How To Be a Broker of Hard Money or Private Money

I have been a Lender and Broker of Hard Money, also known as Private Money, for many years. Over 8,000 brokers have used our services over the years. This article will focus on being a successful Broker of Hard Money. The rules apply for most of the states. If you are looking for a great place to find Hard Money Lenders or Private Money Lenders in any state "click here". There are also advertisers on this page what would like to fund your loans. Note: I am not a real estate attorney and that you should always seek the advice from qualified persons in your state. With that said here are the secrets of the trade. They are not complicated but most Brokers do not follow them. That is why they fail.

Do Hard Money Loans work? Most definitely YES!

Most Important Tip! The one who has the money controls everything. That means not you, the other Broker or your client control the deal. The one who has the money controls the amount to be lent, the loan to value, the commissions to be paid to you and everything else. There are so many good deals out there the lender can easily just move to another loan.

Tip: You must be licensed in the state you are trying to broker in. To many times over the years a deal dies because the broker said that they were licensed to do business and were not. Think you can get around it just one time. Well just remember that if your client needs Hard Money there is probably other problems you do not know about. Many of these loans end up in the hands of attorneys and you will be sued! Not being licensed just means you will loose. Ask your Real Estate Attorney.

Tip: Make sure that the funding source actually has the money. More often than not you think you are dealing with a direct lender and they are only another broker. At times they can be both so ask every time if the loan you are submitting will be funded in-house. And if it won't be request that it NOT be brokered to anyone else.

Tip: Broker Chains usually never work. Nothing worse that finding a funding source and having the fourth broker (who actually has the client contact) demand to much money to make the deal work. Remember the more commissions paid weakens the borrowers position and this always makes the lender nervous. If you do end up in a broker chain make sure that all the Brokers have agreed up front what each will be paid. An even better way is to split the commission as a percent of total commissions. This must be in writing!

Tip: Stay away from Owner Occupied properties. The commissions are capped in most states and more importantly they are more litigious. I call this the "never be on the 6:00 o'clock news". Nothing is worse than helping with a Hard Money loan that goes south and the poor old person is telling the reporter how they never could have serviced the loan in the first place. And that "YOU" lied to get them the loan. Think this doesn't happen...Just watch the news.

Tip: Non-Owner Occupied properties and Commercial properties are the best. These borrowers are considered "sophisticated investors" by the courts. This means that when the loan goes into default you are not kicking someone out of their house the lived in for the past 30 years. Also most property investors are not emotionally attached and if they loose the property, it was a business decision.

Tip: LTV or Loan To Value. LTVs range greatly and change daily according to the kind of property and amount of money the lender has to lend at any one given time. Bottom line is the lower the LTV the happier the lender. As a general rule Single Family Residences are lower than Commercial (more tenants = more stability). Keep your LTVs under 60%!

Tip: Loan amounts are crucial! One of the biggest mistakes I see is the Broker trying to make the 1 million to 50 million dollar deal. Yes they do happen but very very infrequently. At a Hard Money meeting I attended one of the old-timers said to me. I quote "if they cant get the Bank to lend on the project, and it looks like a great loan, you just haven't found the problem yet". Here are the facts: 90% of all Hard Money or Private loans are under $400,000. The reason is simple. Most Hard Money lenders have under $7,000,000 to lend and the smaller the loans the less risk per loan. The other reason is if one of their investors looses money their whole business is at risk.

I hope you liked this article. To find hard money lenders go to http://www.hardmoneyhunt.com

Hard Money and Private Money Land Loans:

Hard Money Land Loans are some of the hardest loans to acquire unless you are prepared.

Land comes in many different forms, from Raw Land to Developed Land. From a single lot to a subdivision. If your land is surrounded by houses or commercial buildings you will find a lender much easier. This will give the Hard Money Land lender a good feeling about the value of the property.

Location, Location, Location. Land is harder to value depending on its location and comes with the greatest amount of risk to the lender. Hard Money Land lenders typically do not exceed 30%-50% LTV unless the land is very desirably located or you have other properties to cross collateralize.

