choosing hard money brokers.

Your Credit Score Isn’t Important

When you apply for a traditional loan, your credit score is considered to be very important. Hard money brokers aren’t as worried about it because you have to put down something as collateral before you can be approved for the loan. Traditional loans often require 7% as a down payment, whereas, you can use the property that you are buying as collateral or property you already own for hard money loans. The amount of loan you possibly qualify for will be dependent on the value of the property that you are using for collateral. The hard money lenders will typically provide you a loan that covers a portion of the overall value of the property.

Hard money loans are considered to be high risk. If you don’t pay your loan on time, the lender will have to sell the property in an effort to get their money back. If they approve a loan for the full value of the property, getting the money back if you default will be slim to none. According to Consumer Finance, for traditional loans ” Loan amount must be $484,350 or less in most counties and may be as high as $726,525 in high-cost counties. ” Hard money loans do not have such a stipulation.

Interest Rates for Hard Money Brokers are Often Hefty

Hard money lenders do not lend money to people out of the kindness of their hearts. The transaction needs to be profitable for them in order for them to make the loan. This means that they have to charge an interest rate for the loan that takes some of the risks out of it for them. Higher interest rates are attached to hard money loans than traditional loans. Since they require less stringent stipulations to be met, they can be easier to get. This often makes the higher interest rates worth paying for many borrowers.

Approval Takes Less Time

Traditional loans can take a long time for approval. Many stipulations must be met and then the lender, typically a bank, takes often more than a month to approve a loan. When you need money to buy a property that is up for auction or simply selling at a great price, you need to be able to get the money quickly. This is where a hard money loan comes into play. You can often get approved for a hard money loan within a very short period of time. This allows you to never have to miss out on great deals.

Your Loan Needs to be Repaid in a Timely Manner

Hard money loans often have the requirement to be repaired in a very timely manner. The loan agreement has stipulations for when the entire debt needs to be repaid. This is often just a few years or less. You don’t have to make a lump payment to pay it off though. Many people who use the loans do pay it off in a large payment when they sell the property. Most hard money loans are used in the house flipping business.

Choosing Hard Money Brokers Isn’t Difficult

Choosing a hard money lender to work with doesn’t have to be difficult. You simply want to work with a lender that has experience with hard money loans. An experienced lender will have the paperwork already created. They will be able to answer specific details when you ask them and get back to you quickly about whether or not you have been approved for the loan.

Before applying for a hard money loan, you need to know exactly how much money you need. Have an attorney look over the application to ensure that you understand the stipulations of the agreement. You need to be sure you know how much the loan will be for, how long you have to pay it back and what the interest rate will be. Once you are approved for the loan, you can buy your property and get started with your project right away.

Resources:

Consumer Finance – https://www.consumerfinance.gov/owning-a-home/loan-options/conventional-loans/

Down payment for traditional loans – https://www.nerdwallet.com/blog/mortgages/20-percent-mortgage-down-payment-dead/

Definition of hard money loan – https://www.investopedia.com/terms/h/hard_money_loan.asp

Fast Hard Money

Fast Hard Money When Its Needed

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Do you need a loan right away? Some people find it too hard to get traditional loans from credit unions or banks. Hard money loans might be just what you need when everyone else is denying you money for your new investment idea such as flipping houses. Learn more about how hard money loans can help make your dreams of real estate investment a reality.

Why You Need Fast Money

Are you looking into flipping houses as your new career change? If so, you might need money right away to make this happen. You might be desperate for a money loan as quickly as possible. Other investors buy real estate property off the market in a blink of an eye, especially if they see similar potential. This means you need the money right away to buy it before another buyer grabs the opportunity for themselves.

Most traditional money lenders take too long to grant you the loan. Or you might not be eligible enough to get their approval. They might take as long as 30-45 days to approve you for one. By then, someone else will have used their loan or cash to buy the property you had your eye on.

So, what can you do? You don’t have to give up because hard money loans can be the answer to all your money struggles.

How to Get One When You Need It

Have you ever heard of a fast hard money loan? You can easily search for reputable hard money lenders online. There are a lot of options to choose from, whether it’s companies or individuals who’ll invest their money into your new lucrative business. With it, you can restore those real estate properties, and both of you can gain profit from it.

According to Washington State Department of Financial Institutions, “hard-money loans are based primarily on the value of the property with which they are secured, which the borrower already owns or is acquiring with the loan.” Therefore, you still have to give up some types of property as collateral to get a hard money loan. They won’t hand over a loan with no backup, especially if you have bad credit.

Benefits

Applying for a loan is as simple as filling out an application online. The best part is that you don’t even need to have the required eligibility rules that most traditional lenders expect. This means you that even those with bad credit scores or an unreliable income can get approval from these lenders.

