First off I’m not new to real estate investment. Your effort to disqualify my opinion by attempting to portray me as an investor, “with little or no experience,” is both insulting and unprofessional. I am new to this site. I was attracted here by a client who was so misinformed that I was curious what information was currently available on different message boards. I have read many of Ed Garcia’s posts and as of yet have found none that are misleading or uninformed. Let me ask you this, being a hard money lender you never ran across a client who would have been better off with conventional financing? As an experienced loan officer that does consulting for one of the largest real estate investment groups in the country I have ran across many people who were better suited by hard money than conventional financing and I told them so. Have you ever done the same? You are wrong in your contention that I dislike hard money. I have personnally on occasion used hard money. My point is that many people use hard money unnecessarily. The reason for that is because some individuals misinform the public that hard money is the best way to handle any rehab deal. IT ISN’T. I don’t attempt to mislead any of my clients. When someone comes to me for financing advice they get the best advice I can give not the advice that makes me the most money. I have a fiduciary responsibility to anyone that walks in my door as a potential client to provide them honest, efficient, and beneficial service. As evidence of my integrity I submit one final thought. I don’t sign my posts,
Shane
Mortgage Consultant
Nameless Funding
P.S. Because I am not soliciting, (as others obviously are) the above mentioned company is fictious and not my true place of business.
Why does everyone want hard money? I understand that for some people hard money makes sense but I’d say based on posts I have read in the last two days that at least 50% of the people who want hard money would be better suited with conventional financing. Does everyone believe that just because Joe Idiot loan officer at the local yocal bank says they can’t get conventional financing it is a fact? I believe in common sense financing. If a deal makes sense I know that somewhere out there a conventional lender exsists who will finance it. Does anyone understand that most loan officers are either to lazy to do the right research or to arrogant to believe that they don’t have all the answers? What kind of people are normally attracted to the loan officer profession? If it is at the local bank normally anal retentive number crunchers who aspire to become even more anally retentive underwriters. At mortgage brokers it is normally lazy useless people who have a good way with words but are lost when it comes to the numbers. They are attracted to the money along with the wake up when you feel like it and do as much as you want schedule. In the meantime hard money lenders are making a mint charging 8 to 10 points at 15 to 18% interest rates on short term investments. I’m not attempting to insult hard money lenders. If somebody wanted to borrow money from me when I had little risk and agreed to pay me not only the money back but about 10% more within a short time I’d borrow the sucker money too. Please enlighten me if I am missing the whole hard money thing. Shane
Posted by Marcos on February 08, 2002 at 15:36:20:
It seems like you already have your mind made up Shane. But, I’ll take a stab at this.
I did a house a year ago, where there was a hole from the clouds to the earth. Straight through the roof, through the ceiling, through the flooring, through the subflooring, all the way to the earth underneath the house. In total there was about $20,000 of repairs to be done to it.
Obviously completely uninhabitable. Bought at 30% of FMV.
Tell me how someone with no money does this deal with a traditional bank. The days of 203k programs for investors ended 6 years ago. Basically there is no other way to do the purchase.
From what I’ve seen Bob Beckman offers a good service. Sure, he checks credit. But, wouldn’t you if you were in his situation. Bob doesn’t want to own homes, he wants to lend money. I can’t fault him for that. He doesn’t mind helping others to get these deals done. And when you’re talking the really, really UGLY houses. I challenge you to find a conventional loan where you could get the deal done. If I’m only holding the loans for 3-6 months why do I even care what the interest rate is. It’s negligible in the scope of things. Instant access to unlimited pools of cash is what works. In every market I’ve seen, cash is king.
Now, on the flip side. I know that often I can pick up homes that won’t fit their criteria. Ie, about 70-75% of FMV with only cosmetic repairs. Hence, I do see the other side. But to completely discount HML’s is obviously unreasonable.
Posted by Josh PA on February 07, 2002 at 20:44:41:
I have never used a HM lender… yet. I don’t see where using HM is all that much more expensive than using a mortgage broker. From what I have experienced, brokers charge 3-5 points on these loans anyway, HM lenders charge 7-8 points. The interest rate is significantly higher but you’re not tied in for three years with prepayment penalties like most lenders (other than local banks… from my experience). I have found that the fastest closing I’ve had through a local bank on a purchase/ rehab (in PA) has been over six weeks. Hard money lenders claim they can close in under two. For those investors with poor or new credit, unverifiable income, unestablished local bank contacts, etc., or for those who need to move fast, hard money seems to be a terrific and SIGNIFICANTLY CHEAPER alternative to bringing in an equity partner! I know that I’ll keep Bob Beckman’s website bookmarked.
