Hello all, I would like to know what kind of resources some of you investors use in acquiring hard money loans. I have a couple individuals in mind which I have not contacted yet. My purpose in acquiring hard money loans is to put downpayments on investment property. Also, to cover loan costs and to have contingency money available for things like covering expenses in case of vacancies or negative cashflow, etc.

A hard money investor will lend 65% of the value of the property you are purchasing or refinancing and sometimes go to 70%. They charge anywhere from 3-6 points and interest rates of 10-14%. There are probably better options out there that you havent discovered. You can get 100% for an investment property thru a conventional lender.

Those 3-6 points are usually for the broker. I have a couple of direct hard money sources that run 0 pts and 12%

I agree with Paul. Make sure you are borrowing money from the actual lender not a broker if you decide to do hard money.

I would steer you away from HML in general. There are much less expensive sources of capital out there if you spend a little time looking.

there are no hard money sources that dont charge at least 2 points.

3-6 pts is a bargain! Mostly 9-10% is very common...

Thanks for the input. My feelings are that I probably could get a HML at 0 pts. and somewhere at 10%. I'll be looking at some investments in about a month or so after I pass my broker's exam, get with an agency, and get a job. After all that is done, I'll hit this issue hard. You guys are great!

I'm telling you. You will never get a HML with no points. If you do, call me with the name of the company and I'll send you $500

maybe its private money from a family member or friend. id like that number too thats offering 0 points for HML.

You would be surprised where you can find Hard Money! Work on finding your own money sources. Make friends with Financial Planners and show them how much better your projects return than a CD and they will recommend you to their clients.

Okay maybe your best friend will give you $200,000 and not charge you any points. Most of us dont have best friends like that and guys that have $200K to lend are in business to make money not help you out cause youre a nice guy.

I've got at least 30 hard money sources that I've worked with from Bevery Hills to Yazoo, Mississippi AND THEY ALL CHARGE POINTS!

Just FYI and to help you out... HML should only be thought of as the last resort. Hard Money Lenders usually loan up to 60-60% and maybe 70% on exceptions and if it makes sense. Historically HML carries an interest rate of 13% but nowadays you can have some luck in finding 10% Hard Money Lenders.

P.S. Please post or email me if you have any more questions.

Thanks!

Some of my best sources of cash has been friends and family. One of my best friends from high school has given me more than $200k. He doesn't charge me any points at all, nor do I have to make payments. Instead I give him a fixed % return on his money when I cash out of the deal.

Another guy I know does something similar with his friends, but he offers them 2% per month! They don't charge him points.

I think the trick here, as was pointed out above, is to find creative sources of money. I love the idea of talking to financial planners. It would be fantastic if we could start a discussion on how to approach them and get them to take us seriously.

Hard money is "institutional." Money you borrower from a private party is "private money." Hard money lenders all charge points, private money lenders might not.

Also, VERY IMPORTANT POINT, the 65-70% LTV limit offered by HMLs is typically based on the AFTER REPAIR VALUE, not the AS IS VALUE. All other lenders base their LTV limits on the lesser of the current value or contract sales price. Therefore, if you are able to buy at a discount, and need short term financing for acquisition and rehab costs, HML lenders might be able to do the loan with zero to little out of pocket can make sense (if the #s work).

i agree with sammy

thats how i understood the difference between private money and hard money lenders. private money are personal friends and family. im assuming abundantone is referring to this type of source where he/she can get 0 points.

HML could care less if the investor defaults on the loan since they have a property with enough equity as collateral.

i would like to be a HML sometime in the future, would i need to have a broker's license for this?

Alvin & sammy.

There really is no difference between Hard Money and private money. The only difference is usually Hard Money is associated with a broker who is getting points off of you.

Aaron,
Take a pill and calm down. Your lenders charge points cause that is how you get paid. The money sources I deal personally bypass you the broker so no points just 10-11% depending on LTV. I also do deals with some of them on a partner basis. They front the money and I find the deal taking it from purchse to rehab and finally sale.

No Paul, that seems to be the misunderstanding here. Hard/Private money lenders charge points themselves before I charge anything for brokering services. Its really rather pointless for a broker to try to get involved in a hard money deal because after the lender charges 3 points there's no room for me to charge anything. I offer hard money sources as a courtesy in hopes that I can refinance them into better terms later down the road.

This is great stuff! It's interesting to see the different people and their beliefs. Take a look...

"You will never get a HML with no points."

"3-6 pts is a bargain!"

