Posted by John B. Corey Jr. on September 18, 2005 at 07:29:30:
You raised some good point. You also missed the point of my post. Maybe I was not clear.
First, the original note was asking about hard money. Nothing presented indicated that conventional was being requested. Fair enough to suggest that a person should check into all options.
Second, hard money is a tool. Even when a person has great credit and cash reserves there are properties that will not qualify as they have a specific defect. Hence there are certainly times when even a great credit borrower can not obtain financing on a specific property. They can use other loan products, maybe even secured by other property. Or they can use hard money. Or they can get a partner. You might know the list.
Third, if you were in the lending business and knew the details you would know that hard money for investment property is mostly classified as a commercial loan. Hence the usury laws rarely apply (usury laws are designed to protect consumers and not commercial based transaction). The laws do vary by states. I am not saying that all states line up with what I have said. Just that usury is rarely an issue.
Even if the laws for usury do apply hard money is generally lower cost than the rates credit cards can charge so the usury limits are higher than most hard money. I spoke to one assistant DA about usury in his state. He said that the limit was 29% and as hard money was being provided to an investor it did not apply (investors are not consumers needing protection was the message for that state).
Robert is mostly talking about a business venture. Learning the business and the tools of the business is good advice. That includes learning all the options and not just the ones that are popular with the public as the public rarely knows much about the more specialized tools. Hard money and other forms of creative finance are specialized tools.
Chelsea Private Equity LLC