SHANE I WILL SAY THIS/ hard money can be a value in some cases. I use hard money to buy, quick flip, and rehap properties. I use conventional for my long-term purchases, and sub-prime lenders for my buyers to get financing. So all have value, however, my hard money lenders ( I have 2) only care about the value of the property and the deal. I have never been asked to submit a credit report. I do believe that time is wasted when banks or lenders try to hard money lend without being TRUE HARD MONEY LENDERS. I don’t mind paying the points for the immediate access because I build those cost into my deal to make sure it doesn’t hurt my profit, but I will not pay those fees and have to wait for underwriting on my credit inorder to fit the credit guidelines, and rate class on some matrix. I thought this was HARD MONEY, why am I being Prequalified? So I agree with you on this one Shane, This maybe a case of posing as a HARD MONEY LENDER
Posted by Rich (Ohio) on February 06, 2002 at 17:27:50:
Shane brings up good points. Here’s what a local hard money lender I spoke to last week wanted; 10 pts. paid up front, 18% interest, 3 mo. payment penalty if paid off before 1 yr. It almost knocked me over. Local banks that I’ve spoken with only wanted 10% down on investor property. Yes, I know they move slower but I’m considering all options.
Posted by Brandon (FL) on February 06, 2002 at 11:41:07:
I’m a loan processor for World Savings so I can give you my experience. All the personalities you hit on the nose. Our reps don’t know numbers. They come to me.
Our underwriting time is 72 hours max. I rarely get a conditional loan approval by the next day. It usually takes 2 days. As an investor I couldn’t take this unless I wanted to close a month after. We service our own loans so I guess the reason we take so long is because we have so much business we don’t need to speed our process up.
I haven’t checked out other conventional lenders because I am one of the people that figures that my deals can only be meet by hard money. But, I’m a reasonable man. I’d much rather avoid paying the high points.
Posted by Bob Beckman on February 05, 2002 at 22:16:42:
Shane,
I appreciate your opinion, but you are missing all of the advantages of hard money:
Most banks and lending institutions will not make the type of hard money loans that real estate investors need. They are regarded as too risky, too work intensive (inspectors needed, etc), and too short term for the amount of money. The typical deal from a real estate investor will fall between $25,000-$250,000. This is peanuts to a bank.
Banks and lending institutions are not built for speed. They will typically take 30 days or more to approve a deal. Try bidding on a foreclosure or estate sale with that type of performance. Also, if you are bidding against another investor who can move quickly, who do you think will get the property? Any legitimate hard money lender should be able to work quickly. Rehab Funding can easily turn a deal around within two weeks.
Banks and lending institutions typically have seasoning issues. You must keep a loan out for a certain amount of time. This costs you a lot of money. Assuming that you are a competent rehabber, you should be able to finish your repais within two months, three tops. Each day you hold on to a property costs you extra interest, taxes, insurance, and utilities. A hard money lender like me has no pre-payment penalty. As soon as your done, you can work to sell the property of refinance it.
No bank or lending institution will give you a Six Month-No Pay Plan (which Rehab Funding offers to good credit candidates). Your cash flow situation is truly enhanced.
Most banks need a down payment. 20% is fairly standard. That’s a lot of money out of pocket. Many hard money lenders (Rehab Funding included), require no down payment. And we even loan 100% of the sales price of a property. How many banks will do this for a rehab job?
I hope that this gives you a different perspective.
Thanks,
Bob Beckman
Rehab Funding
I have no verifiable income
My FICO is under 500
ARV = $100k
FMV = $75k
I need a loan of $50k to buy it and fix it up; will you give it to me? Or should I say a bank or mortgage broker.
Probably not, but a hard money lender may look at this person, the deal, and determine if it is worth their time. I don’t think a normal mortgage broker would touch it. Frankly not sure that a HM would either.
Why does everyone seem to believe I don’t see the usefulness of hard money? If you take the time to read all the posts I openly admit I have used and will continue to use hard money when the situation calls for it. My contention is that many people new to investing are using the wrong type of financing for their particular transaction. I further contend that many hard money lenders (and conventional lenders) don’t care if the investor would be better suited elsewhere. They want their profit. Does anyone here believe Bob as a hard money lender would turn a customer away because in his heart he believes the investor would be better suited by conventional financing? My discussion with Bob was a discussion between a hard money lender an a investor using this board. Do you walk into a car dealer and listen to everything the salesman tells you about the car? Bob is a salesman. That is all Bob is. He isn’t advising you about what is best for you, he is selling you a product. Sometimes that product is a good investment sometimes it isn’t. You decide for yourself. Shane
Posted by Bob Beckman on February 06, 2002 at 20:38:49:
Hi Frank,
Good post. My only counter point is that we hard money lenders should only need the underwriting information on the first deal. After all, wouldn’t you want to know who you are lending your money to? After this, I wouldn’t need the information re-sent for future deals.
