Proven Ways To Make Money In Real Estate

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There is no industry in the world where more money has been made than in real estate. Yet, many people still worry about getting involved in it, mainly because they feel that they need to have a significant amount of capital. However, that isn’t true. Hard money loans are just one way in which you can enter this market with little to no capital to your name.

Success Stories

There are numerous success stories out there from people who had made it big in real estate with little to no money. For instance, there is Kent Clothier Sr.

Before his career in real estate, Kent started out in the supermarket industry in the Dallas area, managing a billion-dollar supermarket operation by the young age of 32. Kent brought his expertise in the grocery industry with him to Memphis and began American Wholesale Grocers in 1987. By 1995, he built the enterprise into a $50-million venture, which he sold in the late 1990s before pursuing his passion for real estate and establishing Memphis Invest.

Another example is Dean Graziosi, who has a trailer park background and now owns more than 400 properties. There are many others like these two and what brings them together is not that they had, or didn’t have, any money behind them. It is that they had the guts to try things and now have a fantastic amount of money and knowledge.

Real estate is no more or less difficult than making money online. It is simply about knowing what you do and don’t need. One thing you do not need, which may surprise you, is good credit. You also do not need significant capital. Yes, you will have to start with the lower priced properties at first, but this is where you can start to grow. Lastly, when you start, you also do not need to have any major assets to get financing. You simply need to get creative.

How to Make Money in Real Estate

There are two key ways to generate money in real estate. The first one is the passive method, which means you buy property and hold it, by purchasing turnkey properties.

If you leverage turnkey investment properties, then most everything is already done. All you would need to do is purchase the investment property, let the professionals manage it and collect your monthly cash flow checks while your tenants help you build equity.

Your second option is to earn an active income. The most common way to do that is by flipping properties, after you have added value through renovations or development deals. The big thing to learn about, however, is how you can get your foot in the door without having a huge amount of capital. To do that, there are multiple options available to you, including:

  • Lease options for seller financing
  • Trading jewelry, cars, and other fixed assets you have
  • Finding someone in a distressed situation and taking on their payments
  • Finding an investment partner
  • A loan
  • Peer to peer lending
  • Home equity lines of credit
  • Hard money lending

If you are hoping to earn an active income through real estate, which means you will buy and sell properties in a short period of time, then hard money lending is probably the most viable option, and the most preferred one.

Hard money loans, sometimes referred to as bridge loans, are short-term lending instruments that real estate investors can use to finance an investment project. This type of loan is often a tool for house flippers or real estate developers whose goal is to renovate or develop a property, then sell it for a profit. Hard money loans are issued by private lenders rather than mainstream financial institutions such as banks.

The reason why this works is because real estate is based on a simple cash flow principle. This means that, so long as you earn more than you spend, which means you are in positive cash flow, you are doing well. Real estate investments are some of the best investments around to generate continuous positive cash flow, which is why they are so popular, and why so many people have literally made millions of dollars doing so.

8 Key Strategies to Make Money in Real Estate

There are eight key strategies that you could consider if you want to make money in real estate. You could decide to focus on one strategy at a time, or you could combine them in ways that are suitable to you. You are likely to find that, as your incoming cash flow increases and your assets and savings increase, it will become easier to make money in multiple ways, thereby also increasing the speed with which you make more money in real estate. The eight strategies are:

