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Hard Money Lenders are Here to Help

Hard Money Private Lenders Are Here To Help

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

Why Hard Money Lenders Help Others

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

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

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

The Concrete Tangibles in Hard Money Private Lenders

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

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

Hard Money Private Lender: Follow the Rules

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

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

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

Example

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

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

Final Thoughts

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

Sources

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

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

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

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Why Use Hard Money Private Lenders?

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So, you’ve seen a house that could use some work and you think that you could make something of it. The trouble is, you simply don’t have the cash on hand to buy it. What’s your first thought? See if you can get a loan. If that’s refused, what do you do then? For some people, they don’t even consider a traditional loan, they go straight to a hard money lender.

What is that exactly? It’s a non-traditional lender that can loan you the money with different terms and conditions than you would receive from a bank or normal credit institution. If this isn’t something that you’re familiar with, not to worry – you’ve come to the right place.

What is a Hard Money Private Lender?

A hard money private lender is someone who provides you with credit when you offer property as collateral. They are private investors, either individuals or groups, and they usually have plenty of experience in offering out these loans.

They don’t finance loans with money from deposits, which is how other traditional institutions do it, such as banks and other credit bureaus.

Hard money private lenders are business people and risk-takers, yes. However, they have private funds, which they use to provide quick financial loans. Due to the fact that it is private money, you can skip over most of the regulatory stuff that you’d have to go through if you applied for a conventional loan.

Why is this beneficial for them? Because they earn a lot from it. The loan terms are short, the interest rates are high and they have property as collateral should anything go wrong.

They clearly live by the words of Rich Dad, Poor Dad author, Robert Kiyosaki “As they say in the world of finance, ‘I’ll give you your price if you will give me my terms.'” It’s basically win-win for a hard money private lender.

However, most hard money private lenders like to build relationships and they often lend to the same people over and over.

Hard money lending is big business, with recent reports showing that there are 40% more private lenders now than there were just three years ago.

What do People Use a Hard Money Loan For?

A variety of things. As mentioned, it’s often to do with real estate. Real estate investors often lend to each other and they make big bucks using hard money loans. Here are the things that hard loans are most commonly used for:

House flipping

If you want to earn some money quickly, then one of the best ways to do it is by flipping a house. Real estate investors keep an eye on foreclosures or short sales, and when they need the cash, they simply skip the banks entirely and go straight to a hard money lender.

Development of Property

Smaller developers often use hard money loans when they have found a plot of land or old buildings to develop. In this case, it’s important that the developer either carries out the construction themselves or has a very close relationship with the construction team, as timelines need to be pretty quick in order to turn a profit and pay off the loan.

Personal loans

It’s not as common but some people do use hard money lenders to get access to cash quickly. They can take the loan against their property, but need to keep strict control of their finances so that they can pay off the loan. One way this can work is when homeowners to get a hard money loan to do some renovations to their home and then apply for traditional re-financing with their home revalued at a higher rate.

Why Should I Choose a Hard Money Private Loan?

The pros of using a hard money private lender are as follows:

* Avoid bank limitations

*Fewer requirements to fulfill – less paperwork overall

* Get cash much quicker than through traditional financing institutions

* Shorter term loan, so once you’ve made a profit you can pay off the loan and move on to your next investment.

Overall, as long as you are confident that you can pay off a hard money loan and have a plan in place to control your budget and finances, it can be a brilliant solution to get a hard money loan, especially if you are starting out as a real estate investor.

If you’re looking for reputable hard money private lenders near you, you can search here.

Sources:

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

http://www.quoteswise.com/robert-kiyosaki-quotes-6.html