Good luck,
Bob Beckman
Rehab Funding
Posted by Bob Beckman on February 06, 2002 at 20:41:22:
Rich,
It’s like anything else in life, there are good hard money lenders and bad hard money lenders. It sounds like you spoke with a pretty bad one.
Bob Beckman
Rehab Funding
Posted by Mike G on February 13, 2002 at 22:39:40:
I been reading this thread with interest.
I already commented to one other person and I would like to comment to Bob.
I am not one to argue with people on this board and I agree Hard Money Lenders have a real legit niche. I don’t doubt you offer a good service for those in need, but I must make a few points about your comments that I find incorrect…
I do many loans for under $100K and no lender yet has told me to go away because its peanuts. You seem to imply that banks, lenders or brokers don’t deal with loans under $250K - which is a wrong assumption as most loans done are below this.
Also, the sub prime market has gotten a bit more advanced in recent years and they have many many programs for all types of investors. Many people who a few years ago only had the Hard money route to go can now get funded at reasonable rates. Many sub prime loans can be closed VERY quickly, with the paperwork I could close as early as 2 weeks. I also never had a bank say to me that a loan is too “work intensive”, especially when I do most of the work on each loan.
In terms of speed. I could talk to you on the phone and with my technology and experience I could get you a pre-qual in a few minutes and have a pre-approval faxed to you in less than 30 minutes. Closing, once we got the paperwork from you can be done in less than 2 weeks for B&C deals and 3 weeks for A Paper. I find most of the speed problems are on the client/investor’s end - not ours. So, if you were bidding and needed a GFE and an approval to do the bidding NOW and then needed to close in 3 weeks - a good broker can get it done via sub prime or through conventional lenders…
Seasoning issues are where you guys have the advantage. I have some lenders who will waive some of that, but it depends on various factors. It would always pay to try me (or any good mortgage broker) first, if I can’t do it then I would tell them to go to a hard money lending source or fix the conditions that prevent them from getting funded.
Going to me cost them nothing so it doesn’t hurt.
For most our our lenders its not how long you have to keep the loan outstanding, its if an investor can use the new appraisal value or the old selling price to determine LTV’s and loan amounts. We have lenders for numerous situations so usually I can overcome that but, traditionaly, hard money lenders do have an advantage in terms of being a little more flexible.
I wouldn’t say 20% is standard, not in today’s markets. I would say 90 - 95% is standard. 100% financing on a rehab job using the estimated “post rehab” value is not likely via the conventional way but there are many different scenario’s and deals. I would always tell someone, it does NOT hurt and will ONLY save you money to go to a good mortgage broker first. If you can’t get the deal from him/her than go elsewhere. I would assume you would agree with that as you seem to be an ethical person because a person shouldnt have to pay the high cost from a Hard Money Lender unless they couldnt get funded fast enough or at all.
I must say that there are a lot of deals out there conventional lenders wont touch - either because the FICO is extremely low combining with no cash OR seasoning issues, etc. and in those cases a hard lender would be better.
Like I mentioned in another post, both markets have their niche.
First off I appreciate your input but I kind of feel like I asked “Why would anybody want to go to hell?” and I’m listening to Satan tell me why it is a nice place to retire to. If you don’t mind I’d like to comment on the 5 points you made one at a time. Perhaps if you aren’t to busy you can rebut some of my rebuttals.
First your use of the word most is a hint within itself, you obviousley acknowledge that there are some banks and lending institutions that will. Secondly Banks and lending institutions have been doing these deals for centuries, hard money is a new thing. Sorry I take that back there have been people offering to short term 100% finance investors at ridiculous interest rates for a several points rolled into there loan for centuries as well. The thing is those guys were called loan sharks and had names like Capone and Gotti, when you didn’t pay they usually took all they could and broke a leg or two. It’s nice to see you guys have droped the whole leg breaking thing.
2)An investor should know better than to find a property and then go looking for financing. Most banks and lending institutions will pre-approve their clients for a proprty that falls within certain parameters. Those parameters can be wide or narrow depending on the investor. A pre-approved buyer who finds a property can easily be turned around faster than two weeks. Currently underwriting time for most large lenders is twenty-four hours. Rehab money would require a subject to appraisal but that shouldn’t take more than a week to put together.
Predominantly subprime lenders have seasoning issues, not conventional lenders. Even if you pay a pre-payment penalty to dump a propety that you use a subprime lender to acquire sometimes that fee is still less than the points rate and cost of dealing with a hard money lender.
4)Now this one scares me. Why would a real hard money lender care about good credit? Normally the reason most people are told to go to a hard money lender is because of bad credit. Sounds to me like you are a bank pretending to be a hard money lender so you can charge outrageous points and fees. If you require your clients to credit qualify then why wouldn’t they credit qualify elsewhere? How is my cash flow truly enhanced on my next investment if I walk away with 30% less profit because I was duped into using a hard money lender?
