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.
Looking for Hard money lending… - Posted by Robert
Posted by Robert on September 15, 2005 at 13:55:01:
I want to start rehabing houses. I am a newbie at this. I will be upfront, I have low credit scores, no savings and little know how.
But I have the drive and desire to make this happen. The only thing I have is my word to pay back the money I borrow to find a house, rehabe it and sell it.
Is there anyone in Arizona that can and will help me with this?
Well John seeing as how usury laws were made with hard money lenders in mind… Ah. I won’t go there.
A good mortgage broker is going to look at every way possible for Robert to get a loan and will follow all ethical and legal guidelines set fourth by the State and Federal government.
Now John, I’m sure you are aware of the glut of subprime programs there are out there. If Robert can’t even qualify for one of those programs don’t you think the responsible thing do is help Robert improve his sitution before he assumes a large financial obligation?
And as a matter of fact I have seen a lot of bad credit, little cash loans go through. The question is, should they have gone through?
IMHO if you can’t qualify for a sub-prime bank loan right now and you have NO Real Estate experience you should not be doing any RE investing. Why? Because you will probably starve to death and loose what precious few assests you do have to some other RE investor who told you, “Yeah. Hard money is the way to go, sign here.”