It’s also much faster for hard money lenders to approve you for a loan. You could have it as soon as a few weeks after you submit everything required for the process. However, you need to create a thorough plan when you apply to explain how you will repay them on time. Having an excellent plan will also give you an easier and faster approval for a loan, so that can be an incentive to create an excellent one. Investors will take you more seriously than if your plan was sloppy or confusing.

Pitfalls

What happens when you aren’t able to stay on track with your detailed plan? Other complications can arise with construction or unexpected costs. Or you could fail to remain committed to the project. This can all lead to you not paying them back the money within the time frame you agreed on.

When you don’t pay them back on time, this means you’ll default. As reported by the Washington State Department of Financial Institutions, when the borrower defaults, the moneylender can take control of the property and sell it themselves. This could make you question getting this loan. If you aren’t confident in making a profit or repaying them the amount within a shorter time than traditional investments, it might not be the right loan for you.

Another thing to consider is the high-interest rates and points that the lenders can also add to the total amount you owe them. There are a lot of benefits to this loan, but you can weigh in if it’s right for you.

Are you letting a lack of money keep you from your dream job? Whether it’s flipping houses or another type of investment business, don’t allow money to get in the way. Hard money loans can solve your money troubles. As long as you have a well-thought-out plan for repaying your lender off, then you can do this. You could also gain enough profit to make a full-time career out of it. The choice is yours to consider taking action today and researching the best hard money lenders in your area.

 

 

Profit from Hard Money Loans

Hard Money Profits

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Are you interested in making profit fairly quickly in the real estate market? Any good investor is always looking out for something that can provide a high return on investment with a quick turnaround, so probably, yes. A great way to invest in real estate is with hard money loans.

Hard money loans are a specific kind of very short-term loans. They are usually paid in around 12 to 24 months, sometimes even quicker. They often have loan fees ranging around 5% and the annual interest can be as big as 15%. That looks high, so why would you be interested in this kind of loan?

Because it can be highly profitable for you. With this kind of loan, you can invest in real estate quickly and without any hassle. This way, you can be able to get a high return on investment within a short timeframe.

How Does a Hard Money Loan Work?

A hard money loan is made when you borrow money to buy a property and repair it in order to sell it for a higher price. The main goal of this investment is to choose an old house in need of repairs, keep the costs low and the profits high.

The investor can borrow around 65 to 70% of the house’s “after repair value” (ARV) to get started. Let’s use an example. If you buy a house for $100,000 and its ARV is around $180,000 after it is repaired, you could get a loan for up to 70% of that value, that is $126,000.

With a loan fee of 5% and an interest of 15% a year, you would owe $132,300 plus the annual fees, which are paid monthly. The quicker you can repair the property and sell it, the more profit you can get.

If you are able to repair the house in two months and then take another two to sell it, you can pay the interest for only around four months. You can also try to keep the costs of renewal under the $26,000 you still have. This way, you do not even need to use any of your own money.

This way, even by paying the fees, you can still profit around $40,000 in only four months. If you could make three of these deals per year, you would profit around $120,000. Not a bad investment, right?

While you could argue that the interest rates are, indeed, very high, they are simply meaningless. What matters is only your profits.

Is a Hard Money Loan a Good Way to Profit?

If you have enough money to be sure that you are not risking too much, hard money loans are a great idea. You should be certain that you are not making a mistake, though. To be protected, you need to study the local real estate data carefully.

According to specialists Denise DiPasquale and William C. Wheaton, you have to look at the market via both micro and macro perspectives. From the micro perspective, they affirm that prices vary a lot across locations, even in the same city. Some places are more valuable than others. From the macro perspective, they affirm that the “broad economic forces” always affect the market, so the economy is a good indicator as well.

At the moment, the number of houses on sale is going up, so you have more choices (and prices will tend to go down). According to the latest report of the National Association of Realtors, the number of existing homes for sale is 2.5% higher than the last month.

This is the kind of data that you need to pay attention to determine if you making a good deal. Without viable research and a good idea of how costly the repairs will be, it is easy to make a meaningless profit with a hard money loan. This will only waste your time and money.

Many people get rich with hard money loans. If you want to be one of them, you have to work hard. Understanding the market and the costs involved is the key to success in this market. The chance is out there, but you have to be prepared to take it.

Sources:

https://notendur.hi.is/~ajonsson/kennsla2013/The_urban_land_market.pdf

https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales

 

 

How to Find a Hard Money Lender

How to Find a Hard Money Lender

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There are several ways that you can locate a hard money lender that has a good reputation. One of the simplest ways to find a hard money lender is locally. You can find a lender local to your area is by searching online. Of course, there are many companies that will be listed in your search results. However, you will likely come across a larger list of hard money lender names as well. This is a good way to start the process of your search. By gathering a handful of lender names you can begin researching the individual lenders you may be interested in contacting. Once you start contacting different loan providers you can evaluate the information you have been given. It is important that you don’t just jump the gun and go without the first lender you find. Doing your research and thinking the process through is important for responsible real estate investing.

