Hard Money Vs. Private Money in Real Estate Investment

One of the first things people looking to start investing in real estate generally ask about is how to find investors, or how to generate the capital to do their deals. While a traditional bank or mortgage lender can be of some help, most real estate investment companies today use other options for funding. Two of these options are known in the business as “hard money” and “private money.”

Hard Money

In real estate investment, the term “hard money” refers to a short-term loan which is used to finance a property. Hard money gets its name from the fact that these type of loans are very expensive for the borrower and yet also very advantageous for the lender. For real estate investment transactions, hard money lenders will generally only loan on properties up to 65% loan-to-value and will charge an interest rate well above the current standard mortgage rates. The reason for the high cost of obtaining hard money is that it is much easier to borrow, and because of this the lender is placed in a position with much more risk of default. Hard money can be good for very short-term needs or if a situation comes up without any readily available alternatives.

Private Money

Private money, just as it sounds, is money you can obtain from private individuals for real estate investment funding purposes. Private money can be obtained in a variety of ways, and can be a much better deal than using hard money. The biggest advantage of private money is the lower cost than hard money, and the added flexibility of working with investors who come to know you and understand your business.

Finding private money lenders requires prospecting for investors. When you enter the arena of real estate investing, prospecting for investors needs to be something you do on a regular basis in order to insure that you always have the capital readily available to fund your deals. Finding the right real estate investors means that you can make the best deals possible, and you can make them on your own terms rather than the terms of a bank or a hard money lender.

Besides a construction loan,How do you apply for a mortgage that will pay for demolition fees,bluprints?

I own a bunch of garages.I would like to demolish them and build a 3 story house.This requires blueprints from an architect and other crap,in order for the city to ok the building.What bank and how will this process work,without me spending a dime out of my pocket.My credit is good and this will be my first home.What loan will accomplish all this without closing costs because ther is no physical building established yet.The garages are classified as commercial property and built in 1910.I tried to use whatever possible equity against the garages and I was told commercial property like this will not allow that.

Are there any hard money lenders out ther for homeowners in Pennsylvania?

Private lender in Thailand for Foreigner?

Please tell me are there any lender for foreigner in Thailand. If the lender is foreigner too is perfect. Need urgent money for 15,000 USD. Must be not SCAM things. Thank you very much.

Standard Mortgage Named Servicer of the Year by Mortgage Technology Magazine

If you’re facing foreclosure in D.C., relief might be possible
Do you live in the District and are you facing foreclosure? If so, and depending on the details of your original mortgage transaction, you might be able to get relief from the D.C. attorney general’s office.

Read more on Washington Post

Foreclosure Lawyers Put Second Mortgages on Clients’ Homes
Some defense lawyers call the mortgages crass. Yet they solve a vexing issue: How can clients who are broke pay?

Read more on New York Times

Standard Mortgage Named Servicer of the Year by Mortgage Technology Magazine
Mortgage Technology Magazine named New Orleans-based Standard Mortgage, one of the South’s oldest and largest privately-held mortgage banking firms, “Servicer of the Year” at the 2010 Mortgage Technology Awards Ceremony held last week at the Mortgage Bankers Association’s 97th Annual Conference.

Read more on Business Wire via Yahoo! Finance

Becoming a Commercial Loan Broker

Searching for information on becoming a commercial loan broker?  There are a few things you need to be very good at  in order to make it as a commercial loan broker.  1. You have to be very good at reviewing loan packages.  2. You need a strong lender network.  3. You need multiple, reliable sources of leads.  Becoming a commercial mortgage broker is really not that difficult and it certainly isn’t brain surgery.  But like all businesses you need to get to the point of really knowing what you are doing and why.      

A lot of time and energy goes into all deals.  Knowing how to examine a potential deal is critical.   You need to be able to sit down with a package and in 20 minutes figure out if you will work on it or pass.  It’s very easy to waste hours on a loan that doesn’t have a single chance of closing. 

Having a strong lender network in place is just as important and goes into qualifying a loan request.    Number one you have to know their programs inside and out.  You need to know what they really like, beyond what shows up on their matrix.  Also you need solid relationships with the individuals you work with.  You need quick, thorough decisions.  Having your files on top of their pile is important. 

Becoming a commercial loan broker is all about having a solid influx of deals.  You need to compete on a lot of commercial mortgages in order to find doable deals and ones in which you can have control over.  There are a lot of marketing methods out there and most of them will work in this business.   

The traditional method of developing relationships with the local investors, commercial real estate brokers, CPA’s, attorneys, bank representatives, etc is still a very good method.  This still maybe the best route to go, though it takes a lot of time and effort to build a name in your market.  Newer methods include mailers, email campaigns, ads in newspapers, etc.  Regardless of which route you feel more confident about you need some type of program that gets your phone ringing and keeps it ringing.  Be patient and survive the “green” period in your quest to become a commercial loan broker. 

Doral Financial Corporation Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2010

Where the rich can go when they need a loan
Scotiabank has stolen the march on its rivals in the race to provide simplified lending to the 1.1 million Canadian families with net worths of $1-million

Read more on National Post

Buy-to-let boom? 1 in 3 landlords to increase size of property portfolio
The increase in demand for rented homes, combined with a shortage of properties, pushed rents up to a record high of £689 a month in September.

Read more on Daily Mail

Doral Financial Corporation Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2010
Reduces Non-Performing Loans $90.7 Million in the Quarter; Capital Exceeds Well Capitalized Benchmarks

Read more on Marketwire

Does anyone know of any hard money lenders in Florida that are really lending on rehab properties?