1. Investing in long term residential rentals, which is a passive form of income with a lot of security: people always need somewhere to live.
2. Taking out lease options, which is a perfect starting point in which you lease a property while also having the option to buy. This is a good option if house prices are going up, because you will have set the purchase price before this increase.
3. Home renovation flipping, for which you either need quite a bit of cash behind you, or a good relationship with a hard money lender. In this case, you purchase cheap and distressed properties, fix them up, and sell them for a significant profit.
4. Contract flipping, which means that you find people who are willing to sell at a ridiculously low price, and bring them together with an investor looking to buy. This means that there is less risk for you, because you will never have to close escrow either. However, it is quite tricky to identify these properties.
5. Short sales, which means you find those who are willing to sell their property for far less than it is actually worth, and certainly less than the balance outstanding on their mortgage. This is generally accepted if a quick sale is needed to avoid foreclosure.
6. Purchasing vacation rentals, which is a great way of earning a passive income while at the same time having a piece of property that you can use yourself if you are on vacation. By working with a good property manager, there is not much you need to do to earn your income.
7. Through hard money lending, which you will probably only be able to do once you have been involved in this field for quite some time. When you first start out, you will look for hard money lenders to help you get on the ladder. But as you continue, and if you are successful, you can become a hard money lender yourself. There is a lot of profit to be made in these loans, and the risks are very low.
8. Investing in commercial real estate, which you will probably only be able to do once you are truly established.

Invest Money in You

Private Money Lenders Want To Invest Money In You

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

Who Are Private Money Lenders?

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

Why Lenders Want to Invest Money in You

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

Getting an Approval

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

The Downside of Using Private Money Lenders

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

Sources

http://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1445&context=honors_research_projects
What is a hard money lender?

What Is a Hard Money Lender?

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Who do you imagine when people talk about a private hard money lender? Many people don’t have a good understanding of who hard money lenders are. Unfortunately, this kind of private investor is seen by many as a shady person who will break your legs if you don’t pay your debts in time. This image could not be further from the truth.

The Private Hard Money Lender

A hard money lender is a private investor or a group of investors who can offer a hard money loan. The main difference between them and banks is that they are not institutions. Their activities are less regulated, which enables them to create their own rules.

More and more people are entering the hard money lender market. Bloomberg recently reported that private credit is on the rise lately, and it is helping to fuel the current private equity boom. Private credit is now reported to be as big as $776 billion. While hard money lenders are not the bulk of those credit offerings, they are certainly an important part of them.

It’s important to understand who these investors are and what they can do for you. In fact, it’s important to understand what a hard money loan is. They are short-term loans that are generally used to buy properties. They are secured by the property that is being bought, and are considered safe investments. That is, if you are careful and only invest in property after you’ve done plenty of research.

People generally take hard money loans to “flip” houses. That means they buy a property with a low market value, renovate it, and sell it for profit. The idea is that you can buy the property quickly, fix it up, and turn a quick profit. The faster you do it, the more you’ll profit.
This activity is becoming pretty common. According to ATTOM Data Solutions, 2019 marked a 9-year high in home flipping.

Before you look for a hard money lender, you should know that they are not fit for all investments. They are most ideal if you can’t go to a bank or don’t have time for the process.

How Does The Hard Money Lender Benefit?

The hard money lender’s benefit comes from comparably high-interest rates. People who can’t, or don’t want to, use traditional lenders generally seek out hard money loans. This happens for several reasons, and they work as a second option, as well.

Loan fees can be around 5 percent, and the annual interest could easily be higher than 15 percent. Not many investments allow for these profit margins so quickly. Overall, this can be beneficial for both parties.

Another reason why people decide to become hard money lenders is that they can determine their conditions and guarantees. This gives them many advantages during the negotiation.

Lenders generally lend up to between 65% and 75% of the value of the property that they hold as collateral. But, some decide to take on more risk for the benefit of a higher interest rate. The higher the interest rate, the more profit the lender will achieve. The time frame to pay off these loans is often short. Most of them have to be paid in 12 to 24 months.

Keep in mind that fees and interest may vary a lot, though. This practice is not strictly regulated, so lenders can set prices and conditions as they wish. Do your research and tread with caution when looking for a hard money lender.

The criteria for approving loans may also vary from lender to lender. Most of the time, they don’t evaluate someone’s credit for approval. Their attention is most set on the asset that they are lending money on.

