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Real estate money and access to quick cash is the key for any real estate investor. Having cash to buy properties is the life blood of your investment business. But where does this money come from in the post-credit bubble market place?

Real estate investors are looking for better financing options as the old traditional sources of money are becoming more difficult to find and qualify for than in the past.

Here is a quick look at some of the traditional sources of real estate capital and the pros and cons of each and a new and better source of money in this market place.

Mortgages Loans: Most real estate investor became very accustom to borrowing money from the local bank or saving & loans. Yet in the post-bubble market place these sources of real estate money have all but dried up. Banks are no longer offering subprime loans or no-doc loans. Even when they do loans they want excellent credit scores over 700, sizable down payments in the 30% to 40% range and quality properties with little or no rehab involved. This isn’t always possible for real estate investor and especial if you are just starting out as a new investor. These loans are also very costly for investor with high interest rates and lots of closing cost. Not only do you need the 30% to 40% down but the closing cost can be several thousands dollars and dramatically reduce your profit upon sale of the property.

Hard Money Lenders: Hard money lenders were very popular for real estate money despite the high cost. However even hard money lenders are having problems getting money to lend in the post-credit bubble and as a result many markets no long have hard money lenders in business. Hard money loans have always had several drawbacks including only lending to about 65% of the home’s value and you have to come up with the balance of the money. In addition, the fees to obtain these hard money loans are a crushing at 5 to 10 points up front and generally 5 points on the back end. The net effect of all these coast is real estate money that will cost in the 20%+ range and you still have to come out of pocket for almost 1/3 of the purchase and rehab costs.

Private Lenders: Private lending, through individuals and not through banks, is a much better option for real estate money in this new market place. Private lenders are willing to negotiate with you for both the terms and amount of the loan that will both fit the deal and there needs. This way both parties are getting what they want and need out of the lending transaction.

Private lenders can do either as a first mortgage loan where they put they put in senior dollars or second mortgage where they are subordinate (behind) another bank or other lender. The cost of private lending is very low as they are almost no closing cost and the interest rates are in the 9% to 15% range with no back-end fees.

Do you want to learn more about Private Lending and how it can transform your real estate investing business then please click here ===> Private Lending Presentation Kit.

The Private Lending Presentation Kit is powerful done-for-you kit loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter please visit http://realestatewealthtoday.com/Private-Lending-Presentation-Kit.html and join the thousand of happy investors who have already joined.

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Today’s high risk money lenders are mostly private lenders and small companies that specialize in making loans that the banks avoid. Some people call them hard money lenders, but regardless of the name that you use, you will find that there are many advantages to this unconventional source of financing, particularly if you are a real estate investor or rehabber. There are always profitable opportunities in the real estate market, but in order to take advantage of them, you must have a good source of funding. Let’s look at a few examples.

High risk loan lenders can help you buy property with “no money down”. You may have read a book or watched a video about buying property with no money down. You may have even tried a few deals. Hopefully, you were somewhat successful. If you went to a bank for financing, they probably required that you make a down payment to the seller, probably about 20% of the purchase price.

Now, some investing “experts” suggest that you use credit cards or other sources for down payments and closing costs. We have even heard the suggestion that you borrow it from a friend or family member. They say that you have nothing to lose because you know that you will be able to repay all of the loans once you resell the property.

Well, first of all, the bank will want to know the source of your funds and it is illegal to make false statements on a loan or credit application.

The same is true for most high risk money lenders, but they consider things that the banks do not. If the amount that you need to borrow is less than 65% of the fair market value after repairs or upgrades are completed, they will finance 100% of the purchase price. They do not require a down payment. So, they can truly help you buy with no money down.

Another example: high risk loan lenders can help you buy when banks turn you down. Most banks avoid financing rehab projects completely, even when the investor has the money for down payments, closing costs and improvements. Banks usually deny loans for vacation property. They will refuse to fund building in areas without fire hydrants or those that are too close to flood plains. In some cases they will turn you down if your property is oceanfront or for any number of reasons that they consider risky.

