Posted by James-IN on March 30, 1999 at 22:04:50:
Dion,
Why don’t you “flip” your idea. Why not buy homes at a lower FMV by using hard money and then flipping the home to a new buyer using seller financing. Then you sell the note to payoff the hard money and closing costs. You make your money off the down payment and the second note. Just a thought.
James
Hard Money Craziness!!! - Posted by Carmen
Posted by Carmen on March 26, 1999 at 12:05:29:
This is in regard to the deal I mentioned earlier in the week. House cost $62K, FMV $100k, about $5K of work.
Has anyone heard of this silliness?
Hard Money Lender says they will loan $62K, but (get this) we have to escrow, out of OUR OWN MONEY, $10K with him, and he will dole it back out to us as we do the repairs - oh, and he will give us a list of all repairs to be done, and in what order, and will send an inspector to the house, AT OUR EXPENSE, once a week (at $100/pop), to make sure it is getting done.
If we had $10K, we certainly would not give it to someone else to hold - and plus, now we would need $20K to do the repairs, because he would only give us back our first $10K AFTER the repairs were done “to his satisfaction”.
Has anyone heard of anything less desirable??? That is, besides the 6 points that he would be charging up front…
Re: Hard Money Craziness!!! - Posted by Frank [Pgh PA]
Posted by Frank [Pgh PA] on March 26, 1999 at 20:46:14:
“…we have to escrow, out of OUR OWN MONEY, $10K …” the guy I use doesn’t ask for any of my money. He gives me the option of getting a 50% loan on the “As-Is” appraised value or on the “After Repair” appraised value. When choosing the latter, he escrows the “After Repair” money and releases it in stages as the repairs are completed. He does the inspection himself after he’s told each stage is completed at no charge.
One thing to keep in mind is, each Hard Money Lender sets his own criteria for how he conduxts his business and this can vary greatly depending on where you are in the country. I’ve heard there are places where there are several of them in on area [AZ I was told] and as a result of the competition, borrowers can do better there than in places where there is only one.
Play ball or go Shopping - Posted by James-IN
Posted by James-IN on March 26, 1999 at 15:00:44:
Carmen,
You may not like what I’m going to say, but here it goes anyway. The reason they call it hard money is because it’s “hard money.” You got to remember, this guy is giving you “his” money to you without going through all the standard loan requirments of a conventional, FHA, VA or non-conforming loan. When you finally prove yourself to him that your a “good” investment, you should be able to get better terms. With hard money, he is only going by the future value of the property and your word that you will pay him back.
Hard money is best used when you can acquire a property at a substantial discount because of the ability to provide to the seller a quick closing (1-7 days). For example, “Hey seller I’ll give you .50cents/$1 in 2 days or .75cents/$1 in 30-45 days.” Also, you get the property without a second mortgage or downpayment, it’s a straight cash offer.
The industry standard for hard money is usually 40-75% LTV, 12-18% interest only, 1-5 year tems, cash in 1-7 days, with 5-10 points added to the loan. There sould be a prepayment bonus for paying back the money early.
I would suggest you spend a little more time to “shop” for another hard money lender. His 6 points should be financed into the loan, not upfront. So, your loan amount would be $65720 when you finally “flip” the property to a new buyer at $100,000. Also, you should be able to find a hard money lender that doesn’t “escrow” for repairs. The ones I use require proof that I have the money needed to do the repairs and 2 estimates for the work that needs to be done. There are plenty of hard money people out there. So, have fun and enjoy the search.
Best of Luck,
James-IN
Re: Hard Money Craziness!!! - Posted by Dan in Dallas
Posted by Dan in Dallas on March 26, 1999 at 13:06:03:
Can’t blame a lender for wanting some assurance that the work is being done, but to make you pay his brother-in-law…oops, I mean his “inspector”, $100
per week is over the line. As Joe Kaiser would say,
“I think I’ll pass”. LOL
Dan
P.S. To paraphrase an old saying… - Posted by Frank [Pgh PA]
Posted by Frank [Pgh PA] on March 26, 1999 at 21:08:51:
If you think Hard Money is too expensive, try missing a chance to to pick up a real bargain because you don’t want to pay that many points and/or the high intereet rate.
The saying I paraphrase, as most of you already know, is…"If you think education [paying for a course or a seminar] is expensive, try ignorance.
Hard money lenders - Posted by Donna
Posted by Donna on March 26, 1999 at 15:59:45:
James,
Would you mind sharing how you find your hard money lenders? If through ads, what do you say in these?
Thanks, Donna
Re: P.S. To paraphrase an old saying… - Posted by Carol
Posted by Carol on March 27, 1999 at 07:10:51:
Shoot, I thought the old saying was going to be
“he who has the gold …” !"
My experience in finding “Hard Money” - Posted by Brandi_TX
Posted by Brandi_TX on March 27, 1999 at 02:36:27:
As stated, Hard Money is “hard” because of the terms. In my town I have found that it could also be considered “hard” because of the dificulties I had finding it.
My strategy was to call mortgage companies and ask to speak to someone that handles investor loans. When that person got on the phone, I told them this:
“I am looking for an investor loan that you may or may not offer through your company. I am in need of a lender that will loan on the after repaired value of a house I want to buy. I am in hopes that you can help me find such a lender. Have I called the right place?”
The responses varied from “There is no such lender.” to “Those can’t be done.” to “Sure, I can help.” (My favorite response!) You know you have found the right person when you don’t have to explain how a Hard $$ loan works to them. I found 3 Hard $$ lenders this way. Unfortunately, I had to call the nearest large city to get them, but what the heck… that is what fax machines and Fed-Ex are for!
Also, I recieved 2 more contacts simply by bringing it up in the chat room. Someone in my state gave me the #'s right there in chat. (Thanks Jackie, One will work for sure, the other will call me when she finds out if they will do my area.)
Yet another resource for Hard $$ lenders is other investors in your area. (REI club) Not only can you get contacts from them, but they can tell you their experiences in using them.
Hope this helps - Good luck!
-Brandi_TX
Re: Hard money lenders - Posted by dion
Posted by dion on March 26, 1999 at 20:06:13:
That’s my problem as well. I wanted to create mortgages and sell them to a hard money lender. I’m told that doesn’t work. I’m now back to square one. I’ve got to find some hard money from somewhere