hard money Definition

Hard Money Definition

/in /by

What comes to mind when you hear the term ‘hard money’? This term can be used in a number of financial contexts. With the coming of financial technology and increased access to banking for most of the population, hard money is not as popular as it was some decades ago. Interestingly, even with these developments, new reports show that hard money lending is on the rise. Before going into details of how hard money works and what good it is in the market, let’s slice up its definition.

What is Hard Money?

Hard money is used to define a funding stream from a government agency or a donor organization. In this case, it is used to describe a series and scheduled payments as opposed to a one-time award. In another hard money definition, it is just what it sounds – physical currency.

In another definition, hard money is circulating currency whose value ties directly to the value of a specific commodity. Think about notes or coins from precious metals such as gold, silver, and platinum. A good example of it is the Gold Standard.

You can also define hard money as the opposite of soft money. Here, it is perceived as physical cash or fiat money used to make payments, while soft money is either credit or any other money that is not physical or fiat and which is not backed by any commodity. You can also look at soft money as indirect contributions or fees for financial services such as brokerage fee.

The most important definition is in lending. In a lending context, it refers to a  loan that is backed by a physical asset. Unlike traditional lending that considers credit rating and ability to pay, this loan is based on collateral as the lender considers the value of property vs the amount requested.

Let us focus on hard money definition in terms of lending.

What is it Good for?

What is the first thing that comes to mind when most people hear hard money lending? Some people envision a ruthless lender giving out money at sky-high interest rates, or a scam posing as lenders whose interest is in getting the property at a cheaper price from unsuspecting borrowers?

On the contrary, these loans are a fully-fledged industry. According to Forbes, flippers control about $56 billion markets. Private lending stakes about 5.6% of this market share. In 2016 alone, flippers borrowed around $18 billion. It is estimated that a third of these were financed through local land deals by getting hard money loans.

There is a growing demand for credit than conventional banking and mortgage industry can meet. So investors, particularly real estate investors and small businesses take advantage of this gap through private lending – hard money loans.

Hard money loans are good for;

  • Small businesses that are overlooked by conventional banks and lenders
  • People with poor credit rating
  • Real estate investors that need quick cash to take advantage over a deal
  • Construction and land loans
  • Fix and flips

Basics of Loans

In lending can be described as asset-based financing where the borrower gets a loan secured by a property. While the reputation of the borrower matters, hard lenders are solely interested in the value of the property which serves as collateral.

Interest rates for the loans range between 7% and 35% depending on the need, risk, and terms of lending. Hard money loans carry a higher risk to the lender because most borrowers have a low credit rating. This is why their interests are higher. In the U.S., this borrowing is regulated and strictly governed.

Hard Money Loan to Value Ratios

Loan to Value (LTV) is the ratio used to determine the amount the lender will extend to the borrower. It is simply the ratio of the loan amount divided by the value of the property. Hard money lenders should loan up to 65% to 75% of the market value of the property. Some lenders use the after repair value (ARV) to estimate the value of the property. This increases the interest rate instead since it is riskier.

Hard money loans are popular among business people especially in real estate and small businesses. They allow you to save your business during a crisis or take advantage of a quick business deal, especially in property deals. When it comes to hard money definition, we will help you look at lending from all angles.

Sources

https://www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#6ceb95f452ae

https://www.entrepreneur.com/article/218880

https://www.sba.gov/business-guide/plan-your-business/fund-your-business

https://www.educba.com/hard-money-vs-soft-money/

 

 

 

Big Changes In Mortgages As A Result Of Private Lending

/in /by

There are quite limited options available to people who own real estate if they wish to refurbish or if they want to purchase real estate that requires refurbishing. Mortgage lenders do not usually like to take a gamble on a property’s potential worth sometime in the future. The result is a growing demand for private lenders who would be happy to provide fix and flip loans, bridge loans, and refurbishment loans.

Many private lenders are people who were in the real estate investment market themselves and who realized that there is a gap in provision because they themselves experienced to difficulty of getting funds. What this means is that these lenders have a true understanding of the needs of the market and, therefore, have the potential to deliver a relevant and fit for purpose service. So popular are their services now that their market share seems to be growing rapidly.

