Posts Tagged ‘private money’

Using hard money

Friday, May 6th, 2011

As banks continue to make institutional lending a challenge for so many of today’s borrowers, hard money financing has been the source of funding for many. Based primarily on equity, hard money lending gives borrowers with equity an opportunity to further leverage their capital and invest in the current real estate market!

This is in direct contrast to the bankable financing available on the market place today .  With so little fluidity, institutional lending has become hard for even the most highly qualified individuals to obtain .  If you own too many properties, you may not qualify , if you are self employed and tax returns do not reflect your true income, you might not qualify , even some asset classes can exclude you from obtaining bankable financing.

This is why hard money lending is able to fill such a gap.  Instead of focusing on paperwork requirements , hard money lenders will depend on the actual value of the real estate that will secure their loan.  Interest rates will be higher than bank financing, but hard money is still less expensive than having a partner in most scenarios .
 
There is a viable alternative for unique, the stated income, those with credit issues, and those that do not fit into a tidy box but have a good amount of equity in a property – private money!
 
No matter what your credit, whether a 800 fico score or a 450 fico score, the top criteria is the loan to value ratio. Hard money lenders will review the borrower’s income and credit, but these factors will only have a minimal affect on the decision making.

The final factor that will dictate whether or not financing will be extended , for a commercial hard money loan or other type of private financing when dealing with hard money, is the value of the real estate to be encumbered .  If there is enough value in your real estate, chances are there is a way to structure a loan that can meet your needs.

Real estate investing

Friday, April 29th, 2011

Real estate investing, specifically fix and flip type investing , has become very popular lately .  With the influx of REO’s and foreclosed properties , many people are able to purchase a fixer , do a little work to add some curb appeal, and sell to an end user buyer .

When dealing with these types of proceedings, many investors find themselves looking for a hard money rehab loan , only to be rather surprised by the requirements needed to line up money of this type.  In this case , a number of investors will turn to a private money lender to help them leverage their existing cash .

A private money investor is much more conciliatory than a bank may be in today’s market .  This is particularly true if your project includes any type of construction or rehab.  The banks simply are not lending money for these deals in the market today , but private money lenders are.

Private money lenders will give you the power to structure this type of funding in a fashion that will allow you to leverage your existing cash.  Typically, you can obtain hard money rehab loans using the after repair value of a property.  In addition, financing for all of the purchase price is realistic, provided you have the cash to cover the cost of repairs and interest on the loan.

In the event the real estate sector continues to experience stress, these types of investor loans are going to allow more and more investors the ability to get into the fix and flip business .  

Most of these loans are structured as short term loans, perhaps twelve months to twenty-four months at the longest .  Typically there is no pre payment penalization on these short term loans , and you can expect to pay an interest rate of anywhere between twelve and fourteen percent.  It is not cheap money, but California rehab loans are much less expensive than taking on a partner!   If you are in the market for this type of money, consider hard money lenders as a good avenue to go when looking for this kind of money .