Just like with traditional banking, each player in the hard money lending process performs a unique role to ensure a successful loan transaction. From application to approval, funding, and closing, there are various stakeholders involved at each stage. But, the private lending roles are noticeably different from what you would find in the banking sector. Understanding these roles will give you a clearer picture of who does what.
Read on to find out what each person does and why it’s critical to the entire process.
The Hard Money Lender
A hard money lender is usually your first point of contact in the whole private lending process. They may be a corporate entity or an individual, and their goal is to connect you with the right private loan for your desired investment.
Every aspect of the loan from start to finish is handled by them. Where the lender is an individual, such a person will be a highly skilled professional that is good at multi-tasking and handling all aspects of this business unlike in the banks where different staff handles different roles.
The hard money lender will do the following:
- Guide you in filling out your application. After that, they will create your loan package which will include details of your credit status, income, and assets.
- Gather and review title information.
- Work with you to evaluate your investment needs and advise you on the best loan option.
- Order for a property appraisal and review the appraisal report.
- Oversee the necessary title and escrow services as required.
- Provide you with details of all federal and state disclosures as required by law.
- Keep you updated on your loan status at intervals.
- Underwrite the loan and approve you file for funding by a private investor.
- Link you with a private investor to fund your loan.
- Appoint a loan servicer to receive your monthly payments.
- Create the final loan documents and coordinate loan settlement or closing.
The Private Investor
This party puts up the money to fund your project/investment. The private investor could be an individual or group of individuals. The lender may also decide to play a dual role as lender and investor, using his/her personal money to fund the loan.
The term investor is commonly used in hard money lending since the lender has to source funds from someone willing to invest in your loan. The investor may fund the entire loan themselves or gather the funds from other investors depending on how much money is needed. Such collaboration is known as a fractionalized loan.
Another common practice is when hard money lenders operate a mortgage pool and use this as a resource for funding hard money loans. With this arrangement, the broker or funds manager will assess each application and decide whether to fund it and then proceed to set the rates and loan terms in compliance with the previously fixed guidelines of that mortgage pool.
If your lender operates a mortgage pool, you can expect to get a faster decision on your loan application since the funds are already available and the lender doesn’t need to go out looking for investors.
The Title Company/Escrow Services Company
These two services are usually initiated simultaneously during the loan process. Depending on your location in the USA, different departments in the same company can handle these two services. Most states in the western USA allow this, but in the east, escrow services are termed “settlement services” and must be performed under the supervision of an independent attorney.
The Title Insurance Company.
Their role is to provide a preliminary title report on the collateral property. They get the necessary information regarding liens and other encumbrances against the potential borrower (you) from the county records. It’s best you come clean with any defects in the title to your property to make the process faster.
Any problems at this stage could terminate the loan especially if you withhold information because the lender will make their decision to underwrite the loan based on the report. If there is no hindrance, then the transaction can proceed and the property will be insured to protect the investor from losses on the asset.
The Escrow Company or Settlement Services Provider
The lender will ensure the funds are wired to the appointed escrow or settlement services company when due. This company is a third party in the loan transaction. They will receive and disburse the money as detailed by the investor. In addition, the escrow company will oversee the sign off at the closing stage (normally at their office), and ensure proper recording of the deed documents at the appropriate county offices.
The Property Appraiser
A licensed appraiser will prepare a detailed evaluation of your collateral. The appraiser will consider factors like the structural condition of the building, location and comparable sales price of similar properties, etc. before arriving at a value. The finished submission is known as the appraisal report. This document is for the information of the lender and investor only, but you can get a copy for yourself if you so wish.
Note that appraisals are expensive to conduct and the investor will not always ask for one. In the alternative, he/she may visit the property themselves to get an opinion of the value or opt for a BPO. The BPO is short for broker price opinion and is a summarized and cheaper version of an appraisal. It is prepared by a local real estate broker and if expertly done will also give an accurate, if not better, value estimate.