"You would be surprised where you can find Hard Money!"

"Okay maybe your best friend will give you $200,000 and not charge you any points."

"HML should only be thought of as the last resort."


...wow, so neat. Nobody is right or wrong, I just encourage everyone to take a look. I'll just comment on a couple.

"You will never get a HML with no points." -Double negative and the effort is made only to emphasize what can't be done. How about this... what if I can find someone of retirement age who is just interested in sitting at the beach and sipping margaritas while his money is hard at work for him. He might be open to not charging points and increasing his rate instead.

"You would be surprised where you can find Hard Money!" - Here is an individual who is open to possibilities. My impression of this person is that they tend to create opportunities out of thin air.

I'll keep you guys posted on my findings. Ciao!

I'll try to make it simple and sweet according to the best of my knowledge. Somehow... I hope that I can contribute...

First of all, HML & Private are pretty much the same... both terms are used interchangeably and loosely. HML make their returns on charging higher interest than others, normally 10%-13%+ and do have to follow certain guidelines, i.e., Dept. of Corporations. Private money on the other hand can set their own rules and you play by their own game. Private money is usually a pool of investors that have a collective interest in loaning out money. They can set commitment points up in the front and charge some in the back if need be. They can also charge outrageous fees or no fees... a friend can be called a "private" investor.

Basically, a Private lender can come after you and 'break your leg', whereas a HML can not... they can come after you by foreclosing

Hope that Helps,

i've found there is no "usual" description of a private money lender. it can be a pool of investors or a rich doctor up the street looking to invest some money.

Wow!

Hard Money lenders are not all institutional... some are not even entities by personal choice. Hard Money and "professional" Private Money are about the same thing. Many have guidelines they work from, particularly with newer clients. Many do allow for flexibility with clients who have demonstrated credibility. Some are open to wide variations in "deals" and some have interest in Equity positions although not typical for most.

Some DO NOT CHARGE POINTS. Most Professional Hard Money and Private Money lenders have the ability to make adjustments to get desired "deals" to work.

They are NOT lenders of Last Resort... often they are the most desired lender, again depending on the specific "deal".

Best sources are developed and often more local than national. You can develop better working relationships that way. Some HML are more touchy feeley and like to "see" what is going on even if they don't have an Equity position.

HML come in all sizes and have varying criteria. They are most often considered "PRIVATE" by most State banking laws and are not subject to the state banking rules and regulations. You can not paint them all the same color but you can select those that can change colors to fit your specific deal.

watch out for non conforming sub prime lenders pretending to be hard money lenders. if they ask you for paystubs, tax returns, credit check, bank statements, etc. theyre trying to see if you can fit their lending criteria and still charge you 8-12 points and high interest rates.

a real hard money lender wont even ask you for these items. a real hard money lender will ask for:
1) LTV 65% max.
2) Appraisal subject to completion.
3) First lein holders position.
4) Exit strategy

if youre going to jump through hoops then youre not dealing with a hard money lender.

Thats not always true Alvin... I have several hard money lenders that will give more favorable terms if the borrower can show he has the ability to repay. That could be with paystubs or lottery winnings or any number of creative things.
- 70% LTV is easily attainable in CA and 80% is out there if you know where to look.
- I do hard money 2nds all the time
- Only loan amounts under $50K charge 8 points, 3-4 is the max for 1st TD, I've never even heard of 12.
There will always be hoops to jump thru, hard money just doesnt have as many.

Last time I checked Hard Money loans were based solely on the properties LTV. Never have I or any investor I know been asked for personal information to verify income or anything other than a satisfactory appraisal on the property on a Hard Money Loan.

Once you start asking for W-2's, Tax returns etc...well then it is a standard loan and not when others in the industry call hard money.

Glad I don't deal with you cause I don't jump through hoops for hard money as it is all LTV. The hard money lenders I deal with look at the current appraisal and the repaired value appraisal based on my rehab breakdown and the avg days on market for similiar properties in the area.

Well Paul, I'm glad I dont deal with you either since you often dont know what you're talking about. I'm sure central Illinois is on the cutting edge of real estate lending.

Well Aaron I did 112 residential and 7 commercial transactions last year and developed a 45 home subdivision. In addition I am a builder who built 19 custom homes last year.
I buy on average of 10-15 rehab properties a year to fix and resell and own alot of rental properties in 4 different states. I have been in this business for 17 yrs and hold a BS in Finance and a MS in Real Estate Developement

How about you?

