Would it help you as a real estate investor to be able to
“Close for cash in days” even if it’s sold out
financially?
Hard money lenders are perhaps the best way to get 100%
financing with easy qualification, money to fix and fast
closures
So what can hard money lenders do for you? hard money
lenders make short-term loans (12-24 months) to
real estate investors in order to acquire the
ownership and property rehabilitation.
These loans are often financed by groups of private investors.
that have been grouped into a set of capital by a
lender.
The hard money lender is looking for maximum returns and is
willing to take more risks for this return in the form of
easier loan rules.
If you get the right purchase agreement, you can even borrow
100% of the purchase price plus part or all of your repair
money by using hard money lenders. Is that how it works.
Hard money lenders generally lend at or after 65% ARV
Repair Property value when repaired or ready
for resale
That 65% loaned by the hard money lender is calculated based on
about the value of the property AFTER THE REPAIRS, not as if
currently sits, and is not based on the price being paid
the property.
For example, let’s say the owner is willing to sell me his
house for $60,000. The hard money lender’s appraiser agreed.
with my assessment that the house could sell for $100,000
once fixed. That evaluation would allow me
borrow 65% of the $100,000, or $65,000. i’m just paying
$60,000 for the property, so guess where that extra $5,000 is?
goes?
Unfortunately, not in my vacation fund!
Additional loan proceeds go into an escrow account maintained by
The hard money lender, and I can take it out like I do
repair.
Remember, hard money lenders don’t care about your
Personal credit at the level of traditional lenders.
They are concerned about property. They know that their
loan is quite safe if you do not pay.
What’s wrong with hard money loans?
Commissions are higher than conventional financing.
Hard money lenders in my area charge 15% interest and 5% down.
the value of the loan in closing costs (“five points”).
Therefore, in a loan of one hundred thousand dollars, there would be
$5,000 in fees to the lender to close the loan, plus
attorneys’ fees and other charges.
Second, the loans are generally only good for 12 to 24 months.
After that time, you have to refinance. if you have not sold
by then, you have to get a new loan, pay more commissions, etc.
These are not loans to buy rentals.
Another disadvantage is the fact that most of the hard money
lenders do not calculate payments on a 30-year basis. Tea
the longer the payments are spread out, the cheaper the payment will be.
They calculate these loans in terms of 15 or even 10 years. Thus,
the monthly payment you must pay is much higher than what you
It would be on a conventional 30-year amortization schedule.
Also, hard money lenders are often harder to find.
than traditional funding sources. I have as a gift
I compiled a national list of hard money lenders on my site for
solve this problem for you.
Finally, most hard money lenders require a prepayment
penalty that must be paid if you refinance or cancel the
mortgage before a certain period of time. Fortunately, this
the time period is often quite short. For example, the hard
money lender i use has a two month prepayment penalty
period. Even if I’m not going to do much work on it
property, and have a contract on it quickly, I can establish
until closing for after the prepayment penalty expires.
In conclusion, hard money lenders present an attractive
option for investors to succeed without having to resort to
the late-night TV creative hype we’ve all probably been on
exposed to. If you can qualify for traditional financing,
and your seller is comfortable with a longer closing window,
you may want to stick with conventional financing.
However, if down payment money is tight and your credit is
not perfect, or need to close real fast, hard money
lenders can be a viable solution as they will allow
almost anyone who can find a good deal to buy a
property extremely fast, with less red tape, get money
for rehabilitation, and have virtually unlimited access to cash.
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