Post on 30-Mar-2018
Table of Contents
Introduction …………………………………………………… 2
What is hard money ……..……………………………………... 3
Who uses hard money …………………………………………. 4
Where to get hard money loans ………………………………... 6
Hard money lending today……………………………………... 6
How to apply for a hard money loan …………………………... 8
Why use hard money loans …………………………………..... 15
Hard money loan tips …………………………………………. 21
Conclusion ……………………………………………………. 28
1
Introduction
If you a received a copy of this 28-page report, you just moved a step closer to
boosting your real estate investing career with the help of hard money loans.
Although hard money loans are considered great “deal savers” by many entrepreneurs
and property investors, there are some who are still reluctant to take advantage of the
benefits that these non-traditional loans bring. Because of the misconceptions of
many people on hard money lending, they would rather use personal savings or
traditional loans to finance a real estate deal.
After reading this handbook, you will discover why hard money is the perfect type of
financing for your business deals, especially real estate investments. You will also learn
all the things you need to know about when getting a hard money loan.
2
What iis Hard MMoney?
Hard m
small len
compan
determin
is asset-
that a p
money is a t
nding com
nies, and c
ned by asse
-based, the
property, o
type of cre
mpanies inst
redit union
essing the v
credit sco
or “deal,” i
ative finan
tead of ins
ns. It is p
value of th
re of the b
is good, th
ncing usuall
titutionaliz
rimarily as
he collatera
borrower is
he hard m
ly provided
zed lenders
sset-based
alized prope
s not impo
money loan
d by private
such as b
and a loan
erty. Becau
ortant. If a
will be p
e investors
anks, mort
n’s eligibili
use hard m
lender beli
rovided to
s and
tgage
ity is
oney
ieves
o the
borroweer.
Th
pro
Ha
loa
a b
fas
to
his type of
ovide long-
ard money
ans, or sho
borrower
st solutions
close a bus
f lending is
-term finan
is usually
ort-term loa
to obtain
s to a finan
siness deal
s not mean
ncing soluti
used as br
ans, that en
temporary
cial problem
quickly.
nt to
ions.
ridge
nable
y but
m or
In real
property
valued a
lender. S
estate inv
y’s after re
at $100,000
Some lende
vesting, har
paired valu
0 in good c
ers go as hi
rd money
ue (ARV).
condition, t
igh as 70%
lenders ge
That is, if
the borrow
% of the AR
enerally pr
the proper
wer, can usu
RV. Interest
rovide arou
rty offered
ually get $6
t rates, on t
und 65%
d as collater
65,000 from
the other h
of a
ral is
m the
hand,
3
usually r
for finan
months
lender. T
to repay
range from
ncing fees.
to three y
This setup
y his loan an
m 10% to 18
The repay
years, depe
provides s
nd they hav
8% and len
yment perio
ending on t
security for
ve to forec
nders may c
od is relativ
the agreem
r hard mon
lose the co
charge two
vely shorter
ment betwe
ney lenders
ollateralized
to five poi
r and it ran
een the bor
in case the
d property.
ints of the
nges from t
rrower and
e borrower
loan
three
d the
fails
Althoug
borrowe
matter,
structur
Who U
Typicall
borrowe
fit their
those w
standard
sponsor
Fannie M
gh obtainin
er, securing
can be extr
ed properly
Uses Har
ly, hard mo
ers when a
r needs. Th
who cannot
ds set by
red financi
Mae and F
ng hard m
g hard mo
remely ben
y.
rd Money
oney loans a
traditional
hey are als
comply w
banks or
ing institu
Freddie Mac
money loan
oney for a
neficial to b
y Loans?
are pursued
l loan does
so pursued
with the len
r governm
utions such
c. For insta
ns can be
real estate
both the bo
e quite ex
deal, or a
orrower an
pensive fo
any busines
nd the lend
or the ave
ss deal for
er if the de
erage
that
eal is
d by
not
d by
nding
ment-
h as
ance,
4
a real estate investor may opt to use hard money if he can’t qualify for a conventional
loan. He may also use this type of financing if the bank or the mortgage company is
taking too long to process his loan application.