They all have different considerations and, in the case of rehab projects, the time involved in getting a loan approved will sometimes mean that you lose your seller.

The bottom line is that high risk money lenders offer options when the banks have none. And they offer better options for certain investors. If you are planning a rehab project, they might be the right choice for you.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Guide, a comprehensive resource for those looking to secure funding for real estate projects.

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When shopping for hard money loans online, there are certain things to look for and certain things to avoid. As with any internet transaction, when personal information is requested, the consumer needs to use caution.

The FTC says that con artists have “gone high-tech”. There are numerous reports from people who have been taken in. In many cases, alternatives to conventional financing are the best way to go. You just need to choose your lender carefully. Here, we hope to give you the information that you need to find a legitimate company to deal with.

Many of the companies that advertise hard money personal loans online are payday lenders. While the payday loan is not a true scam, the fees that the companies charge are equivalent to yearly interest rates in the double digits. This type of loan is not the right choice for anyone who has an option, but is definitely wrong for the real estate investor. If you are new to investing, looking to buy, build or flip a property, you should be looking for lenders that advertise rehab funding, construction loans or something similar.

Brokers are another group that advertises hard money loans online. If you use a broker, you are paying him or her to go out and find financing for you. They may or may not be able to provide this service. Avoid the ones that ask for large up-front fees, anything more than a few hundred as an application fee. There have been reports of consumers that paid thousands of dollars to brokers that “guaranteed” financing. Not only was there no loan, they lost the money that they paid to the broker.

Legitimate companies offering hard money personal loans online rarely list their services with a broker. They can do their own advertising. They may have associates that refer clients to them, but the consumer does not pay a fee for the referral.

Remember that anytime an online site asks for credit card or other personal information, they should be a registered secure site. They should have a complete privacy policy available for your inspection.

It is much safer to use a lender that has you send your information to them by regular registered mail, rather than e-mail. They might request a copy of your credit report, but they would not need your credit card numbers. You might feel like regular mail is slower, but it is safer. You could always send the application overnight. You can get pre-approval while you are still looking for the right property, so there is no real need to rush. Not all companies offering hard money loans online have a pre-approval program, so look for one that does.

Currently the FTC lists no complaints with hard money lenders, though there are many with payday lenders, but if you have a concern about a specific company, you can check Federal Trade Commission’s website (www.ftc.gov) and run a search for the company name. If nothing comes up, then no complaints have been filed with that company.

You can definitely find hard money personal loans online, you just have to know where to look.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Guide, a comprehensive resource for those looking to secure funding for real estate projects.

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When you’re ready to start your own small business, one of the first thoughts that comes to mind is how to fund the business start up. After all, starting a business usually involves buying supplies, getting licensed, possibly renting office, retail or warehouse space, and so on. If you’re starting a small business which will involve selling products, then you also need funding to buy your initial sales stock too. And that’s where small business loans tend to be a huge help.

Getting a small business loan can make the difference in your businesses success or failure. Some experts estimate that at least 90% of brand new small businesses fail because they lack capital – a.k.a. funding. When you don’t have enough money to buy products which you will sell, or you can’t afford to buy supplies to make your products, you will not be able to even get your business off the ground, let alone make it successful.

Now, there are many types of small business loans out there in the world. Unfortunately sometimes you have to search high and low to find ones that will meet your personal needs. Not everyone has collateral they can put up to secure a loan, and not everyone has impeccable credit ratings either. So sometimes you have to look for creative options with small business loans.

Government small business loans are a popular option for many start ups, because they can be easy for some people to get. If for instance, you’ve served in the military or you’re in a minority group, you may find it fairly easy to get a government small business loan. Check with your local Small Business Association (SBA) to find out what kinds of government small business loans you might be eligible for.