Finding The Right Hard Money Lender

If you need a loan, it is important to find the right hard money lender. You need someone that you can trust and preferably who will be near you.

You should look for a professional investor who has experience with hard money loans. Ask for referrals from previous clients or associates. Learn as much as you can about the lender’s past business practices. This will help you avoid fraudulent lenders and scammers.

You should also get to know the hard money lender before you sign any final paperwork. It’s also a great idea to ask an experienced attorney to look at the details of the contract before you sign it.

Remember that hard money loans are not without risk. If you are well-prepared, however, you’ll minimize unhappy surprises.

Sources

https://www.attomdata.com/news/market-trends/flipping/q1-2019-home-flipping-report/

https://www.bloomberg.com/news/articles/2019-09-22/how-private-credit-soared-to-fuel-private-equity-boom-quicktake

How To Get A Hard Money Loan

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If you are a small business looking to invest in your company, a land developer or even an architect, you may already be aware of hard money loans. With the inflexibility of banks or other traditional lending institutions, you may have decided that a hard money loan is the best way for you to finance a project without having to sell any property or assets.

How do you go about getting a hard money loan? Much easier than you might think. Here are some tips to go about it the right way.

Find a Good Hard Money Lender

Firstly, it’s important to do your research. The American Association of Private Lenders estimates that there are around 40% more hard money loan providers in the country than there were three years ago! So, although the market has widened, it is not subject to much regulation, so don’t just go to the first one that you come across.

Genuine hard money loan providers will be interested in your project, and they hope to build long term relationships. Some, although thankfully very few, are simply glorified loan sharks. Learn the difference before you get burned. According to Jay Garner, chief executive of Quicken Loans, a lender who has provided hard money loans nationally, companies such as theirs has a mission “to lend to people properly and responsibly, following the guidelines established by the particular agency that we’re selling mortgages to.”

Here are some ways to discern the good from the bad:

  • Reviews – ask around locally, especially with real estate companies, if there’s anyone they have heard of who is well regarded in the area.
  • Has this lender financed loans like the one you are seeking at any time in the past? It’s a red flag if they haven’t.
  • Can you meet the hard money lender, or at least someone that works for them? If not, it’s best to avoid them, as they may just want to get your money.

Applying for a Hard Money Loan

Now you have found a reliable lender you need to present your plan. Even though you don’t need the same amount of documentation as for a normal bank, you still have to come prepared.

  1. Let the hard money loan provider know the value of the property in question. This is one of the most important pieces of information for them, not your credit score. The loan will be given against this. You may need to present budgets for construction or renovation and repairs.
  2. Tell them about the area that the property is in. Have information on how much other homes/businesses went for in the area. They are looking for a good investment. Have your prices of other developments and properties in that area? You can check out zillow.com and realtor.com to do some research.
  3. Show them your financial plan for the property. You can likely get between 60 – 70% of the after-repair value of the property, but you’ll need to come up with the rest. If you have some cash in hand, then it will make the approval even quicker.

If you have a history of making risky, but ultimately good investments, then let them know.

Ensure that you get some legal advice before you sign a contract with a hard money lender. You need to make sure that you are protected within the terms of the agreement. Also, ask your lawyer about any impact that the hard money loan may have on your personal liability.

You should stay in contact with the hard money lender. Give them the information they need to show how much you want the loan. Especially in cases where they only lend to a small number of people, if you miss out, they may have decided to lend to another party.

Things to Note

A hard money loan is not the same as a mortgage or a loan from a traditional lender. The terms are different – usually the approval time is a lot less, and you require less documentation. However, you also will have to pay the loan back much quicker than a traditional loan and at a higher rate of interest. If you think that this works in your favor and that you still stand to benefit from the transaction then it could be a fantastic decision.

