People use hard money and private money loans to accomplish a variety of goals and objectives. Most people who work in the private lending industry have some great success stories about their clients. Please share your own success story, or a story about one of your clients, below in the comments section.
I will tell 2 of our stories here and hope they inspire you….
Belinda – A first time real estate investor, Belinda was presented with an opportunity to purchase a small, mixed-use commercial building from a family friend. The building was fully rented and had good cash flow. The family friend had to sell the property quickly and was willing to sell it to Belinda far below market value. But only if she could come up with the cash in one week. Belinda’s credit has been hit, but she had enough cash reserves for a down payment. Because she was getting such a low purchase price on the building, we gave her a commercial hard money loan and she brought in the down payment. We were able to close within a week to satisfy the seller, and Belinda was able to get into a positive cash flow investment. Not too shabby for a success story eh? Read more..
Mortgage scams and other lending scams are common in today’s tight credit markets. Banks aren’t lending and everyone is looking for private money loans to fund their investments and businesses. When the market demand is high for anything, there are always crooks in the marketplace that try to rip their customers off. In private money/hard money lending, there are plenty of lending scams everywhere you look. Here are 3 tips for avoiding popular lending scams:
- Run away from fee collectors: A lending scam is usually present if high, upfront fees are paid directly to the lender. A client asked me about hard money lenders in Utah and specifically about a lender I had never heard of. I suspected the reason I had never heard of this lender is because they are a lending scam that charges hefty upfront fees. The client confirmed this and said they asked him for $3,000 to underwrite a loan. This hard money lender in Utah is obviously running a lending scam so run away fast! Read more..
Because every hard money lender has different requirements, it is difficult to say all the items you will need. However, the good news is that there are standard items you’ll need to close a hard money loan fast:
- Find a Good Hard Money Broker: A good hard money broker is your friend because he or she already knows the real hard money lenders from the fake lenders and can steer you in the right direction for a fast hard money loan. This is not to say you should go to your standard mortgage broker for a hard money loan though. A standard mortgage broker is just going to send you to a hard money broker anyway and you’ll be paying double the loan fees because you’ll have to pay the standard mortgage broker a fee for referring you.
- Have a Preliminary Title Report ready: A hard money lender always wants to see clear Title to a property before lending on it. You can get a Preliminary Title Report or a “PR” from the Title company that will be handling the escrow for the seller of the property. If it’s a refinance loan, find a local Title company to obtain one.
- Get Your Property Documents Together: If it’s a rental property, you’ll need copies of the leases. Apartment complexes will need rent rolls and an Income Statement that shows the income and expenses for the property. Most lenders want to see an Income Statement for 2 years on the property. Read more..
There are a lot of bad hard money lenders
in the private money lending space. Because it is not regulated as much as the banking industry, hard money lending has its share of scam artists. Below is a top 4 list of scams to watch out for when looking for a good hard money lender.
- Fee Collector: When a lender asks for an upfront fee for a sum of more than $1,000 this is probably a scam. There are a lot of hard money lenders who make money from charging upfront fees, and not by actually making loans. These hard money lenders are often called, “fee collectors.” Although there are exceptions, scams in hard money are usually found when a lender is charging $1,000 or more to give you a loan. Sometimes a lender will require an appraisal or site inspection as a final underwriting condition for giving you the loan. However, in most cases, this type of upfront fee will not be more than $500 and will typically be paid for a third party service.
- “Bait and Switch” Lender: The lender promises the borrower a low interest rate and a low fee loan that seems too good to be true. Right before funding the loan, the lender may give the borrower a less desirable loan term, at a higher interest rate. This is called “bait and switch.” Read more..