The Hard Money Loan Servicer
The loan servicer is responsible for collecting your monthly payments, sending year-end tax reports on paid interests, and providing periodic loan statements. If your loan terms dictate that taxes and insurance should also be collected every month as part of your monthly payments, the loan servicer will keep the funds in escrow and pay as due. The lender, investor or even a neutral third party company can serve as the loan servicer.
Clearly, every stakeholder in this transaction has an important contribution to make to the success of the whole endeavor.
Private investors with cash to invest actively seek new avenues to grow their money apart from the age-old vehicles of stocks and bonds. While individuals with business ideas seek funds that are easier to access than those available with traditional/institutional lenders. One party has money, the other needs money. Both parties have a need, and when they meet, everyone can go away with positive returns and with their goals achieved.
That’s the appeal and the basis of private money lending.
Potential borrowers can source for capital from two avenues:
- Personal investors with capital including family/friends or from pooled investment funds where a group of people pool money together to fund loans.
- Corporate entities called private lenders who have capital that they manage and issue as loans.
How Banks Make The Decision To Lend Capital.
Banks have their modus operandi for assessing every request for capital.
Credit: What is the borrower’s credit reputation in terms of their credit score and payment history?
Capacity: Has the borrower shown evidence that they can make payments when due?
Collateral: What is the value of the asset pledged as collateral on the loan?
Even if the borrower scores well on two points but fails on one point, the chances are high that the loan will not be approved.
This kind of scenario creates an opportunity for borrowers and private lenders to do business.
Finding The Best Loan For Your Needs.
Once you have decided to use a private lender, you now have to consider finding reputable lenders and choosing one. You could get one through referrals from family, friends, and acquaintances or through a real estate mortgage broker.
The real estate mortgage broker is an independent and licensed professional who matches borrowers with investors based on the unique requirements and situation of both parties. The broker will guide you through the entire loan process and handle the packaging and delivery of the loan from start to finish.
As you can imagine, private investors are shrewd and experienced business people. They will guard their money carefully and make investment decisions after careful considerations. The brokers know this too and will also want to protect their reputation. As a result of this, each broker will have different loan programs in their portfolio with different terms depending on the lending criteria of each investor. Discuss with a real estate broker to find out exactly what they can offer you and if they can find an investor for your kind of project.
Note that private loan terms and rates are usually much higher than traditional banks. They are for a shorter term too. That’s why they are called “hard money” loans.
With that in mind, let’s look at the process you can expect when you apply for private lending.
Finding Reputable Private Lenders
You’ll have to go the extra mile to find private lenders as they are not as common as banks.
- Ask for referrals from your acquaintances.
- Check online and read reviews from past clients.
- Use a directory service.
Once you narrow down the choices of lenders to about two or three, you can dig deeper to get an idea of how they operate. Ask for references from their past clients and check other things like their foreclosure rates and who funds their loans. Such information can save you a lot of grief in the long term. For instance, lenders with a high foreclosure rate may be less tolerant of even the slightest deviation from the loan terms. You can find out information about foreclosures from your county courts online or in person.
Private Money Lending Process
Submit Your Loan Application
The process officially starts with filling out a loan application and an SI (Statement of information).
Usually, the other documents you may be asked to provide will vary depending on the type of loan, your financial standing and the collateral you are providing. These documents will differ depending on the demands of the lender/investor, but they typically include tax returns, bank statements, property valuation reports, etc.
Ensure you provide as much information as possible in a clear and timely manner, especially on your financial position. This will start the whole process off on a good note for all parties concerned.
The SI form, in particular, is vital for a quick and thorough title search on the collateral asset.
Review Of Your Financial Situation
One major reason borrowers opt for private lending is that they get a quicker response to their application as compared to the banks. Hard money lenders are accustomed to working with borrowers with financial “problems” so come clean with any problems you have with the collateral or your credit score. This will help the lender make a decision as quickly as possible.
Choosing The Right Loan Program
There are different types of loans with specific terms attached to each one. Some offer more favorable conditions than others and also more funds than others. You can greatly increase your chances of getting a good deal by your presentation. The lender will have more confidence to release his or her money to you when they assess you to be an organized and focused person. Your documents, business plans (if required) and other files should be neatly arranged and information stored so that it’s easy to retrieve and read. If this is your first time seeking a loan, you may be nervous, and that’s okay. Just remain calm and think carefully before you respond to any questions.