Find a Hard Money Lender Near You

If you are looking to find a hard money lender near you, it may take some hard work. One of the first things to do is to reach out to real estates agents in your local area. Many real estate agents near you can provide you with referrals to lenders they are familiar with. On top of this option, you can reach out to groups involved in real estate investment opportunities. Groups who take interest in this type of investment are likely to have lender names. People with personal or business relationships with lenders can definitely help you.

Some people try to stick to an online approach when finding a loan. If this is the case, you’ll want to find a hard money lender directory. Most directories will have lists of hard money lenders that are available in your area. Hard money lenders are typically private lenders that can help fund your flipping business. When you find one either in your state or city, they are usually financially ready to help you.

Local Club Meetings

Local investor club meetings are also a great way to find a good hard money lender. Most cities and states hold these meetings regularly. Locating one of these lender club meetings is how many investors connect with potential borrowers and network with the investors in the area. It’s always best practice to get your name and face out there. Networking with individuals who have the same goals and interests as you can only help you be more successful. On a rare occasion you won’t find any hard money lenders are the local meeting. However, if this happens you have a host of individuals in the meeting that are investors and can likely point you in the direction of a reputable lender. Real estate investors are very familiar with the practice and business of hard money lenders so it won’t be hard to get a few recommendations of lenders in your area. On the same note – professional individuals or brokers in real estate or conventional mortgage are often able to make a referral to a hard money lender who is highly experienced. Building a large network and leveraging that is an ideal way to get in contact with a recommended lender to support you.

National Lenders

Without doubt, there are always well-known national lenders that people turn to for loans. If you have little luck with local assistance or you are more interested in getting a loan from a larger lender, you’ll need to look into national online lenders. National Lenders offer commercial and residential investment loans. Although this could be the easiest option for some you need to research each individual lender before you actually contact them. Doing your research help you determine whether the lender can give you what you need or not. Each national lender specializes in something more or different than another. Some common national hard money lenders are Lima One Capital, Lending Home or Patch of Land. These types of hard money lenders are more aimed at providing loans for property renovation or flipping houses. If you are looking for commercial property investment loans, a national lender such as Finance of American Commercial may be a good option for you.

Be organized and professional

Once you have gathered your list of hard money lenders through recommendation or other avenues, start contacting them. if a private lender is going to provide you with lending assistance, they will have to believe that the deal you have is going to be profitable. If your proposal and deal is not up to par, a lender is not going to give you a hard money loan.

As stated, you’ll need to begin by finding a good deal. When you find a good deal, you can look for a hard money lender with confidence and hopefully get them to fund your proposal. However, without a deal that is actually good, the likeliness of you getting a hard money loan will be low. The nice thing about a hard money lender is that the process is flexible. Applying for a hard money loan is something that both an experienced as well as an inexperienced real estate investor can do. Another great benefit is that hard money lenders do not look at a person’s credit score. Many lenders will actually approve real estate loans to individuals who have low if not poor credit scores.

After Finding A Lender

After you find a hard money lender that you are going to request a loan from the process should be straight forward. It turns out the hard money loan process is known to be quick. One of the perks of hard money lenders is that the application to the underwriting and approval is done in a speedy fashion. Moreover, the disbursement of costs for renovation are simple and fast. Learning how to find a hard money lender can seem intimidating at first. However, if you stick to it and put yourself out there, you will achieve your desired outcome. Happy real estate investment opportunities!

What Is a Hard Money Bridge Loan?

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A Hard Money Bridge Loan is a type of loan that is issued by a Hard Money Lender. It’s a private company or investment pool instead of a conventional bank. You may have heard about Hard Money loans because of their increasing popularity in the fix and flip housing market.  The most common situation it is used under is residential and commercial real estate transactions.

Didn’t know that money could be hard?  The term hard money comes from the idea that there is an actual hard value behind the loan.

Generally, it does not exceed 85 percent of the residential property value and 65 percent for commercial properties. Hard Money Bridge Loans typically having higher interest rates and shorter pay-off time periods.

What Purpose Does it Serve?

Are you contemplating a bridge of hard money right about now and wondering what it could possibly be used for? Allow me to give you the scoop. Bridge loans are used as a stop-gap for certain situations and is then repaid shortly after. Common loan terms are 12 months to 36 months.

Imagine this, you’ve found a house that needs some fixing and intend to flip it for a big profit. You go to the bank and get a big fat no, its too big of a risk. That’s where a Hard Money Lender comes in and offers a bridge loan against the value of the property.

You spend 6 months renovating and turn a nice chunk of change for your efforts. The loan is repaid with money from the sale.  You wouldn’t be the first one, flipping houses is now a $56 billion market and private or hard money lenders have plenty of hands in this cookie jar.

