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  • Institutionally Funded or Investor Funded?

    Posted on 10/29/2004
    Hard money lenders are either institutionally funded or investor funded. Institutionally funded lenders generally have tighter restrictions on their lending criteria, but can fund faster, since their money as always available for funding.

    Investor funded lenders float every loan through a prospectus to wealthy individuals who may wish to invest in a specific real estate loan. This may take longer, but private investors willing to take greater risks can sometimes be found, giving the lender more flexibility on the kinds of hard money loans they can fund.

    In general, look to institutional money for the lowest rates and points.
    Posted in Miscellaneous

  • Close Your Loan in Two Weeks

    Posted on 10/28/2004
    "We can close your loan in two weeks or less!" Sounds great, but what does that mean? Two weeks from when?

    Two weeks closings means a hard money lender can close your loan 10 working days from the time they have the following:

    * completed loan application
    * written appraisal
    * signed letter of intent/term sheet
    * receipt of the due diligence deposit costs (usually about $5,000) from you
    Posted in Miscellaneous

  • the right sized project

    Posted on 10/27/2004
    Avatar fields many loan inquiries from investors who want to buy $million+ properties with no money down. While scam artists abound, charging for seminars, books, tapes, and more, telling you that you can get into real estate investment without spending a dime, the truth is that hard money lender, rehab lenders, and banks all want a minimum of 20% in cash or other real estate equity in any commercial or investment project you are trying to fund.

    To be successful in real estate investing, start with a small project you can afford and move up from there. You'll waste less time and achieve your goals sooner.
    Posted in Miscellaneous

  • Qualifying Your Income on a Hard Money Loan

    Posted on 10/26/2004
    Recently, I saw a loan request for the purchase of a motel. The borrower also owned the land next door. It looked like a weak loan, not likely to meet lending criteria. A quick call to the broker revealed that the borrower also owned a casino in the same county which nets enough in a month to cover the annual interest payments on a hard money loan for the B&B. The borrower wanted a 90 - 120 day hard money bridge and already had the take-out financing in place.

    The 'story' behind the loan revealed a lot more equity, income, and financial viability than the simple statement that someone wanted to buy a B&B. When filling out loan applications, be precise and be thorough. Take the time to clearly think out and provide the full 'story' about your loan. You and your project may be a lot more qualified than you think.
    Posted in Miscellaneous

  • Hard Money Land Loans

    Posted on 10/25/2004
    Hard money lenders define a land loan as a hard money loan in which the collateral is a piece of real estate property that has no building on it. Infrstructure improvements to land, such as roads, utility lines or hookups, etc. improve the value of the land, but hard money lenders will still define your property as 'land' and opposed to 'improved real estate'.

    Expect to be able to get up to 50% of the purchase price of the land in a hard money loan.
    Posted in Miscellaneous

  • Hard Money Loan Rates

    Posted on 10/24/2004
    Hard money starts around prime + 7%. As of this writing, the prime rate hovers around 4 3/4%. Points for hard money loans vary depending on the risk involved in the loan. Points can vary from 3-4 to as much double digit figures. Additional fees include the third-party costs of due diligence such as appraisals, inspections, site review and more - rangin from $5,000 - $20,000+ depending on the size of the project.

    When seeking a hard money loan, be sure to ask about all the fees involved adn when you should expect to pay for them... and remember, never pay for the privilege of having your loan reviewed by a lender.
    Posted in Miscellaneous

  • Hard Money for Residences

    Posted on 10/23/2004
    Hard money loans are almost always used for commercial purposes. But it is possible to obtain a hard money loan to use as a bridge loan to purchase a residence or to refinance one. If the use funds is for business purposes and obtaining a conventional mortgage or line of credit is not an option, inquire about collateralizing your residence to obtain a hard money loan to accomplish your business goals.
    Posted in Miscellaneous

  • Defining LTV

    Posted on 10/22/2004
    Defining a realistic and accurate “value” of property is where most loan applications run into trouble. Everybody who buys real estate gets a 'deal' and purchases for less than the "appraised value".

    When requesting a hard money loan, for purchases, ”value” is defined as the actual purchase price of the property, not an appraised value. For refinances, value is defined by a written appraisal from a licensed real estate appraiser.

    If a property is purchased for a sum and a couple of months later, an appraiser indicates a dramatic rise in value, another appraisal by a different agent may be required, unless substantial investment in improvements is demonstrated.
    Posted in Miscellaneous

  • Equity in Your Project

    Posted on 10/21/2004
    "I can get a home mortgage for 100% of the purchase price. Why can't I get a hard money loan for 100% of the purchase price?"

    The answer lies in the kind of loan you are looking for. Owning a home is part of the "American Dream". Our government wants us to own homes, put down roots, become 'stable' citizens. These concepts were set in place many years ago, when physical stability was equated with social stability. Residential mortgages enjoy a special status with underwriting, government support (residential mortgage interest is deductible on your taxes), etc.

    Hard money loans for are for commercial/investment purposes. Count on being required to have a minimum of 20% of the cost of the real estate in your own funds or other collateralized real estate at risk in a commercial real estate deal – even if you are buying residential properties.
    Posted in Miscellaneous

  • Types of Hard Money Loans

    Posted on 10/20/2004
    Hard money loans are always collateralized by real estate. The types of real estate funded by hard money lenders varies. When applying for a hard money bridge loan, be specific about the type of property you are collateralizing.

    Property types include: commercial, industrial, retail, residential, and land. Within those categories, be specific about your property. For example: residential/mixed used: 8-plex w/retail space & pay-parking lot.
    Posted in Miscellaneous