Resources:

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

https://www.nytimes.com/2019/06/11/business/risky-borrowing-shadow-banking.html

Hard Money Mortgage Loan Advantages

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“This is a real-estate-driven economy from top to bottom,” says Christopher Thornberg, leading economist and Director of the UC Riverside School of Business Center for Economic Forecasting and Development. So that would make mortgages the cornerstone of the current economy. Today, traditional lenders must abide by strict regulations. Finding mortgages to buy, refinance, or renovate real estate is not as easy as it was just over a decade ago. This is where the hard money becomes a mortgage loan advantage.

If you want to get ahead, or even maintain your position, then you need financing. Previously, many consumers viewed hard money lenders as untrustworthy loan sharks, but times have changed. Banks haven’t been lenient about their terms since before the crash. With statistics showing the average home sale closing in around 73 days, time is of the essence when it comes to buying.

What is the Mortgage Loan Advantage with Hard Money?

Veteran real estate investors already know the mortgage loan advantage they are gaining with a hard money loan. However, if it’s your first time, or you’re buying a home to get into the flipping market estimated at $58 billion, then it’s best to arm yourself with some facts.

Gaining Approval and Funding Quickly

One of the biggest mortgage loan advantages that taking a hard money loan will give you is that it’s a quick process. In some cases, with one individual lender, you could be looking at just a single day. But that’s usually if you are very experienced.

Hard money mortgage providers look at the value of the asset. That’s the property that is backing the loan. They don’t care about your credit rating. If you have provided evidence that this is a good investment, they’ll move quickly. Having access to funds this quickly is an important asset for real estate investors in escrow. Some find that their original lender pulls out or simply doesn’t deliver the funds. A hard money lender can step in to provide the cash and make the deal go through.

When you consider that a normal mortgage provider can take around two or three months to extend credit, waiting less than a week will seem like a dream come true. It also means you can get moving faster.

More Financing Available: A Mortgage Loan Advantage

If you apply for a mortgage with a traditional lender, you’ll need to put down up to 20% of the asking price of the property. This will mean that you get better terms on the loan, but that may not be what you want, especially if you’re renovating. Who wants to pay for a renovation five years after it’s taken place?

A hard money mortgage will have shorter terms, but it is possible to borrow against the anticipated value of the property after the renovation. This changes things! You may be able to borrow 100 percent of the purchase price.

A Hard Money Mortgage is Good for Your First Investment

If you are just starting out as an investor, a hard money loan can allow you to purchase property with a minimal amount of your own capital. As long as you present your research on the investment, the hard money mortgage loan provider can also verify that it’s a good investment. With this support, you are at an advantage, as you can quickly start on that project you’ve had your eye on.

Help You Build a Relationship

If you establish a relationship with a hard money lender, this will give you a mortgage loan advantage when you choose to invest again. All you need to do is honor the terms of the contract and pay back the loan on time. Good relationships between hard money lenders and clients can mean that the lender extends more financing, reduces origination fees, and achieves shorter approval times.

Contact a Hard Money Mortgage Provider

Whatever your investment goals are, having a mortgage loan advantage will always stand in your favor. Hard money loans are pretty effective when it comes to the real estate market, which can move fast. Check real estate groups and social media real estate forums to discover hard money mortgage providers in your area.

Resources:

https://www.redfin.com/blog/homebuyers-finding-homes-faster-2019/

www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#69a271da52ae

Need A Hard Money Home Loan? Expect To Pay More In Interest

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You can get approved for a loan by using your home or property as collateral. Getting a loan this way is called a hard money loan, and it’s easy to apply for and get approved. But you do need to be prepared for the higher interest rates that come with hard money home loans. Hard money loans continue to be popular. Many people use hard money loans without ever approaching a traditional mortgage lender. People use hard money loans for their mortgage for a variety of reasons.

Hard Money Loans are Often Used for Construction Projects, Flipping a House or Buying Property

Sometimes people get hard money loans to help finance a small business or project. In general, hard money loans are excellent for properties that you fix and flip, land loans, and construction projects. Julie Aragon, a Los Angeles based mortgage expert,  relays why some people gravitate to hard money loans.