After this hurdle, you will get details about the loan terms and mandatory requirements like state and federal disclosures for your review.
Processing The Loan: Title Report, Property Appraisal, and Escrow Services.
At this stage, all parties have agreed on a particular loan type, and the loan process proper can start.
The lender/designated loan officer will play a more active role, and you may be expected to provide more information as time passes. There are three main steps for this stage:
- Title report. A title company will search county records for any encumbrances or liens against the borrower’s property and other entities associated with him/her. Based on that, the title company will prepare a preliminary title report offering title insurance on the said property.
- Property appraisal. There are several ways to estimate the value of the collateral property. The most common methods are: get an appraisal by a licensed appraiser, obtain a Broker Price Opinion or BPO through a real estate broker or use an Automated Valuation Model (AVM) to estimate the value using a mathematical model based on comparative property values and other data. The investor will usually carry out an independent valuation of his own to ascertain the property value.
- Escrow services. This service is provided by an appointed third party company, and they are responsible for collecting and disbursing the loan funds as agreed. They will also oversee the loan closing process, and get the relevant documents like mortgage and trust deeds, etc. recorded at the county office.
Some states in the USA permit an escrow officer to handle these duties while others require an attorney to oversee the process.
Review of Documents
Any outstanding liens or judgments must be resolved before the loan can be funded.
If there is a need to liquidate the asset, the investor wants assurance that he/she will be in the priority position (first position) to benefit from the sales of the property. A title insurance company will not be inclined to offer coverage otherwise.
You should also confirm that any previous lienholder has recorded the release for past debts as these could show up as still pending against you.
Once the lender and investor are satisfied with the property value, title and every other requirements are met, you should be advised that the loan has been approved. Thereafter, you will receive the necessary documentation for signing. You should read through them carefully and take your time to sign them while taking note of any changes. Ask questions about any points that are not clear.
You will be presented with the documents for sign off. You may sign them at the escrow company, in the lender’s office, or they can be signed in your home or office under the supervision of a notary service.
The private money lender wires the funds to the escrow company for disbursement as directed by the investor.
Recording Of Documents
The escrow company records the deeds, mortgages at the county and this loan legally becomes a lien against your real asset until you pay it off.
Once these records are confirmed, the escrow company will disburse the funds.
Payments To The Loan Servicer
Once the funds leave the escrow company and get to you, the loan servicer’s job begins. They will board the loan (add it to their loan system), and start receiving the monthly payments and sending loan statements.
The lender will advise you on when the first payment is due, and often interest will be prepaid 30 days in advance to allow the servicer time to get the loan boarded.
If you are in doubt at anytime especially as regards payment dates, confirm from your lender as they are in the best position to know and keep you informed and on track throughout the duration of the loan.
Borrowers that understand what hard money lenders do and the exact roles they play have an advantage over others. This knowledge puts them in a position for an easier loan application process and increases the possibility of quick loan approval.
To achieve loan success with minimum stress, it’s advisable you work with a loan professional that specializes in this area once you’ve decided to opt for a private money loan for your next project.
Hard Money Loans
There are generally many misconceptions about hard money loans and how they operate.
People also refer to hard money loan operators by many names like loan officers and brokers, agents, mortgage bankers, etc. In addition, they have come to believe that hard money loans are even harder to get than bank loans. But that is not the case.
The Roles And Responsibilities Of Hard Money Lenders.
If you were to approach a traditional lending institution for a loan, you will be assigned a loan officer to handle the front end of the transaction. He/she will receive the application, inform you about different loan programs and their relevant qualifying criteria. Other duties include collating your income and asset information. Once this is done, your loan file moves to other staff for processing, underwriting and eventually closing. Of course, funds for the loan, if approved, is provided by the institution or bank the loan officer works for.