Fast small business loans are usually gotten through more expensive means. If you needed just $1000 or so to get your small business started though, and you feel you really need to have it as fast as possible, then you might try some of the online payday lending sources. Many of these fast lenders will not even run a credit check either. They’ll simply require that you have a bank checking account.

Women and Minority small business loans are often available through private organizations and groups. To find these you’ll need to search your local library or the Internet, because they’re not often publicized widely. You might also find small business and minority loans by talking to an SBA counselor, or talking to a college or other school counselor as well.

Bad credit small business loans are one of the hardest to get, and they’re also the most expensive over time. Bad credit small business loans can still be gotten however. There are hard money lenders which specialize in lending to higher credit risk customers, and there are payday loans available that usually involve no credit checks. You might also want to try some of the private lending groups that can be found online too.

For more information on small business loans, including some excellent resources and recommendations, please visit http://www.gbexchange.net

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Believe it or not, hard money lenders want the same thing you want – a shot at a great investment. Remember: investing involves putting up your time and/or money with the intention of realizing a profitable return. When you keep this concept in mind, it’s astounding just how broad the investing arena actually is. High rise buildings, apartment complexes, condominiums and luxury office space can become a reality – not just a dream!

If, for example, your credit rating is bruised and you’re pressed for time, securing a hard money loan for a shot at a great commercial property – that’s investing.

On the flip side, if an altruistic, financially secure professional discovers that they can make a nice return helping people just like you find the financing they need in order to build their real estate empire- even if all other avenues have failed – that’s investing too!

Of course, as a hard money lender works to decide if yours is a worthwhile opportunity, there are other things they’ll want to know.

What Your Hard Money Lender Will Want to Know…

There are several questions any hard money lender worth a grain of salt will want to know:

• While your credit rating isn’t as important to a hard money lender, they do want to feel confident that you can actually pay them back. This means you should try to gather your W-2s for the past few years, bank statements for at least the last six months, as well as what you’re offering as collateral in the event that you might possibly default on the terms.

• Hard money lenders – across the board – will take diligent measures to accurately assess the value of the property you’re trying to buy. In addition to third-party appraisals, most hard money lenders will require that a personal on-site evaluation is made. Because hard money lenders DON’T want to be stuck managing a delinquent property, they need to determine if your potential property can be profitably liquidated QUICKLY! This is the primary reason that hard money loan to value ratios are often stricter than those in traditional financing situations.

• Hard money lenders will require that you actively participate in the “due diligence” portions of your loan. This means that you’ll need to do your homework to insure that there are no other liens or suits associated with the property. If any are uncovered, they’ll have to be addressed in order for the transaction to progress any further.

• Finally, hard money lenders want to have confidence in your commitment and professionalism. You can help boost their confidence in you by returning phone calls promptly, responding to inquiries in a timely manner, and by actually doing the things you’ve agreed to do.

When it really comes down to it, a typical hard money lender is a lot like the rest of the world at large. They want a good deal. They’re enticed by the opportunity to make a nice profit. They want to handle deals that are secure. They want to team up with borrowers they feel confident about. They have empires that they want to build as well – and together, both of you can win.

If you can find a way to show them that your investment proposition is one that can satisfy all of their criteria, you’re well on your way to establishing a VERY strategic alliance.

If you can set their investment fears to rest, then they can do the same for yours!

A good, solid investment always involves the proverbial “two way street.” As soon as you embrace this fact, you’ll be surprised at how often you’ll hear opportunity come knocking!

If you’re ready to unravel the mystery that surrounds hard money lending, head on over to http://www.hardmoneycourse.com and order a copy of our practical, informative expose on the matter, “Secrets of Working with Hard Money Lenders to Build Your Real Estate Empire”. We’ll even throw in a free bonus book that shares contact information for over 100 Hard Money Lenders from all across the nation.

Aurora Cortez is a private lender and educator who teaches others about private lending and buying positive cash-flowing properties. Her niches are in private lending and investing in multi-unit buildings.