A hard money loan is a great financial tool for those who, due to a number of reasons,
can’t or don’t want to qualify for conventional financing. Investors and entrepreneurs
with poor credit scores, bankruptcies, no verifiable income, or too much debt are
encouraged to use hard money. Investors who are just starting out and are short of
investment capital can also benefit from this type of non-traditional lending.
In particular, hard money is extremely useful for real estate investors. Many real estate
entrepreneurs use this method of financing, especially if they have little time to close a
deal. Hard money loans are also ideal for property owners with unfinished or
undeveloped properties and are in need of short-term financing. In addition, hard
money loans can be used for both commercial and residential real estate transactions.
Aside from obtaining real estate, hard money loans can also be used for building and
land acquisition, real estate development, second mortgage, non-bankable
transactions, foreclosure bail-out, and emergency financing, among others.
5
Wheree to Get HHard Monney Loanns
As men
are the u
money l
tioned earl
usual sourc
loan by visi
lier, private
ces of priv
iting the lo
e investors
ate money
cal bank or
and small l
. That bein
r governme
lending com
ng said, a b
ent-run len
mpanies wi
borrower w
ders.
ith huge ca
won’t get a
apital
hard
To secu
experien
sources
willing t
however
ure hard m
nce workin
of lenders
to fund re
r, a borrow
money loans
ng in the
s because
eal estate p
wer may go
s, a borrow
lending in
they work
projects. If
directly to
wer can ap
ndustry. H
k directly w
f he doesn
the private
proach a m
ard money
with privat
’t require
e lender.
mortgage b
y brokers
te investor
the service
broker who
are also g
s who ma
es of a bro
o has
good
ay be
oker,
When ap
have a g
have an
Hard M
pproaching
good amou
exit strateg
Money L
g hard mon
nt of equity
gy in case s
Lending T
ney lenders
y in the pro
something g
, however,
operty offe
goes wrong
borrowers
ered as colla
g with the d
have to en
ateral. They
deal.
nsure that t
y should al
they
so
Today
Man
busi
boom
the
in t
ny hard mo
iness in t
ming real
recent year
the hard m
oney lende
the late 1
estate mark
rs have see
money len
ers went ou
1990s due
kets. Howe
en a resurg
nding busin
ut of
e to
ever,
gence
ness.
6
Hard money lending has reestablished itself as an important aspect in real estate
investing.
As many banks and institutionalized lenders left the playing field or tightened their
underwriting guidelines, the demand for hard money loans has surged dramatically in
the last few years, prompting non-traditional lenders to return to the market. A recent
study by the Mortgage Bankers Association showed that over 90% of lenders that
took part in the survey have or plan to return to the business in 2010.
One of the reasons why the hard money lending business is showing an increase in
activity and enjoying a boost in reputation these days is that borrowers are more
comfortable with the rates and fees being charged by hard money lenders. Interest
rates and fees have dropped remarkably to the point that they are almost the same or
close to the rates being charged by banks, mortgage companies, credit unions, and
other traditional lending institutions.
7
How tto Apply ffor a Harrd Moneyy Loan
to secu
If you’re
surely w
So befo
property
profit?”
and seek
To help
real esta
the basi
when in
uring a hard
e not convi
won’t be ab
ore you ev
y that is su
If you are
k funding f
you decide
ate investor
c formula r
nterests, clo
d money loa
inced that
ble to convi
ven bother
urely profit
very certai
for it.
e on this, b
rs when de
rehabbers a
osing costs,
65% A
an.
1.