In the case of hard money lenders, this front end is just a drop in the bucket compared to the other tasks they will perform during the entire process.
These hard money lenders have to skillfully juggle a number of demanding tasks from start to finish and will often use their own money to fund the loans. Though one may argue that their work is easy since they can quickly resell your loan to a private investor in the case of default, note that they have to use all their skills to preserve their relationship with funding sources and keep those channels open. Without that, there will be no loans for you to apply for in the first place.
Next, we’ll look at the processes involved in getting a hard money loan so you can understand what the hard money lender actually does to get loans closed.
Creating Your Loan File Or Package.
This is undoubtedly the critical first step for the whole loan process.
The private money lender will need financial details such as your income, tax returns for some years, bank and investment statements, credit report and other assets and liabilities you have. Thereafter, the officer will guide you to complete the loan application which is often referred to as the “1003.” You’ll also be required to fill out a Statement of Information. The Statement of information or SI allows the selected title company to investigate the title of the asset for any encumbrances like liens and judgments.
An experienced hard money lender will make the process easy for you because they will know exactly what kind of documentation/information is required for a quick approval. The documentation is largely dependent on your financial situation and the kind of loan you are applying for.
Reviewing And Coordinating Title Information.
Title insurance is required by law to protect the owner (you), and the lender from any loss or damage due to an existing lien, encumbrance or any defects in the property title. Every investor will ask for this. You can make the whole process faster for yourself by filling out the SI properly and in a timely manner.
How it works: the title company will offer you a preliminary title report aimed at insuring the transaction. The report will contain a summary of the existing encumbrances of any kind on your real asset. The title company will then make you an offer based on the information contained in the report.
Once you have done your part, the title company and the hard money lender will have what they need to proceed quickly and at this point, your loan officer can let you know if there will be a problem with getting your loan approved. If there is no problem, the loan will progress and you can expect it to be updated at intervals especially towards the closing of the loan.
Coordinating Title And Escrow.
Engaging escrow services is another vital step.
This is done at the same time with the title insurance report. The escrow company is responsible for payoffs needed on the collateral (the subject property), recording all deeds and documents at the county office, coordinating the loan closing and handling disbursement of the loan funds. The hard money lender will ensure the loan funds get from the investor to the escrow company.
Often, the same company can handle both title insurance and escrow services or it could be handled by an attorney or two separate companies. This will depend on the law in the state where the loan is domiciled.
Verifying Payoff And Reinstatements.
Payoff and reinstatements are two different terms that you’ll come across during the course of your loan application.
Payoff. In simple terms, this a document that shows exactly how much the borrower needs to pay to settle a loan/debt. Payoff documentation can be ready in a few days or in several weeks depending on the type of lien involved.
Reinstatement. Where there is an existing default, the lienholder will be asked to provide a reinstatement report. The lienholder, in this case, is usually a mortgage or trust deed. The statement will give details of the amount required to make the loan good again.
Traditionally, it is the responsibility of the escrow service provider to get these documents but experienced hard money lenders may take it upon themselves to get them on your behalf. They will do this to mitigate any last minute problems that often crop up due to inaccuracies in these important documents. Specifically, a very high payoff can make it impossible or impractical to proceed with the loan.
Choosing And Advising You On The Best Hard Money Loan For Your Needs.
The loan structure you could expect from hard money lenders is not as rigid and formal as what you’d get with traditional banks for instance. Your hard money loan will depend largely on the lender you pick, their area of expertise, and their source of investment funds etc. The loan terms are open to negotiation and your loan officer is usually inclined to make you happy by adjusting the loan conditions to suit your peculiar situation/needs. So, don’t be afraid to bargain or ask for what you want. Ultimately, if he/she can find a middle-ground between you and the lending company in terms of interest rates, loan terms and so on, everyone should go away happy at the end of the transaction.
Providing Federal And State Disclosures.
There are Federal and State laws already in place to protect borrowers from unscrupulous lenders. These laws differ according to the type of loan but are mostly concerned with information regarding the cost of credit and loan terms.