In 2011, 50 percent of all new mortgage money was loaned by the three biggest banks in the United States: JPMorgan Chase, Bank of America and Wells Fargo. But by September 2016, the share of loans by these three big banks dropped to 21 percent.

Truly determining market share is difficult, however, because the private lending market is potentially huge. One way to look at it is by determining the number of properties that are refurbished and sold on. Another way is to simply determine the percentage of properties that are fix and flippers.

Fix and Flips Across the Nation

According to the latest 2016 Year-End U.S. Home Flipping Report, which looked at counties that are home to around 80% of the country’s population, 193,009 condos and single family homes were flipped in that year, defining a “flipped” property as one that is bought twice within a 12 month period.

ATTOM Data Solutions, curator of the nation’s largest fused property database, today released its 2016 Year-End U.S. Home Flipping Report, which shows that 193,009 single family homes and condos were flipped – sold in an arms-length transfer for the second time within a 12-month period – in 2016, up 3.1 percent from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped.

It has also been estimated that if the other 20% of the market was included, there would be a total of 300,000 flipped properties in 2016. Considering that the average price is $189,000, the market is worth $56 billion. That is a huge amount of money, which certainly makes this market very interesting to lenders, particularly because they know that traditional banks aren’t interested in this. There is a huge opportunity for anyone who has the private funds available.

It has also been estimated that around a third of the flips in 2016 were financed. This means that around $17 billion was borrowed in 2016, a significant amount of money. While it is certainly true that determining exact market share is almost impossible, even accounting for standard deviation and mistakes, this share is significant.

Our industry’s uniqueness makes it challenging to analyze market share. We don’t have the standardization of the traditional mortgage market, where most deals flow through a handful of secondary market players who freely share loan-level, portfolio-level and industrywide data.

Unique Characteristics of the US Real Estate Market

The real estate market in this country continues to be unique. There are entire areas where there are far more home buyers than what there are properties for sale. Flippers must act very quickly if they are to find a deal, even if the kinds of properties they are interested in require substantial refurbishment. Unfortunately, traditional lenders, even if they are independent or a credit union, take several weeks before they can close on a loan, and those are weeks flippers simply do not have.

Flippers like to find tricky deals, although these are high risk, because they also have the potential for a huge payout. Flipping is not just about applying a new coat of paint and laying down some new flooring, which are things that anyone can do. True flippers purchase properties that are in a state of disrepair and require substantial modernization and renovation. They must also consider environmental problems, rewire the electrical system, put in new plumbing, and so on. These are the deals that flippers look for, because they are the deals that most people don’t want to take on. Naturally, the banks are reluctant to work with these properties, again increasing the need for a private lending alternative.

Hard Money Lenders Focus on Fix and Flip

The vast majority of hard money loans focus on fix and flip properties. However, others are used for sort term refinance, development, land acquisition, construction loans, and bridge loans. While this is not a huge portion of the overall hard money lending market, it is another piece of the overall financial pie. It looks like growth in the private lending market, therefore, will continue to grow, particularly in the suburban markets where there are many infill projects and revitalization projects.

So long as there are investors who are happy to diversify their portfolios and take risks because of the potential for a high return, private loans will continue to be available. So much so, in fact, that some are calling for private lending to become an official alternative to mortgages. Not just that, many financial advisors now consider it as an option to diversify the portfolio of their clients. Real estate has always been a solid investment, after all.

There is one caveat, however, and that is that many people now think that it is easy to fix and flip. There are many reality TV shows that make it look like the easiest and most fun job in the world. What these show fail to indicate, however, is that there are associated difficulties that can make a project turn sour. This has increased the risk for private lenders, who now have to spend slightly more time in determining whether a request for funds has been made by those who are experienced in this particular field and know what they are doing, rather than simply someone who has watched HGTV’s Fix or Flop series.

Hard Money Lenders Process

/1 Comment/in /by

Are you thinking about taking out a hard money loan? Before you do, researching more about getting one might help you decide if it’s for you. Read on to learn what it takes to get a loan from hard money lenders.

Who are Hard Money Lenders

Hard money lenders give out loans to people who need money for a new startup, flipping a property, or are trying to renovate their current home. These hard money loans can be the answer to all your financial struggles if you can’t get a traditional loan from a bank or credit union. However, like all loans, it comes with its own set of rules.