Inv
Find a C
vestment
Convincingg Real Esstate
The
mo
lend
Sim
e procedur
ney loan
ders thoug
mply follow
es for appl
vary per
gh use the
these steps
lying for a
lender. M
process be
s and get cl
hard
Most
elow.
loser
the deal yo
ince a hard
r looking
table. Ask
in that this
ou will need
d money len
for a cred
yourself m
s specific in
d financing
nder to pro
ditor, look
many times,
nvestment w
g for will yi
ovide the f
first for
“Will this
will lead to
eld profits,
funding as
an investm
s deal bring
o gains, the
, you
well.
ment
g me
en go
below is a s
etermining
and other i
and other
simplified f
a real esta
investors u
expenses a
formula use
ate investm
se and it co
are calculate
ed by rehab
ment’s profi
ould be mo
ed.
bbers and o
itability. Th
ore complic
other
his is
cated
ARV - Exppenses = Puurchase Priice
8
For exam
raise its
for othe
mple, a fix
price to $
er expenses
xer upper m
100,000 yo
s. In this ex
may be sold
ou need to
xample, the
d for $100,
spend $15
e computati
,000 once r
5,000 for re
ion will be:
repairs are
epairs and
completed
another $5
d. To
5,000
$65,000 - $$20,000 = $$45,000
In this c
rehabbe
interests
beyond
money l
getting a
case, the m
ed house at
s because y
that maxim
lenders wil
approved f
maximum o
$100,000,
your total ex
mum offer,
ll notice th
for a loan.
offer you ca
you’ll earn
xpenses is
, then you
his and will
an give to t
n $35,000 m
$65,000). I
probably f
spot it as
the seller is
minus other
If the asking
found an “u
a mistake.
s $45,000 (
r expenses l
g price of t
unconvinci
You can s
(If you sold
like closing
the seller is
ing deal.” H
say goodby
d the
g and
s way
Hard
ye to
If you s
the lend
and poin
stumble in
der as well
nts due.
the decisio
. The first
on-making
step to ac
stage, you
ctually getti
be
cer
“Is
reh
mo
tha
their
u are likely
ing a hard
eing able t
rtain inves
s this ha
habbing?”
oney lende
at will yield
r money an
to fall befo
money lo
to determi
stment is w
andyman
Keep in m
ers will onl
d profits so
nd give the
fore the eye
an approve
ine wheth
worth mak
special w
mind that
ly finance d
you can re
em the inte
es of
ed is
her a
king.
worth
hard
deals
eturn
erests
9
2. Find a Reliable Hard Money Lender
There are various ways to search for a lender in your area. You may want to ask
friends and colleagues for referrals or publish newspaper ads. You can also do it
online, which is much easier. You can visit www.RehabHardMoney.com, which
contains the largest database of hard money lenders across the United States.
Once you’ve found a lender, contact it (or him/her if it’s a private money investor)
and inquire about the requirements. Usually, they will need the documents mentioned
in the succeeding portion of the handbook, the first of which is the executive
summary.
3. Write an Executive Summary and an Exit Strategy
An executive summary is simply a summary of the investment you wish to make with
the help of the hard money loan. Remember two words when doing it: “short” and
“details.” A single paragraph of a few sentences can actually serve as a good summary.
Do not burden hard money lenders by writing a novel. They’d buy a book if they
wanted long literature. Plus, think of it this way: If you had to read three stories in a
day, in a few hours, which one will you read first, the long, the medium, or the short
one?
10
The exe
the deta
ecutive sum
ails that you
mmary mus
u must inclu
st be filled
ude in the
with detai
summary:
ils despite iits concisenness. Heree are
• AAmount of loan needeed
• R
• T
The firs
from an
property
develop
The oth
you will
example
market f
your op
4. Fill O
Reason for bborrowing money
Timeline of f the investmment
st two term
n existing l
y, how mu
ment on it
ms are well
lot, the tim
uch you’ve
.
self-explan
meline mus
already inv
natory. If yo
st include t
vested in it
ou are borr
the date or
, and when
rowing to b
r year you
n you plan
build a buil
purchased
to do the
lding
d the
next
her part of
l use to get
e, what wou
for a few m
tions with
Out a Loan
f your exec
t out of the
uld you do
months? If
experts or
n Applicat
cutive summ
e investme
o if the hou
you don’t
with more
tion
mary is you
nt in case y
use you reh
have a clea
experience
Nex
lend
rele
ur exit stra
your initial
habbed is n
ar exit strat
ed investor
xt, secure
der. Make s
vant infor
ategy. This
l plan does
not sold afte
tegy, make
rs.
is the me
s not work.
er sitting in
sure to dis
thod
. For
n the
scuss
an applica
sure you d
rmation. Y
ation form
do not miss
You can a
m the
s any
avoid
11
hassles like having to resubmit the form by properly reviewing your application before
giving it to the lender.
