Hard Money Lenders
These are often used to finance projects that are unconventional, great deals, or where money is needed quickly. Typically hard money lenders will lend 50-70% of the value of the property regardless of the sales price (unlike banks). They will typically close loans in 2–7 days. Credit scores and income are often overlooked by hard money lenders, however they may ask to see a business plan or exit strategy for the project. They may get paid via points (e.g. 1 point equals one percent of the total amount borrowed), interest rate (10-20% per year is common), and an equitable interest. These will vary based on the size of the project and the agreed upon contract. Hard money lenders are collateral based and typically require first position on the property.
True hard money lenders do not charge any front fees whatsoever; nothing for appraisals, app fees, credit fees or anything else. One common secret of many hard money lenders is that they want the property for themselves, and thus do not care if the borrower is unable to continue with their payments. After one or two missed payments, the hard money lender will file foreclosure proceedings and usually add the reclaimed property to their portfolio. They also do not care about exit strategies.
Read more about this topic: Creative Real Estate Investing
Famous quotes containing the words hard, money and/or lenders:
“Some hard and dry book in a dead language, which you have found it impossible to read at home, but for which you still have a lingering regard, is the best to carry with you on a journey.”
—Henry David Thoreau (1817–1862)
“I’m a very smart guy. I haven’t a feeling or a scruple in the world. All I have the itch for is money. I am so money greedy that for twenty-five bucks a day and expenses, mostly gasoline and whisky, I do my thinking myself, what there is of it; I risk my whole future, the hatred of the cops ... I dodge bullets and eat saps, and say thank you very much, if you have any more trouble, I hope you’ll think of me, I’ll just leave one of my cards in case anything comes up.”
—Raymond Chandler (1888–1959)
“Gratitude among friends is like credit among tradesmen: it keeps business up, and maintains commerce. And we pay not because it is just to discharge our debts, but that we might the more easily find lenders on another occasion.”
—François, Duc De La Rochefoucauld (1613–1680)