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Getting a hard money loan with bad credit may be easier than getting a standard loan from a bank. It really depends on the individual situation and the lender. Most banks have raised the minimum required credit score for personal loans. If your score is low, you may still be able to get a mortgage for your primary dwelling from a regular bank, but if you are interested in real estate investing, rehabbing or flipping, your application will probably be denied.

For some hard money lenders bad credit is not an issue. It is their business. Some small companies and private individuals specialize in making high risk loans to property owners. The amount that a person can borrow is limited to the amount that the lender can expect to recoup in the case of foreclosure. These are risky deals for both the lender and the borrower, but sometimes it is the only option.

The best advice is to look at your situation carefully. Don’t be overly discouraged by low credit scores, but don’t go around putting in applications at every bank in town. Numerous denied applications will drive you score even lower. It makes you look desperate.

If you have been denied credit based on a low score, you are entitled to a free copy of your credit report. Get it. Check it carefully. There may be inaccurate, old or false information. Even correcting a bad address can add a couple of points to your score. Some people search for a hard money loan with bad credit, because they think that they have no choice. Correcting information on your credit report is the best choice, particularly if you want to invest in real estate, now or at some point in the future.

For real estate investors seeking hard money lenders bad credit scores are not ideal, but private lenders are more likely to take other things into consideration. For example, perhaps you have some experience in flipping properties, but for some reason you credit history is less than perfect. You could have been a victim of identity theft or a difficult divorce. Maybe you have a recent history of making payments on time and repaying promptly, but late payments from years past are still affecting your overall FICO numbers. Once you know it’s there, it may take you months to get the credit bureaus to remove that old information. Those months could cause you to miss out on a good opportunity.

If you explain your situation to the hard money lenders bad credit issues might not prevent you from cashing in on that great deal. Bankers, on the other hand, typically make their final decisions based on the numbers, even though we all know that they are not always an accurate reflection of a person’s creditworthiness. It is that fault in the system that creates one niche for the private lender.

Providing solutions for people with problematic credit is not the only gap filled by private lenders. In fact, it is not even the most common reason that people look for this type of financing. There are advantages to real estate rehabbers that have to do with the time it takes to close, the amount available for the loan and what it can be used for. Both banks and private lenders have different requirements. Even private lenders may take a look at your credit score. Some may require a higher score than others

So, to get a hard money loan with bad credit, you may need to look around until you find the right lender. You may even need to wait a little while or make the effort to correct inaccurate or old information that is still lingering on your credit report. In other words, it may take a little doing, but don’t give up before you even try.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Lending, a comprehensive resource for those looking to secure funding for real estate projects.

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At first, hard money lenders may seem difficult to locate. However, you just need to know the right places to look. Professionals such as accountants, attorneys, and insurance agents have often have clients who are hard money lenders or more generically, private lenders. Especially, if they think they could profit by your endeavors, these professionals often will be eager to refer a source.

Settlement attorneys are often very knowledgeable of individuals in the field since they write loan documents for hard money lenders. Because of their familiarity with the work, attorneys may be hard money lenders themselves.

Since accountants have clients seeking to invest, they are another great source. Real estate is a very secure investment and lenders are not timid to real estate loans, especially when the long term value is low and the interest rate is high. Usually trust in accountants is very high as people let them do their finances. Therefore, a referral from an accountant should carry a lot of weight for a lender

Another method for uncovering lenders is to research the homes undergoing renovation. The courthouse can provide information regarding the lender involved in the renovation projects and often a private lender is involved. Concentrate on contacting lenders who have homes in the same area where you want to invest as their background and familiarity with the market makes them a more likely source.

Insurance agents will also be knowledgeable of the names of hard money lenders in your region. Any hazard insurance policies issued will have listed a “loss payee” if a lender is involved. An agent can go through their records and find names of private lenders on policies they have written.