5. Include a CMA and a Lot of Pictures
A comparable markets analysis (CMA), or simply comps, is a good way to support the
ARV you established in your application. If you’ve already performed your own
comps on the property you want to buy, send it to the lender as well. Make sure it has
lots of pictures of the actual property, the comparable properties, and the
neighborhood in general. Also, you may want to ask the lender how he or she wants
to receive the information – some prefer printed documents while others prefer the
convenience of online media like emails and photo- and video-sharing sites.
6. Submit a Contractor’s Estimate
If you’re planning to rehab a property, and most likely you are, be sure to include a
contractor’s estimate. This document will support your estimate on repair expenses.
The estimate, which should be easy to understand and in writing, will give the lender
an idea on why you need such amount for repairs. Also, ask your contractor to draw a
timeline of the repairs.
12
7. Backk Up Your Bid
it will b
“creditw
your “as
• R
re
b
• C
k
d
H
w
sp
e approved
worthiness.”
ssets” to en
Real estate p
eal estate t
boats and pl
Cash – Thi
know how t
default in ca
He will be r
will be able
pecified tim
d. That doe
” So, to ba
nsure that y
properties –
that has su
lanes, again
s is one w
to handle m
ase some em
relieved to k
e to pay f
meline.
esn’t mean
ack up you
you appear
Most
to see
evalua
money
the pr
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n though th
ur bid, prov
more cred
traditional
e a good
ate borrow
y lenders, w
rospective d
and a pote
hat you don
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l lenders li
credit sco
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what is mo
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ential mon
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nder with i
ike banks w
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information
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hard
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ubstantial e
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as they have
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include o
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Simply put,
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know that
for holding
wing the h
also eases th
s happen du
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g costs, in
hard money
he lender’s
uring the c
ome mone
n case the
y lender th
s worries of
ourse of yo
ey because
project go
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f you endin
our investm
that means
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tually
ng in
ment.
s you
d its
13
• E
b
h
ca
ex
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Experience
because of t
have made g
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xperience.
xperience.
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proofs of y
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ers are able
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For beginn
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can do is
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ners thoug
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e financing
usiness for
gh, you nee
if you don
r with som
g from len
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d not fret.
n’t have eno
meone who
nders
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ough
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• C
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Credit histo
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rower. If it’
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e able to us
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8. Subm
Trust
mit All D
Documentts and BBuild
atting with
When
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the lender
you compl
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and submit
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14
loan. Ta
or return
if you in
Prioritiz
alk about yo
n them pro
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our plans a
omptly in c
the applica
ng docume
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Why UUse Hardd Money LLoans
Hard m
very pop
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ments.
ll be a CA
s have disti
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ing hard m
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This gives y
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t advantag
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paid in full
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Since yo
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auctions
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he property
e necessary
s, wherein b
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When pur
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banks prefe
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chasing a b
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close the d
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ore chance
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s who are a
s of closing
d home, fo
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same is als
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or example,
nce they’d b
o true dur
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you’ll be tre
the lender
believe that
ring foreclo
eated
r that
t you
osure
You cann Close Faast
applicati
to two w
ion faster.
weeks.
In generall, hard mon
Another
money i
fast. Yo
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loan app
the oth
ney loan ap
r importan
is that it al
ou can secu
as 24 hours
tween 30 a
plication. H
her hand,
pplications
nt advant
llows you
ure a hard
s! Most trad
and 45 day
Hard mon
can pro
are approv
tage of
to close a
money loa
ditional len
ys to proce
ney lenders
ocess a
ved within
hard
deal
an in
nders
ess a
s, on
loan
n one
16
And sin
deal and
flip the
rehabbe
in the pr
nce hard mo
d move on
house to
er, you can
rocess.
