What is hard money exactly? Simply put, it is money that is loaned out that does not conform to Fannie Mae standards, and can be loaned to people with not so great credit. Most often it is used in Oklahoma City real estate to purchase "fix and flip" properties. On the surface it looks like a terrible deal with rates like 14% and upfront points of 5%, or a bit lower rate but with 8 points. The key is a fast turn, if you can rehab the property and turn it in 120 days or less, your rate of return can be exceptional. If it doesn't turn it is a drag, and my warning to people is make sure you have reserves, can deal with the unexpected, and realize that real estate flipping is not a perfect game like that TV pitchmen try to suck you in with about untold riches. However, hang on a minute because hard money is adapting to the current lending environment. So much restriction has been put on what a loan officer and lender can make, and qualifying is harder than I have seen since the 1980's. I will be updating you about this transition because I believe that hard money will ultimately fill a void will see some lower rates with long term amortization schedules and with balloon payments. When there is money to be made, and reasonable risk, hedge funds among others will start stepping in, in fact we are already seeing it. Just be careful, use hard money for short term gains, have reserves, and watch carefully, this will get interesting! For help on buying Oklahoma City investment property or a home to live in, contact our team at joe@joepryor.com.
Comments(0)