“Individuals who buy properties, renovate them, and resell them for a profit are known as property flippers, will often get hard money financing because they can get the cash they need fast. This expediency is beneficial when they’re bidding on a property.”

Hard Money Loans Come from Individuals or Investors

The investors who put up the hard money loan usually require you to have higher interest rates. There are some things that can help you find reputable hard money lenders. This includes the most reasonable interest rate possible. Keep in mind if you put your home or another property up as collateral and default, the hard money lender can take that property. It’s their protection from losing the loan money plus interest they gave you.

The Hard Money Loan Lender Interest Rate Range

Financing Strategies for Real Estate Investments is a mortgage hard money lender. They lend you between 60-70 percent of what your property value is. It’s a win-win for most investors because if someone they lend to defaults on their payments, their property can be taken by the moneylender. It’s important to know that reputable hard money home loan lenders want to build a long term relationship with you. They don’t want to have to go after your home or property for a loan to be paid off. There are ways you can research and find out the difference in reputable hard money loan lenders who have reasonable interest rates and the ones you want to stay away from.

Research and Find Reputable Hard Money Home Loan Lenders

Hard money home loan lenders can charge you points and fees based on the amount of money you borrow. Since the loan points are based on a percentage of your loan, you want to be careful to figure out what one or two extra points will cost you when you’re paying it back. For instance, if you borrow $500,000 and your loan comes with two or three points, each point adds another $5,000 to your original loan. You also need to check your hard money home loan lender’s reputation by seeking reviews from others who have used them. Find out if they have a positive history in dealing with those that borrow money from them. If possible, try and meet with your hard money home loan lender because hard money investors are worth having a positive relationship with.

Your Next Step

Your next step is figuring out what type of home loan you want to pursue, and if it’s a hard money home loan, research and find the best one to fit your needs. While your approval time is a lot less, you also have less time to pay it back. Sometimes you have to pay a hard money loan lender back in twelve months. Although sometimes you can stretch it out to two-five years under special circumstances.

If everything above represents what you want to do and then you can find no better resource than a hard money home loan lender. There are so many ways you can benefit from a relationship with the lender. Don’t wait, move forward and find a hard money loan lender that helps you get the future you deserve.

Resources:

https://sfs.columbia.edu/financial-aid/private-loans

https://www.consumer.ftc.gov/articles/0187-when-paying-mortgage-struggle

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

 

 

What Are Hard Money Brokers?

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Hard money brokers

Are you in need of a hard money loan? People with low credit scores or aren’t able to give proof of income to traditional banks and credit unions aren’t able to get a loan. However, hard money loans might solve your financial problems. Learn more about how you can use hard money brokers to get the best loan possible from a lender.

What Are Hard Money Loans

Have you been trying to get a traditional loan? When you have gone through all other financial options, then a hard money loan could help you. It’s easier and faster to get one than traditional ones, which can be beneficial to those who need quick money. Traditional loans take too long and might not be an option for those with low credit.

People might become desperate to help finance their new house flipping business or their investment in real estate. Having the money to purchase a house on the market you want is crucial since it could easily be bought from another buyer.

How Hard Money Lenders Approve You

Getting approval from a hard money broker can be easier than traditional lenders. But you still have to put in the work and effort. You can get approval if the property you want them to invest in is worth it for them. You will have to put up some property as collateral to make the loan a possibility. Without it, you won’t be able to get a hard money loan.

Writing a thorough and organized proposal on how you will repay them will only help you get approval. A sloppy one might not get you far with some investors. Make sure you have an excellent plan for them not to say yes to. Having an exceptional property for them to make a profit off will be a further incentive to approve you for a loan.

However, you shouldn’t be too hasty when you get a hard money loan. According to the Financing Strategies For Real Estate Investments, if you aren’t able to repay the lender, they can “repossess the property because they have a first lien position and will handle it themselves.” This means they have the right to sell the property and take the sell for profit.