For example, you can’t expect the same kind of loan terms for a commercial property loan as you would for a residential property loan so in either case, the required disclosures will differ. Your loan officer will take you through this step too.
Ordering Real Estate Appraisals.
Apparently, inadequate loan collateral equals no deal. The value of your proposed collateral property will determine the success or otherwise of this venture as that is the security on which the loan relies. We could even term it the “backbone” of the loan. Investors know this too and they will usually want to visit the property themselves to estimate its value. Your loan officer will know what works best for each investor. In any case, he/she is responsible for arranging access to the property and getting the reports done.
There are many ways to determine the value of your collateral, the most commonly used ones are:
- A licensed appraiser can prepare a detailed appraisal report.
- Some investors will opt for a Broker Price Opinion also commonly known as a BPO. A BPO is not as detailed as an appraisal report and is cheaper to produce. It is prepared by a licensed real estate broker and is useful as a supplement to other valuation methods or to give the investor an idea of the expected sales price in the prevailing market conditions.
- Automated Valuation Model is another option for estimating value. This service is also called AVM and it calculates the value of properties using mathematical modeling. The major parameters used is the value of other comparable properties at that point in time. The result (value) can be ready in seconds.
Underwriting Loan Applications For Hard Money Loans.
Underwriting is a tricky aspect of the loan process as the private lender’s reputation and relationship with investors can be easily affected by a bad decision in this regard. Usually, the investor has already specified his loan approval criteria beforehand to the hard money lender. Some investors may even choose to review each loan file themselves before approval. In any case, the lender will make his decision to approve your file based on the predetermined criteria from the investor, the risks involved, and after careful scrutiny of every other aspect of the application. The success or failure of every approved loan can make or mar the lender’s professional future.
Getting The Funds For Your Loan.
There are many avenues for hard money lenders to get loan funds.
- They may fund it themselves, if they are so inclined, and keep the loan on their own account.
- They could match you with an investor selected from a pool of investors based on the specific conditions of your loan package. With this arrangement, the funds are kept with an escrow company as explained earlier.
- Alternatively, the lender can sell the loan to another investor or keep it in a mortgage pool they oversee.
Determining The Loan Servicer.
The loan servicer could be an individual or corporate entity and they are responsible for collecting your monthly payments. They will also provide loan statements at predetermined intervals and prepare year-end tax documents. If the loan agreement requires the loan servicer to manage your escrow account for other things like taxes and insurance, then they will perform those functions as well.
The lender may or may not act as the loan servicer though typically, they will choose to service the loan. If they choose not to take on this role, the lender will hand over the loan documents to the nominated loan servicer and let you know when the first payment is expected.
There are some benefits if the lender services the loan as it will allow them to update the investor faster at any time about the state of the loan. In addition, most lenders earn their living and cover their overhead and operational costs through loan servicing.
Creating Loan Documents And Managing The Final Loan Closing.
The final deeds, mortgages and all loan documents will be prepared by the lender, an independent attorney, or a designated document preparation company. This closing and signing of loan documents stage differs from one state to another.
If the hard money lender has a notary as an employee, this person can oversee this step. In some states, only an attorney, an escrow services or title company is permitted to coordinate the signing. There are also regulations regarding the location for signing and who supervises it depending on the of type loan transaction.
Whatever the case may be, the loan officer will guide you through the process to the final sign off and ensure you are clear and understand your responsibilities thereafter.
2016 is the best year to invest on a new property, have your home remodeled or have the broken parts repaired. If you don’t have the budget now then you can get a hard money loan and start investing now. Here are some tips on how to get hard money loans faster and more efficiently.
Work on your past credits
Hard money lenders don’t focus too much on the borrower’s credit history. This means that even though your credit history isn’t good or you’re still working on clearing your credit scores then there will be no big problems to expect.. However, as a borrower it’s still your responsibility to pay off all your existing loans and dues. In doing this, you are not only lessening the burden on your part, plus you’ll get a chance to earn trust of more hard money lenders if your past credits were all cleared up. The more lenders you can choose from, the more opportunities and better loan offers you can get.