Mortgage brokers who regularly work with investors are a good source. There may be a fee associated with the referral, but if it means finding a source, it very well might be worth it. Finding a hard money lender is not difficult if you have connections, know the proper circles to look in, and ask around. Stick to people in your area. It may require persistence, but eventually you will find one. They do exist. It just might take a little ground work to uncover them.

If you are looking for a hard money lender or more information about the industry in general, contact the professionals who take a hard bite out of the hard money business at http://www.pitbullmortgageschool.com today.

Joseph Devine

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When considering a home purchase you will want to excercise many options other than the traditional lending facilities and these have been known for the highest interest rates. If the traditional mortgage lenders are not able to meet your financial needs, you may consider turning to hard money lenders. By going through hard money lenders, you can close a faster loan and get access to your cash sooner. If you are starting a business, buying a business or you want to upgrade your current business, getting a hard money loan might be perfect for your situation.

Many companies offer hard money loans, and if they can’t finance you, you should have no problems finding hard money lenders that will back you and your business. You can finance equipment, commercial real estate, small business loans, construction loans, and more with a hard money loan.

Equity based hard money loans can be funded in as little as two weeks when you apply with hard money lenders. Private lenders can use your commercial property as collateral for these quick and easy loans. Most loans have up to a 75% loan-to-value ratio, and have a super fast turnaround time for funding.

From 1 million to 300 million, you are sure to find the right loan you need. Hard Money Lenders and Mortgages

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Many of us have heard about private money, hard money, and other types of non-traditional funding sources for real estate transactions. It sounds good but you may not be fully aware of all of the benefits that private lending offers to you and your business. With that in mind, I would like to outline the top ten benefits of using private money in your own real estate investment pursuits.

Benefit #1: You are in control!!

The first benefit of private money that I’ll mention is probably the one that is the most important. Private lending gives you far more control over the buying process than afforded by either traditional lenders or even hard money lenders. How often do you get to negotiate things like interest rate with a traditional lender? These rates are generally predetermined and are dictated by your financial strength and/or credit score. Furthermore, the terms of repayment for traditional or hard money loans are rarely negotiable. They know they’re in the driver’s seat (because they’re the ones lending the money and they have clients willing to accept their terms if you choose not to) and pass along that knowledge to you via terms that they dictate. With private lenders, you negotiate the terms of the loan. Granted, the private lender has a say in it but you are in a stronger negotiating position because you are offering an opportunity they might not be able to find elsewhere.

Benefit #2: There is no limit to how much private money you can use on one project.

One of the greatest frustrations in traditional or hard money lending is that of the Loan to Value (LTV). With great credit and a solid income/asset portfolio, you may be able to borrow 100% of the purchase price for a piece of real estate. But what if you have less than perfect credit, limited or “hard to document” income, or desire to purchase land or a commercial property? In these cases, lenders want to see 10, 20, or even as much as 30% down to loan you the balance. This limits your ability to grow your business, even if you’ve found a tremendous bargain that is a sure winner.

Private money does not present the same rigid obstacles. Once again, remember you have the flexibility to negotiate the terms with your lender(s). This means you may borrow enough to fund the entire purchase price of the property if so desired. A private lender will likely want to see how good the investment is first before they will loan this high of a percentage. That is natural and you should be selecting quality investments for your private lenders in the first place. That being said, how cool is it that you can fund 100% of your projects, including repair costs, just by establishing the right relationships with your private lenders?

Benefit #3: Private money is less expensive to borrow.

While interest rates with private lenders may be comparable or slightly higher than with traditional lenders, the absence of third party involvement can dramatically reduce or even eliminate the closing costs and other fees that are normally associated with traditional loans. Furthermore, most private money loans have fixed interest rates and/or are based upon simple interest amortization so you don’t have to worry about floating adjustable interest rates or interest heavy payments in the early stages of a loan. It is also worthwhile to point out that many private lenders will willingly accept either a portion of the profit from the sale of a property or a fixed rate of return upon the sale, effectively eliminating any out of pocket costs during the loan. How many traditional lenders that you are aware of would defer interest payments until you sold a property for a profit?

