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Real Estate Investors After Hard Money to Take Down Foreclosures

11 Jan 2009 | No Comments | posted by Corey Curwick Dutton | in Hard Money

Real estate investors with access to Short-Sales, Foreclosures, and REOs rely on hard money to take advantage of rare opportunities.  When flipping a property, hard money is just a tool to acquire it and make a decent buck quickly. However, unless these same properties are resold at fire sale or deeply discounted, they come with a high risk. Particularly if the investor has no chance of getting long-term financing in place.

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

Borrowing Private Money – What Is Your Exit Strategy?

25 Nov 2008 | No Comments | posted by Corey Curwick Dutton | in Hard Money

Once you’ve made the decision to borrow private money, you must know what your exit strategy is and you should even have multiple exit strategies.  Without a clear exit, you will never get a private money lender to give you the time of day!

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

What is the Difference Between Hard Money and Private Money?

24 Nov 2008 | 2 Comments | posted by Corey Curwick Dutton | in Hard Money

Depending on who you talk to, most everyone will tell you that private money is just a nice way to say ‘hard money.’  Since the word ‘hard’ just sounds so, well, hard, most investors or brokers think you mean hard money when you use the term private money.  However, the world of private money is expanding so rapidly with the opportunities associated with tight institutional money.  More investors are jumping into the private money game and there is beginning to be a slight difference between private and hard money.

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

Hard Money in Utah

23 Nov 2008 | No Comments | posted by Corey Curwick Dutton | in Hard Money

With the credit markets so tight while real estate is being offered at 50% or less of its value, it’s a frustrating time for real estate investors in Utah.  Particularly for investors and business owners who have a stated-income status, private money and hard money is slowly becoming the rule not the exception.

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