So, you might wonder: how can I find these hard money lenders? Well, it’s a lot easier than you think since they are all over the place. You can easily research some local hard money lenders to see which one is right for you.

Asking Hard Money Lenders for a Loan

After you find a few that look reputable and legitimate, put together a professional proposal that will have them saying yes. It’s easier to get a loan through this lender, but they will more than likely approve your loan when you present them with a laid-out plan. This plan should portray how you will repay the loan you owe them within the time they give you, which is likely 3 to 5 years.

Like most lenders, they will each have their interest rates and other particular rules for each borrower. You should go to more than one lender to see where you can get the best deal.

Asking Others for a Loan

Are you okay with asking family for money? It can be awkward, but you can borrow the funds from family, friends, or acquaintances for financial help. Even though family and friends aren’t hard money lenders, they are still another option for getting a fast and private loan.

Your family or friends trust you so that you will get a loan from them faster than other lenders. You can also figure out the loan requirements, such as how long before you need to repay them.

This option might sound great, but it can become a little messier if you drag out repaying them. It could affect your relationship if you don’t pay them back on time, so try to stay on track.

What It Takes to Get Approval

Most people know that it’s hard and takes a long time to get a traditional loan approved by a bank or other lender. However, it’s faster and easier to get approval by a hard money lender. If you are tight on time and need financial help with a project right away, this might be your answer. As reported by Harvard.edu, a traditional loan can take up to 30 to 45 days, while a hard money loan can take a few weeks. Therefore, a hard money loan can get your project going more quickly than a traditional loan can.

Traditional lenders often deny those who have a low credit score. However, that’s not the case with hard money lenders and their stipulations for approval. According to Harvard.edu, “An individual with bad credit can find a hard money loan in the event the job indicates a probable gain.” So, your credit score not matter to them as it does to other lenders since you have to pay them back sooner. This also means you are left with high-interest rates and points could be added to your total amount owed to them.

However, you need some collateral, such as your house or another property for them to approve your loan. They need that collateral in case you aren’t able to pay them back within the time frame you agreed on. Therefore, this is another reason your proposal needs to be perfect. Knowing how you will repay them will be crucial to keeping your collateral in your hands. Otherwise, you might lose it if you don’t commit to your business or remodeling plan.

Conclusion

Is a hard money loan for you? You should research and go over all your options before you settle on this loan. It might seem like your only solution, but going over all the pros and cons of seeking hard money lenders is essential. You could risk losing your collateral and owing them much more than you originally planned. Getting further into debt won’t solve anything, so make sure your proposal is perfect enough. Stay committed and focused on your business goals so you can repay them on time. You can do this if you put the effort and work into it!

Sources: https://exed.canvas.harvard.edu/eportfolios/931/Home/Understanding_Private_Mortgage_and_its_Advantages

 

 

Laying Out The Myths And Facts Of Hard Money Loans

/in /by

The hard money or private loan can, under the right circumstances, provide borrowers with an easy to obtain loan. Unsurprisingly, it is getting increasingly popular, with the lending environment in banks remaining very unfriendly to borrowers. Indeed, there are numerous reasons as to why these loans are now so common.

Recent years have seen major growth in the private capital market with more lenders offering hard money loans and more borrowers seeking them out as alternative financing. While there are many reasons for the growth in this segment of the real estate market, here are four main ones: Mutually beneficial to borrower and lender. Credit availability. Asset-based underwriting. Higher returns on investments.

Yet, despite the fact that there are so many clear benefits, people are still skeptical about these types of loans. One of the reasons for that is perhaps because these loans can be quite a bit riskier because they don’t have a standard application and acceptance process. They also have much higher rates of interest. Nevertheless, everything has its pros and cons and it is all about weighing these up. Let’s review some of the most common myths about hard money loans.

Myth 1 – A Private Loan Is an Expensive Loan

The fact is that these loans indeed have a higher price tag, but a loan is taken out for a purpose, which means that what really matters is the return on investment. When you consider that a traditional bank will only finance up to 65% of the total cost of the project, it means a borrower must still be able to raise at least 35%. This is known as the loan-to-cost (LTC) ratio.