Benefit #4: Private money is faster than going through banks.

One of the common complaints about traditional lending is that the process proceeds at the lender’s pace. This can mean as much as 30-60 days to close a loan, even if you are in compliance with all the lender’s requests. This amount of time may not seem like a lot but it may mean the difference between securing the deal of the year and not doing so, just by not being able to close quickly enough. In these cases, both you and the seller want to move quickly but traditional lenders will still operate at their own pace, regardless of the urgency at hand. Private lenders can often lend immediately because they have direct access to their own lending capital and thus dictate both when it is used and for what purpose. Once you have established a relationship with a private lender or lenders, you can act on these great bargains and know for sure how quickly you can close, without having to wait on the bank. Remember that a great real estate bargain will look as attractive to a private lender as it does to you so they have incentive to make things happen quickly to cash in on those opportunities you present to them.

Benefit #5: Having a source of cash allows greater flexibility for buying properties at a discount.

You’ve all heard the phrase “Cash is king.” Real estate is a perfect example of this, with the frequency of advertising that offers cash for houses, quick closings, etc. True, cash is a powerful leveraging tool with a seller, particularly one who is highly motivated and needs to sell very quickly. By definition, a cash offer only means that there is not a financing contingency in the contract. It doesn’t mean you have to have the money available yourself. Private money is a perfect example of a readily available source of outside funds. When you have this available to you, you have the confidence and the means to offer cash for some or all of your purchases. Faster closing times and cash purchases should translate into more attractive purchase prices if the seller is properly motivated. Lower purchase prices mean better bargains so this benefit of private money is huge, given its impact on your profit margin for each transaction for which you are able to offer cash.

Benefit #6: There are no lender “seasoning” issues or restrictions on loan amounts with private money.

Many investors are not familiar with lender seasoning issues and the effects these can have on successfully closing transactions. In a nutshell, many lenders will look at a recent purchase and see a sale within a short period of time as a red flag, questioning the ability of the property to have increased in value so quickly. When you offer cash and use private money to fund the purchase, there are no appraisals required, no recent loans issued to compare to, and therefore a bargain remains just what it should be, a bargain. Another lender issue concerns the amount borrowed. Many lenders disallow loans less than a certain amount and you may not be qualified for purchases above a certain amount. Both circumstances can limit you if you are using traditional lending sources or even hard money. The use of private lending removes these issues because the lender is more interested in the rate of return and the quality of the transaction than these other issues.

Benefit #7: Using private money preserves your credit and buying power.

Many investors have solid financial strength and can purchase properties through traditional lending channels. This is true up to a point. Once you purchase a certain number of properties, it can become increasingly difficult to purchase more, even if they all have good equity and are producing monthly positive cash flow. If you plan to purchase many properties, the use of private lenders becomes all the more critical so you don’t hit a wall with your own personal buying power. Another issue to consider on this theme is the impact of multiple purchases on your own personal credit. If you are buying 20 houses per year conventionally, you will have at least 20 credit inquiries, which will reduce your FICO score, even if the impact is brief. Private money requires no credit check and thus removes the proverbial restraints on your purchasing power.

Benefit #8: Using private money makes it easier to run your investment business through your entities.

You’ve probably heard that it is better to run your real estate investments through corporations, LLCs, or other legal entities. This is highly advisable and is all well and good in theory, until traditional lenders and even hard money lenders want to see credit backing a loan. Many lenders are hesitant to issue loans to entities, even if you sign personally as a guarantor on the loan. Since many entities are too new to have a credit rating to back them, most investors must take title to a property personally if they use a traditional funding source. Private money all but eliminates this obstacle and also improves the asset protection aspect of your business. Private money backing means you can offer cash for a property and therefore take title to it any way that you wish. This allows you to keep your investments out of your personal name, which makes more sense for both asset protection and for tax purposes. Additionally, use of an entity like an LLC to purchase a property is a way to secure your private lender’s contribution to the project .