What Are Hard Money Brokers

Trying to figure out your first steps after deciding to get this loan might intimidate some. That’s why hard money brokers can come in handy for those who want to get the best deal. Hard money brokers are the middlemen who connect you with hard money lenders that’s right for you and your financial situation.

Hiring A Money Broker

Why do you need a money broker? As reported by the Financing Strategies For Real Estate Investments, hard money lenders will lend about 60-70% loan-to-value of the property you want to put up as collateral. You can’t get a loan that’s 100% worth the value of your home. These lenders need to make money out of their investment in real estate.

So, hiring a money broker can help you connect to lenders who are more likely to invest in the price range that satisfies you. You could search and find excellent money lenders online, but not all of them are willing to contact the borrower directly. Therefore, money brokers can help since they can be a middleman between you and the investors willing to invest in small or large real estates. Without them, you might not have access to investors that maintain a low profile or don’t want to be in contact with the borrower.

However, ask your broker how much they charge you for their services before hiring them. Paying them is another bill you have to think about when hard money loans become your last resort in getting the property you want.

If you are planning on getting a hard money loan, consider hiring a money broker. They can give you excellent connections to investors who match your loan goal or ones who will provide you with the best deal. It can save you more time by having the help of a professional who knows how to deal with busy investors. Research today to see which money brokers are right for you and your family. You can be one step closer to making your house flipping business a reality!

Source: http://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1445&context=honors_research_projects

 

 

Hard Money Vs. Bank Money In Florida

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When it comes to real estate, new investors and buyers should look at hard money vs. bank money in Florida. Many people are used to the traditional route of applying to the bank for a mortgage.

However, rather than just looking at bank money in Florida, there are options for borrowing from hard money lenders. So, what are the differences between hard money and bank money in Florida? It’s worth taking a closer look to determine which one might suit your needs best.

The Difference Between Hard Money and Bank Money in Florida

When you approach a traditional lender such as a bank, they will examine your application based on three main things:

  1. Credit: Your credit score and your history of making payments.
  2. Ability to pay off this current loan – your earnings and assets.
  3. They have stringent regulations and in order to get your hands on bank money, you need to meet those.

When you approach a hard money lender, they don’t have as much interest in your credit rating or history. They are vaguely interested in your capacity to pay off the loan. They will zero in on one main thing – an asset that will be the security. The number one difference between a hard money lender and getting bank money in Florida, is that the bank won’t let you use the property you’re buying as collateral, but the hard money lender is only interested in that.

What Else?

Length of Time to Close the Loan:

It’s no secret that banks take their time processing loans. This is due to the regulatory bodies that they have to abide by. Every box must be ticked, every document scrutinized and this takes time. This means that it usually takes a bank about 3 – 6 months to assess an application, and that can feel like a very long time, particularly in real estate. As Ray Brown said “The best time to buy a home is always five years ago,” and in a market that changes rapidly, waiting any length of time is just affecting your investment.

If you go for a hard money loan, you can get it in anywhere from just a few days to a few weeks, at most. If you’re buying to flip real estate, which happens regularly in Florida, time is of the essence. Tampa-St. Petersburg, Florida had the 4th highest flipping rate in the country in 2018 at 8.2%.

Interest Rates:

If you’re looking for low-interest rates, then bank money is the winner. One of the reasons that banks can offer lower interest rates is because their risk is much lower. The length of time of the loan will also be far longer, more like 10 – 30 years in comparison to a hard money loan. Current bank interest rates stand around 3.45% for a 15-year fixed mortgage. With a hard money loan, you will have a much shorter term, with much higher interest – probably around 30% of the value upwards.

Property Types:

Most traditional bank loans for real estate focus on single-family homes and some commercial properties. On the other hand, hard money loans can be used for bridge loans, construction loans, and mixed-use property loans. If you are investing or looking at something that isn’t conventional, then hard money wins here against bank money.