The loan-to-cost (LTC) ratio is a metric used in commercial real estate construction used to compare the financing of a project as offered by a loan to the cost of building the project. The LTC ratio allows commercial real estate lenders to determine the risk of offering a construction loan.

With a hard money loan, borrowers could raise as much as 90% of the total cost of the project. This means that they have more disposable capital to work with. And although the interest rate is higher for a private loan, many have found that the return on investment is also higher.

Myth 2 – Hard Money Borrowers Lose a Lot of Control of the Property

It is quite common for those who decide to go the traditional lending route to have to bring in a partner in order to be able to finance their project, leading to them having to give up at least partial ownership of the property. Some, in fact, will require full ownership to be given up. With a hard money loan, the lender owns part of the project, not the actual property.

Myth 3 – It Is Much Easier to Deal with a Bank

This myth stems from the fact that banks have a standardized process. While this may be true, this also makes them highly rigid. Banks also generally do not provide any finance for development or construction loans at all.

The implementation of HVCRE (High Velocity Commercial Real Estate) rules that went into effect for the banks at the beginning of 2016 has made a large impact in the space. This causes acquisition, development and construction loans to be reported separately from other CRE loans and to be assigned higher risk weighting by the banks.

Banks have to stick to the HVCRE regulations and they are only allowed to provide loans according to the rules of the Federal Deposit Insurance Corp. Additionally, they underwrite based on the borrower’s income. Finally, they are concerned about exposure and will therefore often only work with borrowers they already know.

A hard money loan does not have to deal with this, which is one of the reasons why even residential borrowers are now considering these types of loans. They have a quick, streamlined process and generally complete the transaction within 30 days. In fact, underwriting often only takes 48 hours. Private loans are also far more flexible as their terms and conditions can be modified or altered as a project progresses.

Refinance

How to Refinance a Hard Money Loan

/1 Comment/in /by

A hard money loan offers borrowers an opportunity to get quick financing without having to deal with the red tape associated with traditional bank loans. They’re often used by people facing foreclosure or looking for capital in order to flip a piece of real estate. These loans have high interest rates and shorter repayment periods, which means they need to be paid back quickly. However, if this is a problem, you can refinance a hard money loan.

For many people, this is a great time to buy a house. According to the U.S. Department of Housing and Urban Development, mortgage rates have fallen since November of 2018, reaching an average weekly low of 3.75% in June.

Unfortunately, those with bad credit still aren’t able to secure a loan from a bank. However, with a hard money loan, a private lender uses the value of the property as collateral instead of looking at your credit score. But what happens when the unexpected occurs and you can’t pay back the lender on time? It turns out there are ways to refinance a hard money loan. Let’s go over a few.

Consider a Fixed Mortgage

If you secured a hard money loan to purchase your home or avoid foreclosure, you may now be able to get approved for a fixed mortgage loan. Sure, you weren’t able to get approved for a traditional mortgage loan in the first place, but things could be different now. The initial hard money loan may have allowed you to improve your credit score.

Securing a fixed mortgage loan will allow you to pay off the private lender you got the hard money loan from. This may seem counterproductive. However, a fixed mortgage will carry a much longer repayment period and allow you to lock into a low interest rate.

This approach allows for a lot more breathing room than a hard money loan does. You have more time to focus on paying off the loan. Plus, your monthly budget won’t be eaten up by high interest rates.

Refinance with a Home Equity Loan

If you got a hard money loan to make renovations to your home, you may be able to use a home equity loan to pay it off. It’s important to remember that you’ll need to have acquired healthy equity and also a good credit score. If you don’t have this, you won’t get the loan.

Some homeowners seek out hard money loans when they can’t get a home equity loan due to bad credit. The hard money loan allows them the financial security to rebuild their credit score. If you’re in this position and want to refinance a hard money loan, consider applying for a home equity loan again. You healthier credit will make it easier to get approved.

Look for a Subprime Lender

Another option is to find a subprime lender to secure financing to pay off your hard money loan. Many subprime lenders work with banks and provide options for those who don’t qualify for a traditional loan.

What makes these lenders unique is they’ll do business with individuals with bad credit and lots of debt. The subprime loans they offer carry different terms. There’s a good chance you’ll have an interest-only or adjustable-rate mortgage.