Benefit #9: Private loans require less paperwork!

While the use of private lenders may require some paperwork to make everyone feel secure about the investment opportunity you are presenting, the quantity of paperwork is far less than if you went with another funding route. Cast your mind back to the last time you closed on a traditional mortgage or even a loan through a hard money lender. How many trees were required to produce the stack of paperwork that you had to go through and sign? A small forest, perhaps? These large volumes of paperwork are a necessary evil in the lending business, designed to protect all relevant parties, disclose any number of minute points of interest, etc. etc. The point is that traditional lenders are required by law to have you jump through these hoops. Private lending is not subject to these kinds of laws and restrictions so that means less paperwork for you and your prospective lenders!

Benefit #10: Securing private money gets you in that negotiating frame of mind.

I’ve heard the phrase many times, ‘You don’t get what you deserve, you get what you negotiate.’ This is particularly true in business and especially true when working with private lenders. Negotiation is something of a lost art to many American consumers, as we are socially conditioned to not bargain for things in the same fashion as in other cultures. Think about that. My point here is not to suggest that you are a poor negotiator. Quite the contrary. Negotiation, like any other tool in running a business, is one that can be developed and improved with a little bit of effort. What I’d like to suggest is that you take the time to develop the skills that I know you already possess but maybe just don’t use as often as you could be.

Dr. Matt Fagerness left the academic world to pursue his own dreams of business ownership and doing things “his way”. Today, he is a successful real estate investor, venture capitalist, business consultant, and author who has touched the lives of new entrepreneurs who are looking to build upon their own dreams of success. Focusing on written materials and coaching services for success-driven and business-minded people, Dr. Fagerness has a no-nonsense approach to starting and building small businesses that speaks volumes to the clients with whom he has worked. Dr. Fagerness and his various professional services are accessible by visiting http://www.jakejasper.com

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I recently attended a real estate investment seminar in Las Vegas. Between speeches by different “gurus” I would mingle with other investors and explain that I owned a hard money brokerage firm. Even though it has been around for almost a hundred years now, I was amazed how hard money lenders still seem to be mysterious to many investors. They either did not understand how the hard money lending industry worked or had heard that it was something they should avoid like the plague.

To put it simply, hard money loans are short term loans that are used for various real estate projects. The most common projects are house flipping, but they are also used in commercial construction and land development. Essentially, a hard money loan is often the best choice for oney that is needed on a short term basis.

Unlike conventional financing, a hard money loan also known as a private loan originates from a private individual or institution unlike a bank. The loans are generally short term between 6 and 12 months and have a high, interest only payment generally between 10% and 14%
Another major difference between a hard money loan and a conventional loan is that a hard money loan is not based on a person’s credit but instead on the value of the project after its completion. A good example is if John has a house that he wishes to rehab and sell for $100,000.00 a hard money lender will lend up to $65,000.00. This is what is known as Loan to Value or LTV. Most hard money lenders lend anywhere from 55% to 70% LTV depending upon what type of project the borrower has.

Now you are probably asking yourself what the catch is, how do these lenders make there money? Hard money lenders make there money 3 different ways. The first way they make there money is the closing costs. These are anywhere from 1 to 4 percentage points of the overall loan. These points are paid when the loan is completely paid off in full. The second way they make there money is the interest only monthly payments on the loan which is anywhere from 10% to 14%. The third way they make there money is if the borrower happens to default on the loan. Being as the loan is not based on the person’s credit, hard money loans are secured by the property itself. If a borrower defaults, the hard money lender now has a property or piece of land for 65% of what it is worth. However, it should be stated that this rarely occurs as most hard money lenders are not in the business of foreclosing on properties.

So should a borrower use a hard money lender? The simple answer is if a borrower has a real estate project that needs short term financing that a conventional bank will not lend on, yes.

Written by Peter Hesselman pete@houseflippingloans.com

Eclipse Mortgage

http://www.houseflippingloans.com