Private money investors (and companies that raise funds from many individual private investors for real estate lending) are commonly referred to as private hard money lenders. These private investor lenders are savvy and well aware of the areas in which they lend. Due to their familiarity in the business of real estate investing, they can accommodate a lot of financing scenarios that other lenders wouldn’t.
(Meet & Learn How to Use Private Lenders. Hard and Soft Money Investor Referrals. LIVE Group Coaching Call with Alexis & Her “A” Team. Group Investor Strategy Session with a 25-Year Foreclosure Expert. Tonight, Wednesday, June 15, 2011 6:00pm Pacific.)
With the legislation of consumer and borrower protection laws over the past century, private hard money mortgage loans are now predominately created for real estate investors looking for short term financing.
Mortgage lenders and commercial banks lend according to their strict underwriting criteria, based on standardized procedures. But not all real estate and investors fit in to a set criteria. The gap between traditional financing sources and active real estate investor needs are filled by private hard money lending.
There are two main reasons why you would approach a private investor hard money lender – opportunity and unconvenional financing.
Opportunities to buy wholesale real estate is high right now and when you do seen an opportunity, time is of the essence. Acting fast in negotiating a contract and getting it financed fast is critical to getting the deal. Lenders and bankers take too long (1-2 months) to process a loan and will cost you the deal. That is why savvy real estate investors approach private hard money lenders and investors… so they don’t lose the great deals.
A loan is considered unconventional when it doesn’t fit the guidelines of banks or mortgage lenders. Most unconventional loans are due to property condition or type, or due to borrower loan profile concerning either credit or down payment or income shortcomings or exceptions. Private money investors with their vast experience in the area of their expertise can evaluate the loan in a more flexible and objective manner to find a way to make the deal work.
Typical Private Hard Money Lender Guidelines
Equity in the collateral on which lending is sought is the number one guideline for majority of the private hard money investor loans. Not that other criteria related to borrower or property doesn’t matter. They do matter, but without sufficient equity, the deal usually fails.
Usually credit history of the borrower carries the most weight with other real estate lending sources, but not with hard money lending. Credit does carry good amount of weight with residential private hard money lenders, but not as much with commercial private money investors.
The duration for which they lend out the money (loan term) for real estate is usually very short compared to other financing outlets. Usually no more than six months to a year is the loan term on hard money.
Loan fees are typically paid up front and interest payments are paid monthly, until the loan is paid off. Interest rates are usually very high and additional fees like points are either paid up front, or added to the loan amount and paid at the end. Pre-payment penalties are quite wide-spread too.
Establishing a good working relationship and excellent track record in terms of payments, pay offs and project completion with local, regional and national private hard money investors is a must to succeed in all seasons and all aspects of real estate investment.
Tonight only, you can meet and learn from active hard money investor lenders from across the USA in my Strategy Session, Group Coaching call with myself, Coach Michal Ballard and two of our hard money investor lender referrals. We have alot of great inside information to share with our clients, that you cannot afford to miss. Check out the outline of tonights live topics here. Make sure you register asap as we are filling up our conference spots fast. 800-310-7730 x2 if you have any questions.
PLUS: One Lender is going to share insider information on an opportunity to buy wholesale REO direct from the source (pre-MLS) using their funding to close the deal. You don’t want to miss this! Register Now!