Earn big for the down payment.
Because hard money lenders trust those borrowers who can give bigger down payment, you have to make yourself ready for it. Especially if you think that the money you’ll borrow is quite big and your property for the collateral isn’t that valuable. Your lender will most likely approve your loan request if you’re willing to pay a hefty amount upfront. You can also cut down the expenses, interests and other fees with a big down payment.
Deal only with legitimate hard money lenders
2016 is the best year to invest and borrow money to use for your investment plans. However, this is also the year when too many scams and bogus lenders have been found all over the internet. Thus, we want you to only deal with legitimate lenders. You can search the World Wide Web to find the best ones but make sure to transact with them personally and don’t give private information online or with no assurance at all. You want to borrow money and not go broke in the end. Always be careful of who you are making business with.
Seek professional advice
Whether it’s your first time or nth time to borrow money from a hard money lender, it’s still best to consult guidance from a professional. You can ask your real-estate broker, a money expert, banker or your trusted lender if you have any questions or you want to clear some things up. If you want advices on what to do with your investments and how to earn money out of them then you can ask what they have to say. Doing this will not only save you from losing your assets but also this will guide you to a good lender and investment plan.
You are now planning to get a hard money loan to buy a new investment. Nevertheless, you haven’t found the property that you want to spend your money with so there’s a possibility that your loan will be put on hold or you’ll be pressured to immediately find a property and end up with not so good ones. To make sure that you’ll get a hold of the best property to invest your hard money loan with and to earn more money in future time, here is the list of properties that you should look for.
- A newly built home in a good location
This is the best property that you can get to invest your money with. Aside from the good location, the house is newly built so you can expect that you don’t need to shell out some more money for any repairs and reconstruction unless you want to do minor changes. However, the downside with this property is for sure, it will cost a lot. If you have the money now then you can buy it because after some years with just few maintenance costs, you can sell this for a good profit.
Before buying, you have to consider first the over-all costs of the property then compare it if you’ll be the one to build the house. It will take time but if you’re not in a hurry then you can wait a bit and save tons in return. Some home sellers sell their new properties with so much profit on top so be careful in making decisions.
- Old house in a good location
You don’t have the money for new houses but you are willing to do all the necessary repairs and reconstruction one at a time? Well, if yes then why not invest in an old house located in a great location. The site of the property is very important when choosing a house to buy. Good whereabouts will make your property more valuable as the time goes by hence you can invest on it for the mean time. Then step by step you can refurbish the house and soon enough, it will look like a brand-new one without the hassle of paying a hefty price upfront. This gives chances to those who want to own a valuable property but doesn’t have the money yet.
Before buying, make it to a point that you’ll get an estimate of the over-all costs of the repairs and remodeling. If this will be too much then you can talk to your broker or to the seller and ask for more discounts since the costs of the construction will be very high.
Yes, you are not seeing it wrong! Selling your old home isn’t just about earning money because before the profits, here comes the pre-selling costs that you need to shoulder. Selling your old home isn’t just as easy as one, two, and three. You cannot just put a signage over the gate and expect that homebuyers will come to you in long lines. Once you have set your mind in selling an old property then you need to exert much effort to make sure that you’ll get the best price and the right new owner of your property.
Why need money when selling your old home?
- Home repairs and remodeling
If you want to sell your old house at bargain for a very cheap price then you should skip this part. You can sell the property but don’t expect to make profit out of it because homebuyers avoid buying properties that need a lot of expensive repairs and remodeling. There’s also a possibility that your property will be put on sale for a longer period of time because it’s not what buyers prefer. Thus, much better to invest in repairs and remodeling, do all the necessary repairs and make sure the house looks pleasant before hanging the for sale signage. This way, you can sell it for a more profitable price and you’ll not have difficulty in finding buyers.
For financial assistance for your home repairs and remodeling then you can always get a hard money loan. You can borrow funds to do all the necessary construction and end up making your property more valuable hence easier to sell with bigger profits.