Regulations

The big difference between getting a hard money loan versus a bank money loan is down to regulations. Traditional banks and lenders are licensed, whereas not all hard money lenders are. This is because they are private individuals or companies with their own money.

Recently, Governor Rick Scott vetoed House Bill 747, which would have made it a huge challenge for hard money lenders to operate in the state and in fact would have damaged the housing market. According to Adam Millsap at the Charles Koch Institute, “Florida’s population is increasing rapidly, but the housing supply is not keeping up.”

Since the Great Recession, banks have moved towards standardized products and not thinking outside the box when it comes to lending, and this can push many people beyond the qualification levels needed for loans.

Which is Best – Hard Money or Bank Money?

If you want the safety and security of a long-term loan with low interest and can meet a bank’s requirements, then bank money is the way to go. If you need more flexibility or need money fast for a good investment, then hard money should be right up your street. Whatever is best for one person may not be for another, so it’s up to you to make the final decision.

Resources:

https://www.flgov.com/wp-content/uploads/2017/06/HB-747-Veto-Letter.pdf

https://www.attomdata.com/news/most-recent/2018-year-end-u-s-home-flipping-report/

https://www.valuepenguin.com/mortgages/florida-mortgage-rates#targetText=In%20Florida%2C%20the%20average%20rate,ARM)%20average%20is%203.63%25.&targetText=Mortgage%20rates%20can%20change%20from,should%20lock%20in%20your%20rate.

https://www.forbes.com/sites/adammillsap/2019/01/07/regulations-make-floridas-housing-more-expensive/#12fc7d643f5d

 

 

Hard Money Mortgages – The New Saving Grace

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“The universe of mortgage lending has gotten to the point where there is a place in it for everybody.” – Joe Mays. As our world moves ever quicker, the star athlete absolutely hit the nail on the head with this one. Mortgages are not just for banks anymore, but they still remain for everyone. Hard money mortgages can be a realistic way for you to buy your home.

Ten years ago hard money mortgages were something that most people hadn’t heard or considered as an option. These days they are something more and more people are looking at. In 2016, non-banks were behind nearly 50% of all mortgages, which shows that people are moving away from traditional lenders.

Why Are Hard Money Loans Gaining Popularity?

After the financial crisis, people were hit hard and a number of people went into foreclosure. Many banks also took a hit – some even collapsing under the strain. This brought about new legislation and regulations that were put in place to protect people buying houses. They also protect the banks, so that they don’t run the country into a massive recession again.

The stringent guidelines that are in place mean that it’s harder than ever to get a home loan. People who are self-employed or who have bad credit won’t be eligible for a mortgage from traditional lenders. This has led to more interest in hard money lenders. When people want to save their homes, it is often the hard money lenders who help them out.

How Does a Hard Money Mortgage Work?

The first thing is that hard money lenders don’t really care about your credit rating. They are only interested in your ability to pay it back. Many private money lenders like to build positive relationships with their clients. Hard money mortgages come from a private individual or group of investors that lend money based on the property being used as collateral. It is a win-win situation for them. They invest on the basis that they get much higher returns than regular lending institutions and they are not bound by the same regulations.

Many hard money mortgage lenders consider real estate to be a much safer bet than investing in the stock market and they are probably right. Bricks and mortar can be seen – they are tangible. So, if they can help someone who doesn’t have cash to hand for a home loan, a profitable deal can be made.

If your home is facing foreclosure, a hard money lender can help you re-mortgage so that you don’t stand to lose your home. The borrower always stands to take a higher risk, but if they can see their way out of the problem in the short term, then it stands to reason that a hard money mortgage is the way to go.

