Posted by James Strange on August 26, 2003 at 18:52:15:
I also recieved those emails but then most of them wanted me to follow a link and fill out my info online.
I did not do it. Now the same folks who were say that they could do that are now using a new lender and I see a lot of complaints that people did not get loans.
So don’t count on 8% Hard Money.
As for getting a 100% LTV loan with good credit 8% is possible.
James Strange
HARD MONEY MORONS! - Posted by Chris in L.A.
Posted by Chris in L.A. on August 25, 2003 at 16:11:55:
I recently put a house under contract that needs virtually no work, but spending $5000-7000 would make the place gorgeous, The contract is fully assignable and the contract is for 299,000 the house is comping at 375,000. I call one of my hard money lenders to tell him that I will probably need 320,000 to see the whole process through and he tells me that the only way I can get the 320,000 is to either change the purchase price on the contract from 299,000 to 320,000 and have the seller give it to me outside of escrow(which would make the seller very suspicious), or to purchase the house for 299,000 and later get a rehab loan which will take up to 6 months?!?
My hard money lender also said that even if the house was worth a million dollars and I was getting it for 299,000 they won’t loan me more than the purchase contract says!
What? Is my hard money lender a moron? Please help I have already lost one deal and a portion of my Earnest money because of one deal falling through. Thanks.
Also what does my appraisal need to say the property is worth for me to get the 320,000 I need to see this through?
Re: HARD MONEY MORONS! - Posted by Jasonrei
Posted by Jasonrei on August 27, 2003 at 22:11:33:
I’ve used hard money lenders on about 12 deals. They’ve loaned me 100% of purchase price before, even rolled loan and closing costs into the loans, but only if the total was less than 65% of ARV less projected repair costs.
Here’s the thing about many hard money lenders- at least in my area. Not all the money they use is their own. They usually have a line of credit with a bank or two or three. The bank loans them the money, but wants to see documentation on the deals the HML funds. The bank sets many parameters- one of those is often that the loan won’t exceed purchase price or some number very close to it. When someone buys a house and gets a nice sum of cash at closing, the chance that the lender will get taken skyrockets. That’s the case even if the appraiser and inspector were both people the lender thought they could trust.
If I was a hardmoney lender I wouldn’t have a problem with loaning someone more than purchase price, but that’s because I would actually WANT the property back. I have yet to meet an active HML who wants to take back a house.
You’re forgetting the golden rule - Posted by DaveD(WI)
Posted by DaveD(WI) on August 27, 2003 at 10:14:48:
Chris, you seem to forget that he who has the gold makes the rules. Then comes the dance between lenders who want assurance they will get their principle back (with interest of course) and innovative borrowers. Some day you may have a lot of money yourself. When you do, would you put it out on the same terms you are now asking for? I doubt it. For that same reason, your lender is hardly a moron.
The real problem is your attitude. Figure out what the rules are and live by them. Or try to educate your lender to see things your way. Or find a different lender living by different rules. Or buy differently so you don’t need lenders. Isn’t it cool to have so many choices?
Is the glass half full or half empty? Only you can answer that, Chris.
All the best. . .
Dave
Lender vs Partner - Posted by Frank Chin
Posted by Frank Chin on August 26, 2003 at 08:59:28:
Chris:
You have to make a distinction between a lender, and a partner in a deal.
Lenders base their decisions on value you can show on paper, in this case, a contract for $299,000. You say “Hey, I got something here worth $299,000, how much can you lend me”?
An EQUITY partner can decide a deal based on how much money you can profit from the deal. You tell this fella “Hey, I tied up a property worth 375K for 299K, can you work a deal to split the profits”?
At 299K, you got a generous lender. At 320K, you’re talking about a partner.
Frank Chin
Re: You Crack Me Up!!! - Posted by Jim V
Posted by Jim V on August 26, 2003 at 01:14:28:
A true HML will rip your heart out and eat it for breakfast with a latte “to go”.
That’s not necessarily a bad thing, just somewhat realistic. Your numbers indicate you are dealing with either a conventional lender, or a broker that doesn’t do actual “hard money”.
70% of your FMV estimate of $375K is $262.5K.
If that number doesn’t work for you, it most likely won’t work for a HML either.
Re: HARD MONEY MORONS! - Posted by Tom PA
Posted by Tom PA on August 25, 2003 at 20:41:28:
It sounds like you aren’t dealing with a true HML.
First, it would be hard to get that high of a %. 80% is really looking to be bank financing.
Second, you can walk away with cash with a HML. That is as long as the LTV is low, say 60%-65%. Remember that this is Asset-based lending, purchase price really doesn’t matter as long as they can sit in a 1st position with a low LTV.
Look around a bit more. Go over to the Financing board and see what they come up with. I am sure there are people in L.A. getting decent HM loans.
Re: HARD MONEY MORONS! - Posted by Marcos
Posted by Marcos on August 25, 2003 at 20:26:55:
I am going to agree with the others. Your Hard Money lender doesn’t sound like a moron to me. Sounds pretty normal actually. There’s two reasons actually. First you bought it really high for a HML. You’re buying it at 80% LTV. A real HML won’t touch anything above 70%, especially on your first deal with them. Then you’re asking to get cash out of the closing. Not a HML I know of that will let you do that. Think of it, he’s going to give you $20k cash for what? For you to buy a new car, and tell him to stuff himself on the property? In a state that takes 6 months to get his money or the property. Highly unlikely. The problem is the only security he has is the property, and he has no equity(85% through a foreclosure process = no equity).
I’d say use him on the purchase and find a partner for the extra cash.
No mention in your post of why you need $20k in cash, when you only plan on doing $5k of repairs.
HTH,
Marcos
Re: HARD MONEY MORONS! - Posted by Kristine-CA
Posted by Kristine-CA on August 25, 2003 at 17:26:32:
Your hml isn’t a moron because he won’t lend you more than he wants to. I’m suprised you found someone to lend you 100%. What kind of terms do they want for that?
I’m sure they are out there, but I haven’t met a hard money lender that will lend on your ratio (you want to borrow 85% of ARV).
If your lender will lend you 100% of the purchase price, why not go with that and borrow the 5-7K from somewhere else?
My suggestion would be to consider assigning your contract or selling via double close now. It’s not that great of a deal for most investors but you may be able to find a retail buyer with funds or with a lender that won’t have seasoning issues.
Sincerely, Kristine
Re: HARD MONEY MORONS! - Posted by RichV(FL)
Posted by RichV(FL) on August 25, 2003 at 18:26:05:
Kristine,
Its funny you mentioned that about 100% financing hmls.
I recived an email about a few months ago from an investor I network with and she mentioned to me she had a 100% HM loan at 7.8%.
I have never seen one myself that lends 100% but I guess some are out there doing it.
Regards,
RichV(FL)
Re: HARD MONEY MORONS!-SMART MORONS! - Posted by Linda Simms
Posted by Linda Simms on August 25, 2003 at 18:20:51:
When people start playing games with contract prices, they are opening themselves up to possible fraudulent activity. I would say the Hard Money Lender is smarter than you think.