“Hard money loans” is a relatively new term to me. From what I can tell they were devised to allow investers access to quick, but expensive moneys, and lenders to make a quick buck at a higher rate than a conventional loan.
After numerous calls to mortgage brokers and banks I’ve been told two things; “We don’t do that” or “We’ll give you 75% LTV”. Now, from what I understand, the LTV is the Loan to “after rehabilitation” Value when it comes to hard money. Is this true?
I’d basically like to wrap my head around this concept, but am finding it hard to gather the proper data.
Who should I go to (bank/broker)?
When should I use them?
How do I prove the ARV?
How does the LENDER make his money (this is important to me for obvious reasons)?
Could those of you that have used this financing vehicle shed some light on the concept as well as offer a pros vs. cons synopsis?
Thanks All,
Alig8or
Have you tried the classifieds in the local paper? I’ve found lenders through adds like “money to lend”. I’ve also used personal friends who have capitol to spend. I get their attention when I mention a greater than 12% return.
Have you tried prosper.com? Usually the smaller loans get funds quicker. The investor wants a safe fast return.
Just throwing some thoughts.
Good luck!
Brandon
I would be more than happy to answer your questions about how we make our money and the whole process.
Thanks for the tips, Fortunate. Michael, thanks for the number, but please no more sales. I’d like to hear from some seasoned guys that are for or against this borrowing avenue. The good, bad and ugly.
Alig8or
Banks won’t have hard money contacts, nor will most brokers. You’ll find several websites listing companies but most of these will be state specific. If you do find lenders for your area they are likely to all have different guidelines.
The best way to find nationwide hmls is to find a mortgage consultant that specializes in investment loans.
Hmls can do rehab loans based upon the arv(after repaired value). Usually to 70%.
They can also do loans based upon the as-is value but at a reduced ltv.
Some lenders will require an appraisal while others will just want comps.
Pros
Quick closings
No income/asset verification
all credit scores
funds for rehab added in loan
payments/costs rolled in
2nds liens allowed if deal is short with the lender’s 70%
multiple properties
very flexible
Cons
Higher cost/rates
short term
need to refi if retaining
The rest of your questions are good as well but would be better discussed in more detail without having to type back and forth.