If you are such in a hurry to find a home buyer then putting up advertisements is a good idea. This will help you reach buyers all over the world so you can sell the property faster. These advertisements are not free so you need to handle all the costs as well. You can put up advertisements online, you can use social media ads or print flyers and signage then scatter them all over the town. Though there are now advertisements for free, still get yourself ready for the costs that you need to spend for some effective marketing stunts.
- Professional help
If the competition is high in your neighborhood then you need to make sure that your property will be recommended whenever a buyer asks for help from brokers and real-estate experts. That is why; you need to invest in more professional connections. You can actually hire a broker that will look for buyers or you can just give commissions whenever the property is already sold. Either way you can ensure that your property will be on the top priority.
Debts are dreadful. It stocked you up into a state that you can no longer control your own money. Those credit card interests, loan interests and monthly payments are just too onerous and it will kill you little by little. Sometimes, it kills you literally. Nevertheless, not all debts are bad, there are debts that are good actually. And that is if only if, you know when the right time to get one and where to get it from.
One good debt is the hard money loan. Yes, paying an 18% interest is not a child’s play but when dealt properly, it helps you advance in your fix and flip business deals.
When there’s a nice property that you can get for a very cheap price in an auction but you don’t have the money, will you just let that chance pass? Of course not! That’s why hard money loans are made, to help you in this kind of situation. This is a situation where you can use a debt for something even better than good.
Don’t pas up on good deals and make use of hard money loans. Buy a nice property using your hard money, have it repaired and sell it for a more profitable price and voila, you just turn a few thousand bucks richer. For example, you loaned $100,000 hard money. You can buy a property worth $90,000 and keep the remaining $10,000 dollars for all the repairs and property improvements. After some time, sell the property and closed the deal at least $140,000. After closing, paying origination fee and the 18% interest to the lender, you can net a profit of more or less $20,000 in just a couple of days. Not too bad for business, huh?
See, this is one great example of using debt into something good. Actually, loans are made to help but you need to deal with the best lenders. Not everyone is here to help and some are just made to bankrupt potential businessmen. So, make the best deal. Try your luck and take a risk. Start with a hard money and keep on boosting as the time goes by.
Most of the time, applying for bank financing home loans could be difficult and if you’re unlucky, your loan applications would be disapproved for certain reasons such as foreclosure or bankruptcy. When this happens then you will not have a chance to own a Las Vegas property not unless you apply for a hard money loan.
What is hard money lending?
A hard money loan or also called private money loan is approved and lent by a private individual or investment group lenders. This is different from the normal loans which are funded by a bank, a commercial company or institution and any other commercial lenders. Private money loans are approved by a real person and not by a machine hence the entire process could be as fast as a few hours and you can have the cash release in less than a week.
Unlike normal loans, private money loans are granted to borrowers no matter what they’re credit score is. Hence, even if you just got out of bankruptcy and you want to invest in a Las Vegas property then these loans will be your best alternative.
Hard money loans are for:
- Home Construction
- Commercial purposes
- House flipping
- Residential investment
- Foreign nationals/borrowers
Who can borrow hard money loans?
There are usually 3 types of Las Vegas borrowers that can avail hard money loans though everybody who has the capability to pay the loan back has a chance to apply for it and get granted.
- If you can fund at least 35% up to 40% for the down payment of the property you have been eye-ing then you can borrow hard money loans. Your application has a bigger possibility to get approved, if you can pay that amount of down payment. Your deal will be faster too.
- Foreign nationals who want to purchase a home in Las Vegas can also apply for a hard money loan. We understand that in some circumstances some foreigners would need a place to stay in Las Vegas but due to some citizenship issues, normal loans couldn’t easily be granted to them. In that case, they can have the hard money loan as their alternative. As long as they can provide proof of income that they can pay the loan, they can avail one and purchase a property they can call home.
- If you want to invest in Las Vegas Real estate properties but you don’t have enough funds then hard money loans will be of great help. Private money lenders help real-estate investors like you to easily purchase a property, rehabilitate it then sell it for a bigger price to earn huge profit at the very least. No need to wait for your credit score to get better before you can score good properties. Once you see one, apply for a hard money loan and buy it immediately with no long waiting.
