Due to the current financial conditions, credit is becoming increasingly hard to come by. Many individuals who used to be able to walk into any bank and get a loan to meet their needs are now finding that there may not be any banks willing to lend to them, despite excellent credit scores and strong financials.
This is especially true for real estate investors, and in particular residential real estate investors. Individuals who own too many properties (some banks may determine 4 properties too many, some as high as 10) may have a hard time obtaining any kind of financing to purchase additional real estate through traditional banks.
As an alternative, hard money financing has become more mainstream in the markets today. The result of this, however, is a shift in hard money lending. Those who are finding they need hard money for the first time may be asking themselves what is hard money and how can I qualify in todays market? If you find yourself in this position, here is a brief rundown on what you should know.
Just as banks have tightened their standards, hard money lenders have as well. Gone are the days where you will be able to find hard money loans for 80% loan to value. Also gone are the days where credit plays no role in the decision making of the hard money lenders.
These days, conservative loan to value ratios are the rule. 50-60% loan to value is fairly common. First position is preferred. Major credit issues can increase the rate, lower the loan to value or even completely disqualify a borrower in some cases.
Borrowers looking for hard money these days may want to educate themselves on the changes in the hard money world. For those who have not been in search of a hard money loan for a few years, the changes may be dramatic.
With that being said, however, hard money is a very feasible option for many real estate investors. The above mentioned changes to the private lending world have created a shift in the average hard money borrower. My average hard money borrower has good credit, good assets and is looking to leverage those assets in order to invest in additional real estate today. For borrowers who fit that bill, there is money available. The cost is higher than what you would expect to find with a bank, but obtaining a hard money loan is less expensive than taking on a partner, and the money is available regardless of the number of properties you may own!
Check back in as I will be addressing a number of topics related to hard money today. If you have questions, don't hesitate to call. I can help with your California hard money or private money needs (sorry, not nationwide!). My toll free number is 877 462 3422, you can ask for Chris.