oney loans
to your ne
o an end-b
immediate
will make
ext project.
buyer and
ly work on
you a cash
So if you’
concentra
n the prope
h buyer, yo
re wholesa
te on you
rty, thus sa
u can imm
aling, you c
ur next de
aving you ti
mediately clo
an immedi
al. If you’
ime and mo
ose a
iately
’re a
oney
Rememb
common
deal ver
want to
investor
to close
ber that ho
n knowledg
ry quickly.
sell their p
rs who are
the deal. T
ome sellers
ge in the r
Homeown
properties a
cash buyer
They know
prefer inv
eal estate in
ners whose
as soon as
rs compared
that deals
vestors who
ndustry tha
e houses a
possible a
d to those
could fall t
o can close
at nearly al
are under
and they are
who rely o
through dur
the deal fa
ll sellers wa
foreclosure
e more like
on financing
ring long c
ast. In fact,
ant to close
e, for exam
ely to deal
g from a le
losing peri
, it is
e the
mple,
with
ender
ods.
Your Crredit doessn’t have too be Perfect
A h
you
me
cre
Ad
the
hard mone
ur credit h
an that yo
dit score
mittedly, ti
e housing b
ey lender w
history, bu
u need to
e to ob
imes have
bubble burs
will often re
ut that do
have a pe
tain a l
changed s
st. Nowada
eview
esn’t
erfect
loan.
since
ays, a
17
lot of lenders (but not all) will check your credit history. So if you have bankruptcies,
liens, or collections, you need to provide the necessary documents for those items if
the lender requires you to do so.
The important thing to remember is that hard money lenders do not solely base their
decision on your credit history. So even if you have a “challenging” credit score, there
is still a very good chance that you will get a loan. In fact, your credit report does not
matter if you’re in the business of wholesaling houses. Your credit history will not be
reviewed since you’re only buying the assignment contract, and not the property itself.
Lenders evaluate the end-buyer’s credit report and not the wholesaler.
Of course it does help if you have a good credit score. While hard money lenders do
not exclusively rely on your credit report to approve your loan, having a good credit
history would tell them that you are likely to repay the loan, thus increasing your
chances of securing the loan.
Lenders Look at the Value of the Property, not your Income
The primary reason why your credit history is not decisive when borrowing hard
money loans is because lenders base their decisions on whether to approve the loan
on the value of your property or your deal. Simply put, if the lender believes that it
will profit from your deal, it will lend you the money. Lenders look at the ARV of the
property, not your income, to qualify a loan.
18
A comm
incomes
The mo
profitab
even ne
would b
loan, the
mon miscon
s in order t
ost importa
ble deals on
ed to have
bring profit
e lender wi
nception am
to secure lo
ant thing
n the table.
a job to se
ts to both
ill provide y
mong real
oans from
when borr
You don’t
ecure a har
you and th
you the mo
estate inve
hard mone
rowing loa
need to ha
rd money lo
he lender. A
oney to clos
estors is tha
ey lenders.
ans from l
ave a large i
oan. All yo
As long as
se the deal.
at they nee
This is abs
lenders is
income. In
u need is a
the house
.
ed to have l
solutely un
to bring g
n fact, you d
a great deal
e qualifies f
large
ntrue.
great,
don’t
l that
for a
You can
conditio
$100,00
the amo
Hard m
the ARV
occasion
n Borrow
on,” or the
0 in good
ount needed
money lende
V. As stat
nally, some
the Purch
ARV. For
condition.
d to purcha
ers, on the
ted earlier,
e lenders co
ase, Repa
r example,
Traditiona
ase the pro
other hand
lenders ge
ould lend yo
ir, and Cloosing Costts from Leenders
Ano
lend
purc
state
the
price
a property
al lenders su
other big a
ders is tha
chase, repa
ed earlier,
amount t
e of the
y that is pe
uch as ban
advantage o
t they can
air, and clo
hard mone
they will r
e propert
erfect for r
nks will pro
of hard mo
n lend you
osing costs
ey lenders
release on
ty “in g
rehabbing c
obably lend
oney
u the
s. As
base
the
good
costs
d you
perty.
