I just had lunch with an friend of mine that is also a real estate investor yesterday and we were discussing finding hard money lenders. It was not too long ago that hard money lenders were everywhere and it was relatively easy to find ones that would do 100% of purchase price and repairs based solely on the property. Today, it is a bit different.
I am going to share with you the slow way and the faster way. First, the slow way: if you go through the phone book, search on the internet and call a hundred plus hard money lenders I think you can still find one that is flexible enough for the right deal.
However, there is a huge shortcut… what if instead of doing all that legwork yourself, you go to your local investor club and call all your investor contacts and ask for recommendations of hard money lenders they’ve used that are still doing that. Don’t have a ton of contacts? Consider using an Absentee Owner list and doing a voice broadcast or postcard to them to get together and network.
Until my next post,
James
P.S. To get access to our extensive training library of over 100 real estate courses plus much more, upgrade to Real Estate Investor Bronze Membership today.
The following article was submitted to me about using hard money lenders (links are for our Real Estate Investor Bronze Members). Personally, I feel there is a limited number of situations where it is appropriate to use hard money.
Hard money lenders provide short-term “Bridge Loans” that provide funds to based on the real estate that is being used for collateral. These companies have much higher interest rates than traditional loans, and there are many other things to understand before getting into these types of loans. Among them are the risks, collateral and market.
There are significant risks to hard money loans. These lenders and investors and not protected from high default rates by credit guidelines. In addition, they do not require income verification, which causes higher default rates. This is another reason that there are higher rates of interest for these loans. Because these loans have higher risks, consumers generally seek them because they cannot secure a typical mortgage due to poor credit or other reasons.
Although hard money lenders usually require the real estate on which the loan is based, it can also include other collateral. One can secure a smaller loan based on a lower “Loan to Value Ratio,” which allows a loan of up to 65% of the property value. Many real estate investors offer additional collateral to secure a larger loan amount, which is known as “Cross Collateralization.” Be sure to balance the money you need with the amount of collateral you are able to put up.
Different hard money lenders serve different geographical areas, from regional to nationwide. You might consider asking your mortgage broker for recommendations. Some lenders are represented by brokers, and some deal directly with applicants. In addition, you should consider other various charges which you might incur such as application fees and prepayment penalties.
If you have decided to apply for a bridge loan, make sure to research your Hard Money Lender. Make sure that you’ve considered all of the risks and decided what collateral you can put up and you’re on your way.
There is a time and place for using hard money lenders. For more information read about the advantages of using hard money loans which covers strategies when it may be appropriate to use hard money.
Until my next post,
James
Sorry to burst your bubble, but there is no secret list of No Money Down Houses, but I can share with you some insights on how to find deals that you can structure with no money down (links are to resources exclusively for our Real Estate Investor Bronze Members).
First, you can find some deals in the Multiple Listing Service (often abbreviated MLS) or through a competent Real Estate Agent or Real Estate Broker. Many, but not all, of these will require great credit and the ability to document income to get anything near financing that involves no money down from you. Of course, with good credit and a flexible seller, you might be able to structure a deal where you provide most of the purchase money with a new loan and the right seller may be willing to carry back some of the down payment.
Second, you can try to find motivated sellers that are much more flexible in how you purchase their properties. A seller that has a property they can no longer afford is much more likely to allow you to purchase the property in such a way that you have to put no money down and can often make payments on their very attractive financing. Spending a little time/resources finding these motivated sellers can prove to be an excellent investment.
Third, using a combination of hard money lenders, private money lenders and flexible owners willing to structure owner financing deals you can find deals both in the MLS and outside that you can buy houses with little or absolutely no money down.
Until my next post,
James
Whether you are a new real estate investor looking for your first property or a veteran that buys 10 houses a month, in our current real estate market, even with the recent lifting of the 4 property limit for investors for highly qualified buyers, it is critically important to prepare your financing in advance.
Of course, you could use investment strategies like lease option, subject to or other types of owner financing to avoid this challenge altogether, but there are so many great deals right now being offered by banks or motivated sellers that having access to some cash or immediate financing can make a huge difference in the opportunities that are available to you.
So, what are some solutions to finding money and/or real estate investor financing for making these purchases?
Well, the big ones that immediately come to mind are: private money, partnering and hard money lenders (in that order).
Private money is when you approach people that are earning 3 to 5% on money they have invested in bank CDs and offer to pay them 6 to 10% (sometimes more) for lending money against a property you are buying. Instead of them lending the money to the bank and getting the lower bank deposit rates and then having the bank turn around and lend that to folks to buy homes, they become the bank lending directly to you to purchase property and they make the extra profit that the bank would otherwise make.
Partnering to buy more houses than you could by yourself can be a great strategy for the right partners. I think it is important that all your partners realize the pros and cons of investing in real estate before entering into a partnership and having a well drafted partnership agreement by an attorney that is neutral to both of you might is well worth the money. The great thing about partners is there are a lot folks that are interested in investing to real estate and have resources (cash and/or credit) to buy, but don’t have the time or expertise to find truly great deals and then manage them effectively during the sales or rental process.
While hard money lenders are becoming stricter in their lending requirements and a large portion of them have left the business during the latest market correction, there are still hard money lenders that, with the right deal, are ready to lend money to make a purchase. Networking at your local real estate investor club meetings and your local newspaper are the best resources for finding hard money lenders. Rates and terms vary widely, so shop around.
Until my next post,
James
P.S. Take your real estate investing business to the next level by upgrading to our Real Estate Investor Bronze Membership now.
I recently got a call from one of our non-local real estate agents who works with some of our investors in another market and she asked me if I knew a good source for hard money in her area. Many hard money lenders will only lend in their local market or to people that they know and have an established relationship with. So, I could not refer her to work with the hard money lenders that I have in my local market.
With the recent pro-investor changes in the seasoning guidelines for buying HUD properties and reselling them, I feel that hard money will be key for many investors to quickly gain control of these deals in order to do some fix up and immediately resell them to end buyers. So, finding great hard money lenders in your local market will be an important tool for investing in HUD properties.
So, here’s the short and the long answer to how to find hard money lenders to buy properties.
The short answer is that I am always actively looking for hard money lenders to share with our Real Estate Investor Bronze Members. If you are a hard money lender and want to lend money to our investors, contact me directly.
The long answer is that you can find hard money lenders yourself by networking with other local investors at your local real estate clubs and associations. You can also find private lenders by talking to people you know about the deal you are looking at and asking them if they know of someone who might be willing to lend money on it. You can also search out hard money lenders in the “money to lend” section of your local newspapers (check all of them) and through on-line classified websites. Of course, a good mortgage broker that works with investors will also have access to hard money lenders.
As an aside, we do provide extensive training on how to raise private money for our Real Estate Investor Bronze Members inside the Real Estate Investor Wiki.
While we continue to seek out additional hard money lenders, I encourage you to find one yourself using the tips above. If you find a great one, let me know about them as well so I can share them with others. If you find a bad one (and there are some out there), let me know about them too so I can tell people to avoid using them.
Until my next post,
James
