Buy Now Hard Money

Underpromise. Overdeliver.

Browsing Posts tagged new hampshire hard money

I have a favorite saying.  Lack of proper planning on your part does not constitute an emergency on mine.

At the same time, one of the reasons that real estate investors use hard money is speed.   If you find a great deal – let’s say it’s bank owned – and the seller will give you a great price if you can close in 10 days, you need either cash, private funding from friends and family, or probably hard money.

Assuming you don’t have cash or wealthy family, you might need hard money.  Here’s what you should do.
  • Don’t wait until 3 days before closing to call a hard money lender.  That reason should be obvious.
  • Make sure you have electronic photos of the property ready – you should have taken them when you first visited the property, both inside and all exterior shots.  If you don’t buy the property, then delete them, but if you are buying the property, you have saved a trip to take photos.  It will also help you document your improvements later if that becomes necessary when you resell.
  • Have a brief bio of your investing experience all ready.  Who you are and what you’ve done as an investor is important.
  • Have signed versions of P&S contracts and addendums all scanned in and ready to send.  If you’re in a hurry, why are these items unavailable?  They are critical to the closing.
  • Know your rehab budget by line item.  Be ready to explain why x improvement is needed but y improvement won’t help your resale.   Better yet, explain in your executive summary.  Have the budget in a spreadsheet that is easy to read.  No long difficult to read paragraphs that ramble.
  • Pay attention to the lender instructions for getting the deal done – they have a process they’ve done over and over, and they need to do due diligence.  Make it easier for them and it will be quicker for you.
  • Be available.  Nothing is more frustrating than working hard to pull the pieces of a deal together only to have the borrower regularly ignore his cell, or not read and answer email.  If you are in a deal that requires speed on the part of the lender, than you need to make yourself available so as to not hold up the process.  Yes, we all need down time and family time.  And if you are in another appointment, of course you need to wait to answer or reply.  But if you’re not available quickly, then you are the one holding up the works.  It could cost you a deal.  
Ask me how I know.  🙂

Hard Money Myth #4

Hard money lenders make risky loans.

The reality:

While the collective wisdom, even among real estate and mortgage professionals, is that hard money lenders make risky loans, our experience is that the opposite is true.  Because such lenders are typically lending their own money (as opposed to a bank employee lending someone else’s money) they are particularly risk averse.  Unless a hard money lender really understands how to value the collateral against which he is lending and the prevailing market, he will likely not make the loan, regardless of the strength of the borrower or the LTV.  Infrequently a hard money lender will consider history with a borrower because of the borrower’s consistent performance.

On the other hand, with understanding comes knowledge, and a hard money lender may make a loan that others consider risky because he simply has better information.   If a lender understands a market and has an exit strategy himself should he/she have to take back a property, the lender perceives less risk and might lend where others won’t.

This is why many hard money lenders are truly local, and don’t use conventional appraisals to make decisions on valuation.  They may use the appraisal as a source of information about the property, but they will value the property themselves based on their knowledge of the local market and the trends in a neighborhood.