How it Can Help You?

“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.” -Aristotle

Bridge Loans can be helpful for residential property owners as well as property investors. Sometimes a family may be selling their home with the intention of using the funds to purchase a new home.

If a hiccup occurs and the timing isn’t just right a family could find themselves missing the opportunity to purchase their dream home. A hard money bridge loan can fill a need until the old home is sold.

In certain situations, money is needed before permits have been finalized. A conventional bank won’t issue a loan until the ink has dried on permits. So how does a developer get started without any capital?

Getting a hard money bridge loan offers developers the chance to get the funds they need now and pay it back after a loan with lower interest through the bank becomes available.

Real estate isn’t the only customer of the hard money bridge loan, businesses that loose major investing partners take advantage too. If a stockholder pulls out their investment and the company faces certain death, a bridge loan replaces the lost funds and is paid back when a new shareholder comes into the fold.

Don’t Get Scammed

Be on the lookout for predatory lenders, while many Hard Money Lenders are honest and true there are still some bad apples in the bunch. USA.gov offers some helpful tips to protect yourself.

Some easy to spot red flags are lenders who offer to pay more than the property is worth, hoping that the loan will go unpaid so that they can reclaim the property.

Interest rates that are too low will generally be accompanied by unexpected fees to lure you into choosing their lending firm over others with higher interest rates. That firm turns a profit with undisclosed expenses. Keep your eyes peeled for firms that seek a loan insurance fee upfront or demand it in a strange payment method.

A general rule of thumb is no cash upfront, the majority of the fees will be processed at the closing of the loan terms through a title agency. Always question a lender who asks for money upfront for a loan insurance fee, these should be paid to the loan insurance company directly.

Lastly, vet your lender, cross-reference phone numbers with known scams. Speak with someone over the phone, visit the office or get a reference from trusted reviews or friends.

Sources:

https://www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#5a8a750552ae

https://www.attomdata.com/news/heat-maps/2016-year-end-u-s-home-flipping-report/

https://www.usa.gov/mortgages#item-36897

 

 

Some Jargon To Know Regarding Hard Money Lending

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If you are an investor and you want to start using hard money loans, you may feel like a fish out of water. It is very important that you research your options before choosing a hard money lender so that you get the best deal possible. During your research, you may come across a number of terms that you may not understand. The following looks at some of the most commonly used jargon in the industry.

1. Loan to Value

The loan to value ratio is something that is of importance in all types of loans.

The loan-to-value ratio (LTV ratio) is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage.

The higher the LTV, the greater the risk, meaning you may have to supply additional collateral.

2. Lien Position

If your investment fails and has to be liquidated, the lender wants to know where in the chain they are in terms of repayments. Ideally, they want the 1st lien position, which means that they have top priority. They may, however, agree to 2nd position as well.

3. Loan Parameters

The loan parameters are basically the acceptance criteria that the lender has put in place.

The factors used to determine whether or not to provide a loan to the borrower.

These parameters tend to be very different with hard money lenders than what they are with traditional financial institutions. Often, they will look at things such as your existing debts, your current credit score, and the type of collateral that you have to offer. Hard money lenders are private lenders, either individuals or groups of individuals, which means that they can set their own loan parameters as they see fit. Banks, by contrast, have virtually the same parameters across the board.

4. Bridge Loan

A bridge loan is a short term solution that covers the financial gap between two transactions. If you were to purchase a home and your old home hasn’t been sold yet, the bridge loan can cover those costs.

5. Rehab Loan

A rehab loan is an investment loan on properties in a state of disrepair. Generally speaking, traditional banks are not interested in providing rehab loans, which is why a hard money loan may be required. That is because private lenders are willing to look at the potential of a property, whereas traditional banks are only interested in what the property is currently worth. Rehab loans are heavily regulated if they are provided by the Federal Housing Administration (FHA).

The rules for an FHA 203(k) Rehab loan include restrictions on the type of property that can be rehabbed under this program, as well as requirements for the condition of properties that are eligible for the 203(k). Those restrictions include the number of units the property has–eligible homes may have one unit but no more than four, and the dwelling must have been completed for at least one year, according to FHA.gov.

6. Commercial Loans

These loans are used for equipment upgrades, new product lines, repairs, expansions, and so on. Banks generally don’t want to offer these because of the uncertainty of getting their money back, which is why private lenders often step in to fill the gap.

7. Construction Loans

These loans are offered to those who want to build a residential or commercial building. Banks are generally not interested in these properties because there is no proof of viability of the project. Hard money lenders, on the other hand, are willing to invest in these.

If you want to invest using private money, then understanding the above terms is very important because it will help you choose the most appropriate solution. Remember that hard money lenders want to make a profit, which means you must show them that you are an investment worth making and a risk worth taking.