What is "Hard Money" Lending

By
Mortgage and Lending with San Diego VA Home Loans/858-777-9751

Hard Money Lending is exactly what it sounds like; loans that are hard to do.  Many borrower's needs fall out of the mainstream loan guidelines and they often need a "short-term" fix.  Now I want to be clear, this is not an advertisement for my private-lending practice; it is meant to be educational so that Realtors know that there are other options out there and mortgage brokers might expand their horizons to fill up their pipeline.

A private loan is essentially someone with a lot of money lending to someone who needs it and can't get it from banks or mortgage companies.  Most of my investors are older, retired, well-heeled, and smart.  I have learned more about "true" underwriting in the past few years than I have in the nine years in the  preceeding.  Investors are sharp and know how to mitigate loss.  They are also quirky and their quirks tend to match up with their life experiences.

Let me give you some examples where hard money loans are appropriate and the type of investors I match up with the loan:

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Rainer
36,692
Sara Lipnitz
Max Broock Realtors - Birmingham, MI
Brian, Thank you for the information.  I can tell that you really know your stuff.  Too bad you favor Plummer!
Sep 08, 2006 01:49 PM #1
Rainer
7,652
Edward Mehnert
Las Vegas, NV
multi family, most banks want 1.25-1.35 dscr.  I can't believe california is that bad that the properties don't cover that.  Then again, look at my backyard, NYC, guess I can believe it.  I was scrolling through loopnet at NY apartment buildings, and basically for it to cashflow you had to offer less than half the asking price. 
Sep 08, 2006 02:03 PM #2
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Here's a good example:

1- rents of $6500- (deduct $2000 for taxes, maintenence, and vacancy)

2- $4000 Net Monthly Operating Income 

3- Qualifies for a payment of $3200 (with a 1.25 DSCR) 

4- 25 year amo at 6%= $500,000 loan

Purchase price= $1.1MM

LTV under 50% 

Sep 08, 2006 10:54 PM #3
Anonymous
Antionette Ross
How can I become a Hard money Lender in my area?  What steps do I take.  Thanks.
Jan 14, 2007 01:46 PM #4
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Antionette:

1- Join Active Rain to get involved in the industry online.  It's FREE and you are invited.

2- Read this post and e-mail me with questions 

 

Jan 14, 2007 02:24 PM #5
Rainer
15,540
Deja Fouts
NONE - Des Moines, IA
were do you find hard money lenders?
Mar 02, 2007 03:17 PM #6
Rainmaker
311,669
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Deja:

Here is one place to find Hard Money Lenders. 

Mar 02, 2007 04:49 PM #7
Anonymous
Mark

I am in the market to buy trust deeds, performing and non performing.

E-mail: TRADERSL@AOL.COM

Thanks

Aug 02, 2007 01:30 PM #8
Rainmaker
291,279
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

As I understand it LTV is the deciding factor on Hard Money?  Am I correct.  Hard Money Lenders won't go above 75%?  Is there any instance when they will go higher than that?

 

Aug 03, 2007 07:43 AM #9
Anonymous
sarah (kenya)
Thanks so much. I have been looking for this info since for ever. You pack it all in very nicely.
Sep 11, 2007 08:34 PM #10
Rainmaker
513,582
Leigh Brown
Leigh Brown & Associates, RE/MAX Executive - Charlotte, NC
CEO, Dream Maker - Charlotte, NC
ah, an oldie goldie.  just sent one of my new buyer agents here to learn more.  how's things?
Feb 13, 2008 01:00 AM #11
Anonymous
yanni raz

First of all I want to make sure that you're all familiar with the term Hard Money. Hard Money is Money Loaned to you by private investors, these private investors can be from anywhere but normally the Hard Money lenders would want to work within their own state, so if you're from California than you want to find an investor in California.

So what type of Hard money loans the Hard Money Lenders will do?
The First type of Hard Money Loans lenders are offering is Construction Hard Money Loan. In construction Hard Money Loan the Hard Money Lender will loan the borrower the money in stages, example: You own a land in Los Angeles California, on that Land you want to build a house, you have the Plans approved by the city of Los Angeles and you're all ready to go, now you need a Hard Money Loan because it will be easier to qualify and get the money you need for the construction. You will call a Hard Money Lender and give your information, the approved plans, your financials, your budgets for the construction(you can get it from your contractor), then lets say the Hard money Lender agrees to Loan you the money you need, but the way the Hard Money Lender will Loan you the money is by stages, and the stages are: When your Contractor will finish the foundation, the contractor will get paid after inspection that is done by the Hard Money Lender $10,000 for the foundation work. Than when your electrician finishes the electricity in the house, than the electrician will get paid after inspection done by the Hard Money Lender another $7000. You understand the concept? Everybody by the completion of the construction will get paid by the Hard Money Lender. Why the Hard Money Lender do that? Because he want to have control of the money, private investors know the risks they're taking but they're still willing to take these risks only if they have 100% control of the money. <script type="text/javascript"></script>
Why Hard Money Lender will choose to Loan money to Investors and not Homeowners?
This is a very good question that a lot of people should know the answer for. The Hard money Lenders wouldn't want to have to take a homeowner out from his home because he didn't make the payments, but with investors it's different, it's 100% business and that's what the Hard money Lenders want- Business. What type of properties Hard money Lenders will Loan money on? A Hard money Lender will Loan money to many type of properties: Single Family Residents, Condos, Townhouses, Apartment Buildings, Hotels, Motels, Office Buildings, Shopping Centers and many others. What hard money Lenders don't like, it's Land. It will be very hard to find a Hard Money Lender that will Loan you money on a Land, and the reason is because there is no income to Lands, maybe you can get a Hard money Loan on a Golf Course or maybe a Land that you about to develop something on, but raw Land- Forget about it. Today Hard money Lenders Loan more money to Commercial Real Estate investors rather then to residential investors and the reason is Less risk. Today the Residential market is not going up, Values of Homes are actually going down by more than 30%, and every day more foreclosures are coming out on the market, so the Hard money Lenders are smart enough not to participate in taking risks with homeowners. Commercial Real Estate is still very competitive, investors are still buying properties, remodel properties and build new properties. The Commercial Real Estate market is still alive just like it was in the residential market 3 years ago, and Hard money Lenders are still in the game, and now they're busy more than ever because the Banks don't Loan money that easy to borrowers. So it's Commercial Properties rather than residential properties, and Construction Loans. <script type="text/javascript"></script> Good Luck

http://hardmoneyloans.org

Jul 22, 2008 02:43 PM #12
Anonymous
cruz

Does Hard money Lenders record the trust deed with the assessors/recorders office just like the banks do or is it recorded different?

The reason I ask is that I bought property with a partner and I check the assessors/recorders office to see if they have taken any loans on our property without my knowledge. I was wondering if the borrowed money with Hard money Lenders would show up under Trust Deeds just like the bank loans or line of credit with the banks do.

 

Thanks

Aug 24, 2008 04:59 PM #13
Rainer
5,446
Moshon Reuveni
Lending Universe.com - Toluca Lake, CA

A good place for hard money lenders is on www.lendinguniverse.com. the trick is to contact many lenders and find out who is for real. Most "lenders" are actually only brokers, there is nothing wrong with that as long as they can produce and fund loans.  

Aug 24, 2009 07:13 PM #15
Anonymous
Scott Williams

Hard money lending is as simple as that but what is difficult is finding the right hard money lender.

 

 

Scott Williams

http://www.squidoo.com/tips-on-finding-hard-money-lenders

Oct 17, 2009 07:30 AM #16
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Brian Brady

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