Hard Money for Creative Real Estate Investors
3 Components of a Hard Money Loan
1. Must be based on the Property – The loan is made based on the deal that you bring to the table for financing…NOT your credit score. Loans are usually around 65 to 70% of the after repaired value (ARV).
2. Short Term – Loans range from 3 to 12 months.
3. High Interest – Expect to pay 12% to more than 18% depending on who you use plus points.
Why Investors Use Hard Money
Why would anybody want a loan that they have to cash out quickly that seems like it costs an arm and a leg? I’ll tell you why! Maybe you have a deal under contract that you NEED to close a week from today. Try going to Bank of America on that one. Maybe your credit sucks.
Maybe you are buying a house that is in such bad condition, traditional banks won’t finance it. Maybe you plan on buying a house, renovating it, and selling it within a matter of months.
Maybe you already have a number of houses on your credit report and the banks won’t lend you any more money. These are all good reasons to bring in a hard money loan to finance a deal among others.
When you break it down, I don’t think that hard money is that expensive. It’s a cost of doing the deal. If you have ever bought a house conventionally, you have seen all the closing costs associated with buying the property.
By the time everybody gets paid that had a hand in the financing process, you’ve shelled out at least a few grand. And how much is it going to cost you if you don’t get a good deal financed?
Who isn’t a Hard Money Lender
There are people that claim to be hard money lenders but when it comes down to it, they want you to jump through every hoop and hurdle banks do. These people aren’t hard money lenders at all. Hard money lenders loan 65% to 70% of ARV, (after rehab value).
Don’t work with a lender that loans on the purchase price, always work with one that loans on the ARV. They typically will require an appraisal, a CL-100, and certification that the heating and air conditioning is in working order.
There are hard money lenders in every community looking for good deals to fund. They know that worst case scenario equals getting a property back and making all the profit the investor should have made.
Even if you don’t plan on using one, get out there and find a hard money lender to add to your team. It could mean the difference between getting a deal done and watching someone else make all the money! The choice is yours.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125