On the surface, these loans may seem unattractive. However, they allow you the ability to refinance a hard money loan and enjoy a long repayment period.

A Cash Loan

If your hard money loan has a relatively low balance, getting a cash loan will allow you to pay it off quickly. This approach should only be used as a last resort, as most cash loans have very high interest rates. Many of these loans also come with fees. However, as Warren Buffet said, “Cash combined with courage in a crisis is priceless.” It may be time to bite the bullet.

Only consider this option if you’re at risk of losing your property by not adhering to the terms of the hard money lender. Yes, you’ll have to deal with paying back the cash loan, but you won’t lose your home. Look for a lender who’ll provide a little flexibility regarding the terms of your cash loan. If you find the right lender, you may be able to pay it off without much hassle.

Resources:

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

https://www.investopedia.com/terms/s/subprimeloan.asp

Hard Money Financing Addresses Your Loan Dilemna

/in /by

Are you trying to get a loan to flip houses? Or need some quick money to finance your new startup business? Some people aren’t able to get a loan for their new business no matter how excellent their business proposal is. Well, you might apply for a hard money loan. Learn more about how hard money loan financing can solve making your business idea come to life.

Why Choose Hard Money Loans

Those trying to start a flipping house business or need funds for a new startup might consider hard money loans. You don’t have to stop your efforts to provide financing for your business since you have this other option.

It’s easier to be granted a hard money loan than to get accepted by a bank or other traditional loan. As reported by the Senate Committee on Banking and Financial Institutions, “Hard money lenders typically lend to borrowers unable to obtain credit elsewhere, or to borrowers who need money more quickly than traditional lenders can fund a loan.”

Most traditional money lenders take too long approving your application. You might not want to waste a whole month waiting when you can start almost right away.

However, hard money loans are a lot quicker to get accepted. People usually have a higher success rate with this loan. Having a great business plan will go a long way in getting accepted faster.

Who Gives Out Hard Money Loans

Some people have to resort to other options to finance their new business like an individual or group of investors who lend out hard money loans. These loans might be your only option if you have an eye on an expensive property or a risky one. Having too much construction to work on or some other obstacle might make traditional lenders hesitate. These hard money investors are used to putting their money on the line on high-risk business situations.

Not all investors will seek those high-risk investments. What will really help get your application accepted faster is if you draw up the perfect business proposal. Organizing the best business idea that shows the least amount of risk for your investors will get you accepted more than a sloppy one. It needs to portray how you will make a quick profit, especially if you want to repay your loan on time.

You can compare different financing companies to get the best deal for you and your business. The lender and loan term can also play a factor in how much they will allow you to borrow. You should make sure you borrow enough money for construction and all the other expenses you haven’t thought of yet. This is where extensive research can help you figure out how much to ask for.

Does Your Credit Score Affect Your Approval?

You don’t need a good credit score to be approved for a hard money loan. As stated by Senate Committee on Banking and Financial Institutions, you don’t need a high score to get hard money loans. Therefore, this loan can be perfect for those who have an excellent business idea but don’t have the credit history to back it up.

Drawbacks of Hard Money Loans

What’s the catch? There are some drawbacks to getting a hard money loan. First, offering your property as collateral, whether it’s your house or another property you own. Something has to be at stake for them to accept your offer.

According to Senate Committee on Banking and Financial Institutions, hard money loans usually have higher interest rates and points added to your final loan. You also don’t have the luxury of a long loan length. You have to repay the lender within a smaller time frame than traditional loans.

It all depends on the particular deal you made with your money lender. So, be absolutely sure your new business venture is successful and will make the profits to pay your loan back.

Don’t Let Financing Stop You

Don’t let your business proposal gather dust when you keep getting denied. Instead, seek hard money lenders to help finance the business you’ve always wanted.  Go over the benefits and drawbacks of hard money loans and see if it works for you. Take action now by researching the best hard money lender today and applying for a loan that will change your life!

Sources: https://sbnk.senate.ca.gov/sites/sbnk.senate.ca.gov/files/final%20backgrounder.pdf

hard money overview

Hard Money Commercial Loan Overview

/in , /by

There’s no denying real estate investment is an extremely profitable business in America right now. A quick look at housing development trends will back this up. According to the Department of Housing and Urban Development (HUD), 854,000 single-family housing units were started in the first quarter of 2019. This means many investors will be seeking a hard money commercial loan to get their projects off the ground.

