With such a shortage of cash over the last two years, it seemed that there were just too many good deals chasing a limited supply of cash.  Since the start of 2010, it now seems that there is more liquidity in the market.

Many private lenders are beginning to match the lower interest rates being offered by private investors or individuals lending out their IRA money.  Some of the programs that are currently being offered in the Western United States include:

• California Residential & Commercial Purchases, Refinances and Cash Out Refinances
  • 8.5 to 9.95% APR
  • Hard money 2^nd mortgages starting at 10% APR

• Utah Residential and Commercial Purchases, Refinances, and Cash Out Refinances
  • 10 to 11.99% APR

• Nevada Residential & Commercial Purchases, Refinances and Cash Out Refinances
  • 11.99 to 12.5% APR

• Arizona Residential & Commercial Purchases, Refinances and Cash Out Refinances
  • 11.99 to 12.5% APR

• Idaho Residential & Commercial Purchases, Refinances and Cash Out Refinances
  • 11.99% APR

These are just some examples. Last year at this same time, interest rates were typically starting at 12 percent and ranged between 12 to 14 percent.  Like you, I’m hoping rates will continue to trend downward for the remainder of 2010!

Any comments on this topic?

Posted by Corey Curwick on May 12, 2010

I did a post back in February called, “How to Fund a Hard Money Loan Quickly.” Shortly thereafter, I reopened the topic again with a subsequent post called, “How To Get Your Deals Funded Quickly.” A lot of the good tips in the last posting came from John Kutac of Western Capital Partners.

I think this is a great topic to post on because it solicits feedback and starts a dialogue.  For those who seek a private money or a hard money loan, or even for hard money loan brokers, the tips provided in these postings are standard protocol in the private money realm.  Don’t follow these basic rules of engagement, and you won’t get money very quickly, if at all.

Documentation is now pretty much a rule for hard money lenders these days. Have all of the typical documentation required for a conventional bank loan on hand, when looking for quick funds. For an express hard money loan, documentation will make the underwriters job a breeze because then they only have to ‘verify’ the documentation. Years ago, documentation was not required, but with lenders now cherry-picking deals, you must have all of your documentation prepared to submit.

Another important tip for getting your deals funded quickly, has to do with networking.  Find out who is brokering money hard money loans consistently and quickly. Don’t waste time with someone who doesn’t have access to the money sources. Real lenders are hard to find. When I say ‘real lenders’ I mean those who have money to lend and are actively lending. Don’t spin your wheels with lenders who advertise on the internet if you want your deals to fund quickly.

Any other thoughts that anyone would like to share in order to continue the thread on this topic? Input or additional tips are encouraged.

For those who plan on buying and holding, particularly in the case of commercial properties, hard money is just a band-aid to get the deal done.  Investors who are taking down commercial properties using hard money, are even more at risk than SFR flippers.  This is because long-term commercial financing is a process that requires a broker who has access to multiple lending sources, and one who moves quickly.  Without this, the 90 hard money term is a nail-biting countdown.

But it isn’t just as simple as that.  Sometimes investors have to get creative with hard money.  A recent example was two weeks ago when a commercial real estate investor friend was able to take down a rare triple net lease opportunity. The seller was the bank, and it was desperate to get the property off its books before the end of the year.  This experienced investor was able to take down this 50% LTV commercial property days before the New Year and he did it by leveraging hard money more creatively than most.

In this case, the investor needed to come to closing with 10%.  Because he was cash poor, he needed hard money for the 10% but of course couldn’t get a hard money lender to take 2nd position to the bank.  With a ton of equity in another commercial property he owned, he took out the first on it with a hard money loan and took cash out in the amount of the 10% he needed for the triple net lease.  With a strong balance sheet and credit history, the investor will be able to secure long-term commercial financing relatively quickly to cover the hard money loan.  This, once again, is the catch. Putting long-term commercial financing in place is a process that requires an experienced broker with multiple commercial lending sources.

Is there anyone out there who has recently had to leverage hard money in a creative way to take down a short-sale or foreclosure? We’d love to hear your story…..

Posted by Corey Curwick on January 11, 2009

In the process of devising a clear exit strategy it is crucial that you mastermind your various options with your partners or members of your advisory team.  Many times, you and your partners haven’t thought of everything that could happen.

The exit strategy you have devised could have some holes in it that you hadn’t considered.  This is another reason why you should seek the advice of a trusted private money broker when pinpointing your exit strategies.  An experienced broker has seen many deals pass over his or her desk and, on the negative side, has also seen many deals go bad usually because of poor exit strategy.  A good broker can help you and your partners trouble-shoot your proposed exit strategies and get clear on what you will do if….

Would anyone care to share examples where a poorly designed exit strategy may have meant the demise of a good project? On the flipside, would anyone like to share an example where the good exit strategy saved a bad project?

Posted by Blake Reese on November 25, 2008

Some of my private money lenders will lend between 12 and 18 percent with points while a typical “hard money” lender lends from 18 and up with points on top of that.  I think with the sudden influx of more private lenders in the scene, my team can safely say there is a difference between those who are strictly “hard money” lenders and those who lend at more reasonable rates.

Another thing I will add to this post is related to choosing who you take money from and through.  One of my primary motivations for starting this blog is to try and keep the private money scene ‘real.’  All legitimate private money brokers and lenders will require a due diligence deposit so don’t be afraid to give them money upfront to get the ball rolling. However, don’t just give due diligence money to any broker or lender unless you’ve first done your own due diligence on them.  Make sure they’ve been in business for longer than a few months. Also, make sure they have some kind of brick and mortar office they are working out of. That always helps!

With so many new private money lenders and brokers entering the scene, you have to pick who you deal with carefully.

I’d be curious to see if there are any hard money lenders or brokers out there who wish to comment on the huge influx of new “players” that have recently entered the private money scene. Any thoughts or comments on this?

Posted by Blake Reese – November 25, 2008

Those with the most leverage right now are finding themselves in a favorable position.  Utilizing hard money and other sources of private sources of leverage is crucial for getting ahead while others are falling behind. The problem is that literally overnight, a million sources of hard money have popped up. So who do you go to?

Despite all the flack that the ‘broker’ has always gotten, the experienced money broker who has lived through many market booms and busts is now an invaluable resource.  Providing another complete set of eyes, an experienced broker, with your best interest in mind can be the crucial piece to the success of your project.

Even though you may think you have the perfect exit strategy, what are you missing?

With no intermediary you are also more likely to be taken advantage of by the lender and you surely stand a higher chance of losing the underlying asset.

Any further insight on this topic is welcome.

Posted by Blake Reese