Las Vegas Real-Estate is very promising today hence many have been trying their luck in this business. Many have applied for hard money loans to fund their business opportunities and to earn huge profit.
Hard money loans opportunities
- Buy and Sell of Las Vegas Distressed Properties
One of the so many opportunities is that hard money loans are helpful in funding your Las Vegas Real estate investments. You can buy distressed Las Vegas properties for a very cheap price then make time and exert effort to repair and rehabilitate it. Once it’s ready to be up for sale, you can sell if for a bigger market price that will surely earn you huge profit. Just make sure that you will choose properties that have great potential to make you sure money in the end.
Aside from buying a property, repairing it and selling it immediately, you can also try other way that will help you ear bigger though it will take a longer time. Instead of selling the property after the rehabilitation, you can make more money if you will rent it out for a couple of years, let’s say 2-5 years. You are making money while waiting for the market price of the property to increase and when you feel like doing it then you can finally sell the property. In that way, you should considerably make more money and even bigger profit.
The only key in this business venture is to find the best Las Vegas property. Make sure that you’ll invest in a property that will help you make money in the end. In this kind of investment, you should be able to compute everything including repairs and rehabilitation fees, commissions and interest of the loan. All these must be covered with the price you have to sell the property in plus there must be something left for your profit.
- Easy and Fast money
Hard money loans give everybody the opportunity to start a real-estate business no matter what your credit score and no matter if you just had bankruptcy. Private mortgage lenders don’t look too much on your history but with your present capability to repay the loan. Thus, you can immediately start your investments, no need to wait for the betterment of your credit score. Also, hard money loans are granted easier and faster so you can have the cash with minimum effort.
Private money lenders also give opportunities to the foreign nationals who want to own their own Las Vegas property. They don’t look at citizenship because as long as you are capable to repay the loan and your property is up for a good collateral then you can own it as soon as possible.
In Las Vegas, retirees and investors are fond of putting their money into better use and that is to invest it in private mortgage. They tend to get annual 10%-12% interest without much hassle of owning their own commercial properties and managing tenants. It’s more relaxed and they don’t need to stress themselves yet they are assured of a continuous cash flow.
If you are interested in investing your money in private money lending then you can do so. For a minimum of $25,000, you can already invest and enjoy the so many benefits of private mortgage. If you’re still unsure then do not worry because it’s normal. In investing your money, it’s normal that you are hesitant and full of doubts, all investments have risk anyway. Thus, your key here is to ensure that the money you have invested is secured. It’s good to dream of making your money bigger with minimum effort but you have install maximum security to make it work.
How to secure your investments in private money lending?
- Invest only in first trust deeds.
There are tons of Las Vegas private mortgage that give out hard money loans especially to those who want to invest in house flipping and any other real-estate businesses. Choose a company that deals only with first trust deeds hence dodge those that accept Las Vegas properties from auctions or courthouses since their trust deeds are usually on hold.
- Invest in companies assuring good collaterals.
Las Vegas hard money loans come with real-estate properties as collaterals. These properties are your keys to secure your investment thus it’s a must that you choose a lender that screens collaterals keenly. They should get properties in the market value or lower than that to ensure that after fix ad flipping, it will earn the borrower a good amount of huge profit.
- Deal with borrowers with capability to repay the loan.
It’s very essential that you only lend money to those who are capable of repaying it with interest. I know that hard money loans don’t focus much on the credit score of a borrower hence the lender still needs to check documents and evidences that a borrower has constant cash flow in able to settle the loan in the given payment term and schedule. Proper screening is a must.
- Return of investment protocol
Not all investments are perfect, there are times that you’ll be a bit unlucky and you just have to try again. Investments come with high risk but even so, it’s a must that you should deal with a hard money lender that will issue you a return of investment protocol whenever the borrower fails to repay the loan. It’s your additional security that your money will be returned even with no interest.
Learning the Basics of Hard Money Lending
How to Flip a House Using Hard Money
How Do I Get Hard Money Loans?