d, can lend
enerally wi
ou up to 70
you up to
ill loan 65%
0% of the A
$65,000, w
% of the
ARV.
which is 65%
ARV altho
% of
ough
19
So if you
for closi
your har
u bought th
ing costs, y
rd money l
he house f
you basicall
oan covere
for $40,000
ly did not s
ed the purc
, spent $20
spend a sing
hase, repai
0,000 for re
gle dime ou
r, and closi
epairs, and
ut of your
ing costs.
another $5
pocket bec
5,000
cause
You cann “Negotiiate” with Hard Monney Lendeers
A major
because
such, th
Since th
to tradit
handle r
r reason w
of the latt
hey can also
hey are mor
tional lende
real estate l
why real es
ter’s flexib
o change o
re flexible,
ers such as
loans.
tate invest
ility. Hard
or bend the
negotiatin
banks, wh
tors prefer
money len
em, depend
ng with har
hich often h
dealing wi
nders creat
ding on the
d money le
have panels
ith hard m
te their ow
e deal they
enders is ea
s or proces
money lend
wn rules, an
are examin
asier comp
sing teams
der is
nd as
ning.
pared
that
Banks fo
never ge
lenders.
loans in
follow certa
et that loan
There is a
this type o
ain procedu
n. On the o
also less red
of financing
ures and if
other hand,
d tape whe
g are proce
you don’t
, you can n
en dealing w
ssed faster
meet all th
negotiate or
with hard m
and easier
heir require
r haggle wi
money len
.
ments, you
ith hard mo
ders that’s
u will
oney
why
You cann have muultiple hardd money loans
Rea
loan
diff
al estate inv
ns because
ferent sets
vestors pref
e they can
of lender
fer hard mo
n borrow f
rs at the s
oney
from
same
20
time. H
investor
ratio is n
Hard mone
rs can have
never affec
ey lenders
e multiple l
cted.
do not r
loans with
report to c
different le
credit agen
enders beca
ncies, whic
ause their d
ch means
debt-to-inc
that
come
This asp
look for
up to tw
you’re o
that you
pect of har
r deals with
wo mortgag
overextende
u can no lon
rd money le
hout having
ges from co
ed, you wil
nger do mo
ending is v
g to worry
onventiona
ll not be ab
ore deals.
very benefic
about finan
al lenders b
ble to secu
cial to inve
ncing. Mos
before they
ure convent
estors as it
st people w
get overex
tional loans
allows them
will probably
xtended. An
s, which m
m to
y get
nd if
means
As men
loans. T
ntioned earl
This means
lier, your d
that you ca
debt-to-inco
an have as m
ome ratio w
many deals
will not be
s as you wa
e affected b
ant using th
by hard m
his type of l
oney
loan.
Hard MMoney LLoan Tipss
Tip #1:: Don’t Woorry aboutt the Intereest Rate
P
m
in
le
18
th
Perhaps the
money loan
nterest rate
nders cha
8% interes
hese rates
e main dra
ns is their
e. Normally
arge betwe
st rates. A
seem absu
awback of
perceived
y, hard mo
een 10%
At first gla
urdly high.
hard
high
oney
and
ance,
But
21
when taken into context, you’d realize that these rates are not really that high
considering the risks that lenders take. Remember that these lenders provide loans
even to investors who don’t have jobs. They are taking huge risks and a 12% or 16%
interest rate sounds fair to all parties concerned.
You should also consider that these rates are yearly rates. So at 12%, you’re basically
paying just 1% per month. Just think of hard money as quick and easy access to
capital that would allow you to profit from a real estate project. Hard money loans
also allow you to focus on the most important aspect of real estate investing, which is
finding great deals. Just think about it, how many offers could or would you make if
you never had to worry about the money?
Tip #2: Get Pre-qualified
Getting pre-qualified is one of the best ways to make fast cash when investing in real
estate. Getting pre-qualified simply means meeting with lenders and knowing what
they are looking for. Determine what they are looking for and go find it for them. It
would be way easier for you to close deals if you’re pre-qualified as you can offer all
cash to home sellers.