A Saving Grace

If a borrower is already in trouble financially, a bank won’t touch them. A hard money provider will. Also, the money can be accessible in as little as a few days. This can be a huge lifeline for someone who is about to lose their home. They don’t have to produce a huge amount of documentation or credit checks, but they need to be aware that they could still lose their home if the hard money loan is not paid off at the agreed time.

If a borrower needs finance for a new home, a renovation or to save your home from being foreclosed on, then your lifeline could be a hard money mortgage. If they can accept that it will have to be paid back in between one – five years, far less than any traditional loan, then it could be the best decision that borrower has ever made.

Some states have a high number of hard money lenders and this means that their rates are more competitive. Those interested in hard money mortgages should contact people involved in real estate in their area to find private lenders.

Resources:

https://www.brainyquote.com/quotes/joe_mays_405263

https://www.brookings.edu/wp-content/uploads/2018/03/5_kimetal.pdf

 

 

What Can a Hard Money Lender Do For You in Today’s Market?

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Do you have a small business that needs some extra funds? A hard money lender might be the answer to your financial problems. Learn more about how hard money lenders can give you the loan you need to stay in business.

How Hard Money Lending Works

Have you tried to take out a loan with traditional banking? They often deny your request if you have bad credit or don’t have proof of a steady income. It makes it nearly impossible to keep your business running without some extra financial assistance. Therefore, some small businesses or startups have to resort to hard money loans.

Quick Hard Money Lending Process

You can easily apply online for a hard money loan as soon as you find a few that you can trust with your business. The significant part about hard money loans is everything is faster, from your application acceptance to getting the money you might need right away.

This can come in handy for those trying to build businesses such as flipping properties. If you depend on traditional banking, it might take too long to buy the property you have your eye on. Or to get the materials in time to get those renovations done. Sometimes fast money can be crucial to the success of your business when you are flipping properties or other similar businesses.

Don’t Need A Good Credit Score for a Hard Money Lender

Do you have bad credit? It doesn’t mean an instant denial of getting a loan when you go through hard money lending. Instead, a hard money lender can help you where banks and credit unions will usually deny your request when your credit is too low.

According to the Senate Committee on Banking and Financial Institutions, hard money loans are for “people with tarnished credit, whose low credit scores render them ineligible for more traditional forms of credit.” You don’t have to worry about having any other alternatives to save your business from bankruptcy.

Hard Money Lender Policies

Like with any loan, it’s better if you check each hard money lender’s policies. They will all give you different estimates on how much money you can borrow. This can be good since you find out which one offers the best deal possible, meaning you get to borrow enough without having to worry about any additional fees.

These lenders will all have different rules on any fees or points that they will charge you. So, make sure you know what each lender’s policy is with their hard money loans. These fees or points can add up to a lot of money if you aren’t careful.

Downfalls of Using a Hard Money Lender

Hard money loans sound good when you have nowhere else to turn to. However, don’t be too hasty in accepting the first offer presented to you.

High-Interest Rates and Points

Since you have to repay the loan faster than traditional lenders, prepare to pay more than you borrowed. As reported by the Senate Committee on Banking and Financial Institutions, hard money lenders give you a shorter amount of time to repay the loans.

So, this means you might have higher interest rates and points than traditional loans. Those interest rates and points can be high, so always think it over before signing up with any hard money lender.

Get Legal Advice Before Signing

A hard money lender can be helpful for businesses, but you also have to be careful with the paperwork involved. If hard money loans are your last resort, then this will make you vulnerable. They might try to add clauses that you might not understand that will add stipulations even after you repay them their money.

You should have the clauses in your deal looked over by someone who can give you legal advice on it. If you don’t, you might get yourself into something you didn’t know you agreed upon.

Are you ready to get a hard money loan? If your business is in danger of shutting down before it begins, you might need to look into getting this loan. It can save you from having to pull the plug on your business before you can make your dream job a reality. So, why not look into getting help from a hard money lender? You can go over your choices with your family or business partner and see what the best option for your business should be.

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