It is a myth that all banks/lenders require 20% down. Some do some don’t. There are many conventional wholesale lenders that don’t operate retail divisions and will finance with much lower downpayments. I will admit that it is difficult to find one willing to do 100% financing on a rehab proerty. However as a serious investor does it make more sense to invest 5 or 10% out of pocket and receive 30% more profit at the end of the transaction or get 100% financing and lose 30% of your profit or more to the hard money guy. Can we agree that if you have been a successful real etate investor and you can’t afford 5 to 10% of your own funds on your next deal you have more problems than hard money can fix?
In closing thanks Bob you have given me a different perspective. Now I know for a fact MORE THAN 50% of people getting hard money would be better suited with conventional financing. Sorry if this response seems argumentative. I don’t mean to sound confrontational I just believe in saying what I mean and meaning what I say. Thanks for your time. Shane
Ok I understand that, but if my score is under 500 and I have no verifiable income how likely is it that I have the 8 to 12 points up front that hard money lenders would require? Even beyond that how many people that are that bad off are looking to invest in real estate? Basically the scenario you presented is about as real as saying, “listen I live in hell and I’m looking to buy a piece of land at the vatican it’s worth 100K but I can pick it up for 50.” My point remains the same most people seeking hard money don’t need it and would be better off with conventional financing. Most real estate investors are hard working people with decent credit. Do you disagree?
Shane
Posted by Redline on February 11, 2002 at 24:34:25:
You’ve stated your points and some of them are valid. I think we’ve all come to realize the usefulness of hardmoney and probably all of us have had experience with traditional financing.
You’re now taking your argument on to another level when you’re accusing Bob of being nothing but a salesman selling people stuff that’s not right for them. That’s a ridiculous assertion.
Bob doesn’t call people up and make them take out loans. If you call Bob for a loan, you might get one. If you’re better off somewhere else, that’s YOUR PROBLEM! It’s called BUYER BEWARE, my friend. It’s like calling a plumber and expecting him to tell you “well you don’t really need me, it’s a simple fix so just go to Home Depot and buy a washer”. This is dreamworld!
It seems you’re grasping at straws because you’ve either got a problem with hardmoney or Bob himself. I don’t agree that it’s anybody’s JOB or RESPONSIBILITY to educate someone else, unless of course you’re hired to be a teacher. I’d like to know how many banks tell their prospective buyers that they can get a better rate down the street. Yah, right!
Posted by Bob Beckman on February 08, 2002 at 23:28:43:
Shane,
As I previously stated, I respect your right to voice your opinion. That’s what this website is for. However you are off base with your characterization of me. I am not a salesman. I am a private money lender. I offer a service, and real estate investors seem very happy to use my money to purchase properties. When I speak in a positive way about my loan programs, it is because I truly believe that I offer a very valuable service and opportunity to REI’s. When I don’t feel that there is a good fit with a certain person, I do turn them away. But I truly am proud of the amount of people that I have helped achieve their dreams in real estate. So please, share your opinions, but please stop impuning my character. You’ve never met me or used my service.
Bob Beckman
Rehab Funding
Re: Advantages of Hard Money - Posted by Bob Beckman
Posted by Bob Beckman on February 06, 2002 at 11:49:54:
Shane,
There are so many points that you raise that I disagree with, that I wouldn’t know where to start. Clearly, your mind is made up, and you believe that hard money is an evil and unnecessary thing (accept for extreme cases). Let me ask you, have you done many rehab projects? From your comments, it seems that you are relatively new and are looking for the right way to proceed with regard to financing. All that I can say is that there are many experienced, and saavy real estate investors (with good credit-many who read this very board)who have found that banks and lending institutions have all of the draw backs that I outline in my original post, and that they have been very successful with hard money because of the speed, flexibility, and superior cash flow possibilities that come from using the right hard money lender.
I agree that you should not use hard money. With little or no experience, you have decided that it is bad, and there is no doubt in my mind that you would be suspicious and unhappy with any hard money lender that you use. I suspect that if you made a handsome profit on a real estate deal that was in part purchased because of the speed and flexibility of a hard money loan, you would waste time lamenting your fees, rather than celebrating your wise and profitable investment.
I have no desire to argue with you. Creonline is for discussion and opinions, and you are certainly entitled to yours. I guess that maybe you should first prove that you won’t lose deals working and waiting for a conventional bank, and prove that you can get similar terms (i.e. 100% financing, no pre payment penalty, Six Months-No Pay, etc.) before you speak with such certainty.
Good luck to you,
Bob Beckman
Rehab Funding