Getting pre-qualified is the best thing that you can do if you don’t have a prospective
deal. Instead of bringing a good deal to an investor, you’ll do the reverse: find out
what properties they lend to and go find it for them.
22
So befo
get pre-
you can
re you star
qualified. Y
show to se
rt making o
You can ev
ellers that y
offers on h
ven ask for
you have th
houses, mee
a proof of
he cash to b
et your loca
f funds lette
buy their pr
al hard mo
er from the
roperties.
oney lender
e lender so
r and
that
Tip #3:: Build Sollid Relatioonships wiith Local HHard Monney Lenderrs
It is imp
in your
deals. In
you’ve g
much tim
local len
portant tha
local mark
n fact, mo
got a good
me to proc
nders.
at you build
ket can pro
st local len
d or bad d
cess a loan
d a good ra
ovide you w
nders could
deal in you
and they h
apport with
with valuab
d just driv
ur hands. L
have less kn
h local hard
ble inform
ve by a hou
Larger nati
nowledge o
d money le
ation and
use and te
ional comp
on your are
enders. Len
advice on
ell you whe
panies take
ea compare
nders
your
ether
e too
ed to
You sho
with sev
lenders
network
benefit a
ould also n
veral local
runs out o
kers as they
a lot from t
ever limit y
lenders, yo
of funds to
y are active
these lende
yourself to
ou will hav
finance yo
e players in
ers if you b
just one le
ve more op
our project
n your loca
uild long-te
ender. By c
ptions for
t. Hard mo
al real estat
erm relatio
creating soli
loans in c
oney lender
te commun
onships with
id relations
case one of
rs are also g
nity, so you
h them.
ships
f the
great
u can
Tip
Pen
Wh
ask
p #4: Dete
nalty
hen borrow
the lende
ermine the
wing hard
er what th
e Pre-paym
money, alw
he pre-paym
ment
ways
ment
23
penalty
a lender
penalty
the pre-
is, if there
r states tha
is usually e
payment o
is any. A p
at you hav
expressed a
r a certain
pre-paymen
e to pay a
as a percen
number of
nt penalty is
penalty if
ntage of the
f months w
s a provisio
f you pay o
e outstandi
worth of int
on in the co
off the loa
ing balance
terest.
ontract whe
an entirely.
e at the tim
erein
The
me of
For exa
sell the
all hard
that hav
mple, if yo
house in th
money len
ve this prov
ou borrowe
hree month
nders requir
vision.
ed a six-mo
hs, you’re s
re a pre-pa
onth loan d
still require
ayment pen
deal but yo
ed to pay th
nalty but yo
ou manage
hree month
ou should a
d to rehab
hs interest.
avoid loan d
b and
Not
deals
Tip #5:
What m
much in
directly.
: Ask Que
makes a dea
nformation
stions
al attractive
as you can
e? How do
n. You will
D
M
yo
If
ch
I make ou
only get ho
Do not be a
Most hard
ou as much
f you wa
hances, ask
ur deal mor
onest answ
afraid to a
money len
h as you w
ant to m
k your le
re enticing
wers if you a
sk your len
nders will
want to bor
maximize
ender outr
to you? G
ask your le
nder.
lend
rrow.
your
right.
Get as
ender
24
Tip #6:: Get to Knnow your LLender
Every h
wasting
make a
get to kn
business
commer
hard money
your time
short list. F
now them
ses? What
rcial proper
y lender ha
with a lend
First, collec
better. Wh
kind of d
rties or is it
as his own
der that ma
ct the nam
here do the
deals appe
t the other
n “sweet sp
ay not be a
es of lende
ey live? In w
eal to them
way aroun
pot.” If you
able to prov
ers that app
what locatio
m? Do the
nd?
u do not w
vide you fa
peal most t
ons do the
ey favor r
want to end
avorable res
to you. Sec
y conduct
residential
d up
sults,
cond,
their
over
Tip #7:: Do not MMisrepreseent your Prroperty Vaalue
As we a
will let
Lenders
property
Tip #8:
all know, h
you borro
s will do
y.