Cutting edge lending....that definately ain't you!

Yet anyone that been in this business for more than a year knows there there are new lending products coming out all the time. You obviously dont know how to take advantage of such products. Maybe you should go back to school. Finance is kind of different now than it was 15 years ago. Phoenix University has inexpensive classes and you can study from home.

I already have a masters so I doubt I need another and Finance priciples remain the same it is just the products that differ.

If this new product requires w-2 info and such then it is really more of a standard or conventional loan than Hard Money which was my original point.

Lets not forget that a Private Money Lender has no limitations on their guidelines.

If a Private Lender asks you to:

1. Walk their dog
2. Wash their car
3. Pay up or Rocco will show up...

Then there's a strong chance it's Private Money

Make Love, Not War...

This is an area with which I'm not familiar but about which I should probably know a little something.....thanks to all posting on this topic as I'm getting quite an education.

Please continue......

There's a near infinite number of scenarios you could come across because there are lenders that write checks based on LTV with no questions asked and there are others who want you to show that you can repay the loan. Its still private money because no conventional source will fund your deal. Perhaps your project is in litigation, perhaps your in the middle of construction or maybe you are in foreclosure. In each case an assesment of risk is made and if you can throw something in the pot to reduce the lenders perceived risk, (like a bank statement or proof of income) you can get better terms.

Aaron,
I work with many investors that use hard money because they do not want to access their personal credit. The properties are aquired in Land Trusts and benefical interest is held by the investors LLC.
The hard money lender are loaning strictly on the LTV of the property knowing they will be paid when work is completed and the property is sold or refinanced if the investor decides to keep it as an investment. Many investors do not even try to get a standard loan becuase of the time involved. Most of the hard money lenders I deal with can get my clients to the table in 3-4days.

Why pay hard money/private investor rates if you want to buy based on your own credit. It you plan to do that you may as well go to the bank and arrange a credit line secured by your own personal property. When someone starts asking for W-2 or 1040's then you may as well just get a conventional loan.

Here's a question that I'm not even sure I can phrase properly: If I know someone that wants to borrow but can't get a conventional loan.....and I know someone that is looking to lend private money.....and I put those 2 people together.....can I get something out of the deal?

I am NOT a mortgage broker.....I have only a real estate license. I just occasinally see situations where I could probably put 2 parties together and each of those 2 can make some money. Is is against the law for me to ask for a referral fee from one or both of those involved? I have no interest in doing anything illegal or "under the table".....only asking for it if it's legit.

You may receive a referral fee or commission for bringing a borrower to a private commercial lender without a broker's license. You would come to an agreeable commission with the borrower, then state it in the Loan Commitment. After closing, funds from the borrower is paid to you. This is possible if the lender and your state allows it.

Promise Land.....thanks for responding.

Anytime... I'm always here to help to the best that I can.

Good Luck Mate!

Hey all...great topic!

I'm just beginning to look at hard money as a resource for rehabbing.

Do you have to have secured a contract on a property before getting a hard money loan? Or do you just give them them property/ARV info on the property you're planning to purchase with the money?

Thanks! Robyn

Bringing this back to the top...

Can anyone PM me with the name of a HML that will lend in MA?
Thanks!

Check out www.brokeroutpost.com for a forum full of brokers, lenders and all the hard money lenders, with lots of front and back end points, one can dream of.

need a good HML in NY

I am a mortgage lender and I also recommend going to a hard money lender directly because it is cheaper that way. Loan originators do have to add points to the deal to earn a living. But that is not the only reason.

I am a national lender and hard money is a very local niche. Local companies know the area, know the real values, and know the repair costs. Since a national company doesn't know these local items they have more risk thus higher fees.

I've been in this business to long to make a claim that nobody does it without fees. I'm sure someone would be more than happy to lend hard money with no fees......instead charging 19% and put a 3 year 5% prepayment penalty on the deal. Thus making more money than the traditional....

Never say never

Danny

anyone know of a good private money or hard money lender in Michigan?

Hml's are expensive and eat up a ton of equity in the deal.Private money is much cheaper and usually you give the person a rate of ten percent which they love,because there bank is only paying them 2 to 3 percent.You can also ask them to waive paying them a mortgage fee for in return giving them some of the profit when it sells.

I have also seen it where people do a passive investment and give the investor/agent the funds to purchase a property and rehab it and then give the passive investor a percentage of the profit at closing.

Ok how do i go about finding private money? thanks