Since the banking crisis of 2008, residential mortgages and real estate loans in California, and other States in the U.S., have become scarce for many real estate investors. For real estate investors seeking Real Estate Loans, those who are in need of capital are needing the help of private or hard money lenders in order to fill their immediate needs.
Most banks are not known to offer Hard Money Real Estate loans. But nowadays, with the changes that have been happening in the market, private money lenders and investors are providing quick approvals and closings. This is an advantage in the current market, because banks take a long time to underwrite a loan and fund. For a savvy real estate investor who understands how to submit offers, using a hard money or private money loan, can be the quickest way to take advantage of an investment opportunity. With hard money rehab loans, investors can stretch their precious cash out over multiple investment properties simultaneously.
The need for hard money loans is fast growing among real estate investors. Find out more by submitting a comment below. We’ll email you about our rehab loans.
What is Hard Money? People ask me this all the time. A private money loan and a hard money loan are used interchangeably to mean the same thing. A non-bank loan, back by individual or private investment group instead of a bank. A private loan is typically faster and can fund in one day up to 30 days, depending on the complexity of the deal. More flexibility often means higher interest rates, from 7% to 18%.
The qualifications are less harsh, some lenders don’t even require a basic loan application or credit report, they just want to inspect the property. While others want to see nearly as much documentation as a bank, but can still move faster than a bank could. Collateral is the most important to a non-bank lender. You must have a real estate asset to use as collateral for this type of loan.
The most important thing about a hard money loan…To find a lender you can trust. Private Money Utah is your trusted resource for private money and hard money loans in California, Utah, Colorado, Arizona, Oregon, Washington, Texas, Georgia, New York, New Jersey, Virginia, and Chicago, Illinois.
How Does a Hard Money Lender Value My Property?
When making a loan, a bank and a hard money lender both have different opinions when it comes to determining the value of the property. A hard money lender takes a very conservative approach to property value. For example, the appraised value means nothing to the hard money lender. Instead, a hard money lender will determine the value of the property as if they had to sell it in 30 to 90 days. This is sometimes called a “fire sale” value. If a borrower defaults on a hard money loan, hard money lenders will be able to sell the property quickly at the “fire sale value” to recover their investment. For this reason, a hard money loan is usually in the range of 60-80% of the purchase price. For example, if you are buying a property for $100,000, a hard money lender will give you between $60,000 to $80,000 max of the purchase price.
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There are two kinds of groups who have a growing need for hard money loans: commercial borrowers not eligible for bank loans, and real estate investors looking for foreclosures.
Hard money or private money to some is getting more popular by the minute as conventional (bank) financing for the real estate industry is still fairly scarce. As a wise borrower, there are rules to learn first before getting a hard money or private money loan.
When banks and brokers are not able to lend money to borrowers, the only option are the private money lenders. These days and with the economy, the demand is high particularly in places in GA, Chicago, NY, and NC.
What is a private money lender exactly? It’s the type of lender that doesn’t use conventional, bank standards in order to qualify a borrower for a loan. Evaluating credit history, income, and debt levels is typically of banks while the private hard money lenders will just provide a based on the value of the asset being used as collateral for the loan.
Real private hard money lenders are hard to find and their interest rates may not be as accommodating as compared to banks. But these lenders are the best option when the traditional financing from banks is not available or when a borrower is in need of a fast loan.