: Your Cre
hard money
ow financin
everything
edit Repor
y loans are
ng based o
in their p
rt Tells a S
collateral-
on conserv
power to
Story
It
co
fo
re
re
-based lend
vative value
determine
ding. Hard
es. This en
the true
money len
nsures secu
value of
nders
urity.
your
t’s not a se
ommon rea
or hard loan
eport. How
ealize that
cret that o
asons why
ns is due to
wever, bor
lenders
ne of the m
individuals
o a weak c
rrowers sh
will use
most
s opt
credit
hould
your
25
credit sc
story ab
core to und
bout your in
derstand yo
ndividual d
our charact
disposition.
er and you
. Have you
ur repaymen
u been divo
nt capabilit
orced? Hav
ty. It also te
ve you lost
ells a
your
job?
Tip #9:
Studies
strategie
environm
wish to
: Buy and
have prov
es most inv
ment, getti
buy, hold,
Sell; don’t
ven that sin
vestors use
ing refinan
, and refin
t Hold
nce last yea
is a quick r
ncing on an
nance for y
ar, among t
rehab of a p
n investmen
our exit st
the most s
property. G
nt property
trategy, len
successful a
Given the p
y may be d
ders may v
and easiest
present ban
difficult. If
view
t exit
nking
f you
this mmove
with gr
e
Tip #10
If you in
that the
neighbo
hold on
about th
eat skepticis
0: Ensure
ntend to re
e outcome
orhood. An
n to your h
he neighbor
sm unless y
that your P
ehab your p
will have
n uncompe
house, the
rhood befo
you have go
Property i
property, y
the “same
etitive prop
more mon
ore taking a
ood credit and strongg financials..
is Competi
you need to
e standard
perty may
ney you w
itive
o make it c
ds” as the
be difficul
waste. Con
competitive
other prop
t to sell. T
e in such a
perties in
The longer
a way
your
you
any action.
T
J
g
d
Tip #11: Bu
Just like w
good re
duct a thorough reseearch
uild a Net
with any o
elationships
twork
other busin
s are
ness,
very
26
important in real estate investing. The secret to building a reliable network and
generating huge profits is by acquiring long-term relationships. This does not only
apply with hard money lenders but also with contractors, agents, fellow investors, etc.
If you make a credible reputation in the business and if you have successful people in
your team, hard money lenders will find you.
Tip #12: Know your Market
This is important because knowing your market will increase your chances of earning
profits that you can use to repay your loans. Let’s say you used hard money to finance
your rehabbing project. If you rely solely on the money that you make after selling the
property, you have to ensure that your house sells fast. This can only be possible if
your familiar with your market. Start with a thorough research or survey. You may
drive around the neighborhood and ask residents about the type of properties that
appeal to them. Find out about their spending capability. How much are they willing
to spend? What is their source for financing? You may also ask help from your fellow
property investors. Ask them about the average time it takes before properties are
closed. Determine what house features appeal to buyers.
Tip #13: Get Started
A lot of people are interested in real estate investing but they never got started
because they think that they need tons of money to launch a career in this business.
27
28
They couldn’t be more wrong. You now know that you don’t need money to get
started in investing in real estate, and the best way to do that is to find local hard
money lenders, find out what kind of properties they lend to, and go find that
properties for them. Always remember that with the help of hard money lenders, you
don’t need money to buy a house.
Conclusion
Hard money loans can do wonders for your real estate investing career. In fact, a lot
of real estate investors credit part of their success to hard money lenders. If you know
how to effectively use hard money loans, you can not only jumpstart your career, but
be successful as well. By following the steps, tips, and other information provided in
this handbook, you can have the confidence to approach hard money lenders and
bring them good deals.
At a time when hard money seems to be the “king” of the real estate market,
developing solid relationships with lenders could be the fastest and easiest way for you
to earn tons of cash investing in real estate. Remember, you don’t need to have a job,
you don’t need to have a good credit report, and you don’t need to have capital to do
business with hard money lenders. So find a lender in your area today and invest your
way to success using hard money loans.