Traditionally, commercial and residential real estate investors would get the capital they need by applying for a bank loan. Unfortunately, this comes with a number of limitations. If an investor’s credit history is unhealthy, there’s a good chance they’ll be denied the loan altogether.

In recent years, however, hard money commercial leaders have become an invaluable resource for large-scale commercial and residential investors. Let’s break down the basics of a hard money commercial loan to determine if it’s right for you.

Understanding a Hard Money Commercial Loan

It’s important to understand the distinction between a hard money loan and a traditional bank loan. This knowledge is key if you’re in the commercial real estate industry and need to make a quick decision to secure capital. Getting the wrong type of loan could result in a financial loss once repayment begins.

An important distinction between a hard money loan and a bank loan is the type of lender. Because hard money loans are provided by private lenders instead of financial institutions, the entire process is different. These differences can be a huge benefit for many investors.

When applying for a commercial hard money loan, the lender looks at the value of the property instead of your credit history. Let’s say you apply for a hard money loan so you can start a commercial development project. The lender will look at the scope of the project and the value of the completed property. This is done by calculating things like gross scheduled income, and net operating income. They’ll use the property as collateral against the loan. If you default, the lender can take the commercial building as repayment.

Why Investors Should Consider Hard Money Loans

It’s important to note that a commercial hard money loan doesn’t come without risks. You must ensure you can pay back the money or you could potentially lose your property. However, if the conditions are right, a hard money loan will prove advantageous.

Real estate investors must make quick decisions. The famous real estate entrepreneur Jeff Greene made a great point when he said, “In real estate, you make 10% of your money because you’re a genius and 90% because you catch a great wave.” When a great wave comes, you need to ride it.

A major benefit of a hard money commercial loan is you can get approved quickly. Because the lender doesn’t have to look into your financial history, the process is much faster.

Another advantage is that private lenders tend to be much more flexible than banks. You can negotiate repayment terms and interest rates. You can also work out deals where the lender recoups personal assets first if repayment terms aren’t met.

Things to Watch Out For

There are also a number of disadvantages attached to hard money commercial loans. You must analyze your financial situation, the scope of your project, and projected earnings before applying for one.

One of the biggest disadvantages of a hard money commercial loan is the interest rates. They tend to be much higher than traditional bank loans. This means you need to be certain you can pay it back fast. If you plan on making a big profit off your investment right away, this shouldn’t be a problem.

Another potential disadvantage is the shorter repayment period most hard money loans carry. Keep in mind that these loans are meant to allow investors to buy property or start development projects right away. These aren’t long-term mortgage loans. That being said, if you don’t feel like you can adhere to the repayment period, stay away from a hard money loan.

Is a Hard Money Loan Right for You?

When considering a hard commercial loan, a good rule of thumb is to determine when your property will become profitable. You need to have a solid business plan in place and know exactly how much time it will take to complete your project. If all these details are in order and you simply need the funding to get started, a hard money loan may be the perfect move.

Resources:  https://www.huduser.gov/portal/sites/default/files/pdf/NationalSummary_1Q19.pdf

https://www.wikihow.com/Evaluate-Commercial-Property

LendingHome Disrupts The Market Of Private Lending

/in /by

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.

Private Money Loans What It Takes To Secure One

/2 Comments/in /by

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

What is a Private Money Loan?

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

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

Professional Private Lending Businesses

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

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

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

 Benefits of Private Loans

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

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

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

Drawbacks to Private Money Loans

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

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

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

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

Conclusion

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

Sources:

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

 

 

Could UK Hard Money Lenders Be Moving Into The USA?

/in /by
[column width=”1/1″ last=”true” title=”” title_type=”single” animation=”none” implicit=”true”] [/column] [column width=”1/1″ last=”true” title=”” title_type=”single” animation=”none” implicit=”true”]

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

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

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

Why this Country Is So Appealing to UK Lenders

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

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

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

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

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

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

Problems Facing UK Lenders in This Country

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

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

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

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

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

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

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

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

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

[/column] [column width=”1/1″ last=”true” title=”” title_type=”single” animation=”none” implicit=”true”]

 

[/column]