Commercial Mortgage Loans – What the Bankers are Looking at Today

Even today, in these challenging economic times, there is no shortage of investors, and developers seeking commercial real estate mortgage loans. The problem is lenders are not funding deals like they were just a year or so ago.

If you want to better your chances of securing an approval and closing your deal, bring these things to the table.

Cash = Commitment

100% financing is extinct. Some borrower cash in the deal is now a strict requirement of all legitimate lenders, including private and “hard money” lenders. From a lenders perspective, the bigger the borrower down-payment the better, but, if there is enough equity in a building or project, lenders will work with as little as 10% down. They might build in a mezzanine facility or structure in some preferred equity, but, quality deals can get done with small amounts of borrower cash. That-being-said, don’t ask for 100% financing. Lenders today are looking for commitment and nothing represents commitment like cash in the deal. (Note: If a lender, or broker tells you they offer 100% financing, beware, chances are good that, in-the-end they won’t be able to fund and you’ll lose your deposit and due diligence money.)

Credibility

Lenders are looking for credibility. Now is not the time to ask a lender to fund your experiment. Don’t try to buy your first hotel during a credit crisis. Finance companies will ask about your experience in the hospitality industry and will be nervous if you lack a track record in the industry. The same goes for retail, office and industrial. Now is the time to go with what you know or partner up with an investor with experience in a particular industry you’re trying to break into. Trust me; lenders are going with what they know and they know first-timers are high risk.

Credit

You don’t have to have perfect credit to get approved for a commercial loan, but your credit report better not portray as a dead-beat either. If you are credit score challenged, be prepared to be able to mitigate that negative factor with either a co-signer, a larger down payment or cross collateralization of other real estate you own. Lenders don’t know you personally but they know precisely how many times you’ve been 15 or more days late on all of your mortgages and all of credit card payments. They look at your credit report as a report on your financial character. This may not always be fair, but to be fair to lenders, it’s really all they have to go on.

Equity

Equity is protection to a lender. If you can show equity in a building or a tract of land lenders will feel more secure and will be more likely to place the money in the escrow account and schedule a closing date. There are simple ways to increase a lenders protective equity (I said simple, not easy). The most obvious is to make a bigger down-payment; another is to ask the seller to carry-back some portion of the debt. One effective method to also consider is to increase the value of a property by taking steps to getting it fully entitled. Sometimes some simple engineering can drastically increase the value of a project. A change in zoning has been known to double real estate values and can often be accomplished simply by petitioning the local zoning authority. Inexpensive site work may also have a dramatic effect on how a bank views a property and they will definitely appreciate your spending money on the deal.

We are facing challenges today in the credit arena, but deals are still getting done, buildings are being bought and developments are still moving forward. If you want your deal to be one of the ones that gets funding take steps to show the lenders what they want to see.

MasterPlan Capital LLC – Financing for all types of Commercial Real Estate – Purchase / Refinance / Development – Simple (1 page) Application Online at: www.masterplancapital.com Quick Answers – Fast Closings – Commercial Mortgage Loans From $1MM – Equity Financing / Joint Ventures From $10MM

Glenn Fydenkevez is a former officer at one of Wall Streets biggest investment houses. His company, MasterPlan Capital, is involved, nationwide, in the financing of and investment in commercial real estate. E-mail him at glenn.fydenkevez@masterplancapital.com

 

 

 

 

Hard Money Loans: A Great Alternative to Traditional Financing

Over the years, real estate investing has provided great career opportunities for dozens of people who have taken advantage of this prolific business. To succeed in this industry, however, you must take certain things into careful consideration. You also have to equip yourself with proper knowledge and information to make sure that you won’t commit costly mistakes that would affect your integrity as a real estate investor. One of the things you should do to ensure your success in real estate investing is to find a good source of funds. You can approach banks and other lending institutions, such as credit unions and mortgage companies, for your financing needs. As long as you can meet the criteria set by these financial institutions, you can obtain funds for your investment properties. But what if you were unable to secure a loan from traditional lenders? What happens next? Fortunately, there is an alternative to traditional financing called a hard money loan. Unlike those provided by banks, mortgage companies, and credit unions, hard money loans (HMLs) are asset-based. Lenders of HMLs verify a loan’s eligibility by assessing the after repair value, or ARV, of a property, which serves as the collateral. Because hard money loans are asset-based, lenders are not concerned about a borrower’s credit history. They don’t care if the borrower has a bad credit score or if his current financial status is unstable. As long as the property, for which the loan is made, has a potential to attract a great deal, lenders will provide the borrowers with the funds they need. One advantage of securing loans provided by hard money lenders is that borrowers don’t have to undergo credit checks. In addition, they don’t have to deal with a processing team, which is a common procedure in traditional financing. Because of such a scenario, the releasing of funds can be done in just a few days. Borrowers don’t have to wait for weeks or months just to acquire the money they need. According to certain experts, it is ideal to use hard money loans when purchasing investment properties. Lenders of HMLs sometimes provide 100% financing on some deals, which is something that a traditional lender can’t do. In addition, some hard money loans provide coverage for repair costs, which is perfect for those who buy and rehab homes for profit. To find hard money lenders, you can join the local real estate investing club and ask your fellow real estate investors for referrals since most of them have experience working with these people. Settlement attorneys can also provide you with a lead to a hard money lender because they are the ones who prepare loan documents for lenders of HMLs. You can also gain access to trustworthy hard money lenders on RehabHardMoney.com. Because the web site brings together HML lenders and borrowers from many parts of the country, finding a good source of funds for your real estate investing business is just a walk in the park. To learn more about hard money lending, visit www.RehabHardMoney.com

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