We suggest finding a lender close to your land who understands the geography and sees the potential in the investment. Having recent sales available to the Hard Money Land Lender will help your situation.

http://www.hardmoneyhunt.com

Commercial Hard Money and Private Money Loans:

Whether you're looking for Private Money or Hard Money for your Commercial Building or investment homes you have come to the right place for information. To find lenders go to http://www.hardmoneyhunt.com

Commercial Private Money and Hard Money financing is available for most properties. Also remember if you own multiple properties to tell the lender. Hard money and Private money lenders are likely to give a higher loan to value if they have other properties to cross collateralize.

To find a lender in your state choose the link "Find A Lender" above or "click here".


How Does Commercial Hard Money Work?

A hard money loan is a real estate mortgage collateralized against the true as is value of the property for which the loan is made. Most lenders would prefer to usually fund in the first lien position, meaning that there is no senior mortgage holder. Many lenders will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien. These are harder and at times more expensive loans.

Most lenders structure their loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 50-75% of the market value of the property. This changes with the economy, strength of the deal and borrower. The LTV can also go much higher if you have other properties to cross collateralize or other assets the lender may see as desirable. We have seen instances of a large wine collection, art and coins to name a few. How to determine you LTV. Determining your LTV, the word "value" is defined as "today's purchase price." This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to three-month time frame. This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress.

Typically hard money or private money loans close quickly with localized lenders. This is one of the most important parts of the equation. A local lender knows your area and therefore has a greater comfort level. Many times a local lender can make a decision on the spot and forgo the appraisal and other due diligence factors a lender who is far away can't.

Commercial Hard Money Loan Program Definitions:

Hard Money Bridge Loans
A bridge loan is a short-term loan which bridges the Borrower's plan from one point to another. The bridge loan is useful when a Borrower only needs financing for a short time frame where a long-term fixed rate loan does not make sense. A hard money bridge loan can be used by a real estate developer, or other business entity to take advantage of commercial opportunities that don't fit into the traditional bank standards. The typical maximum loan-to-value allowed on subject properties is 75%. Additionally, Borrowers are required to have a minimum of 10% cash or equity invested in a project when applying for a bridge loan; this is known as "skin in the game".

Mezzanine Loans (and how they differ from bridge loans)
A mezzanine loan can be a type of bridge loan in the sense that it is short-term and not permanent financing. However a mezzanine loan is not secured by property, it is secured by an ownership interest in the company that owns the property. This occurs when the Borrower needs more money than he is able to borrow against the property, so he puts up an interest in his company as collateral.

End of Construction Pay Off Loans
If a developer has a construction project that is at least 75% completed, they can obtain a hard money loan to pay off the construction lender and complete the project. A hard money loan can also be used to bridge the gap between a completed project and standard financing from a bank or traditional lender. With an End of Construction Pay Off Loan, A developer can use the collateral of the current project to raise capital for the next project.

Foreclosure Bailouts (Foreclosure Prevention)
A hard money loan can be used to prevent foreclosure on a commercial property. A pending foreclosure can be stopped, if a property can be collateralized for up to 65% of its loan to value, based on the quick sale value of the property.

Purchases (Acquisitions)
A hard money loan can be used to purchase real estate if a borrower does not meet conventional bank standards or does not have time to wait for a traditional bank's typically slow lending process. Hard money allows for things that banks never allow: low or no credit scores, incomplete construction, property in need of repairs, etc. Hard money funding can be used to quickly work around these financing problems and provides the opportunity for a savvy investor to acquire new properties.

Commercial Refinances
Commercial cash out refinances allow you to extract equity from real estate you already own. It can be a quick way of generating additional working capital to be utilized as you see fit. These loans are based more upon the building than the borrower. They can be quite creative using not only the property but UCC filings on equipment and inventory. Once all required paperwork has been submitted, these hard money loans will fund as quickly as one week.

Foreign National Commercial Mortgage Loans
This kind of hard money loan is for foreign investors who want to purchase commercial real estate in the United States. All sorts of property can be considered for hard money funding, including; commercial, industrial, residential, hospitality, rehabs, etc. Few restrictions exist for foreign borrorers, with notable exceptions being Borrowers from countries the Unites States Government is currently having problems with.

Rehab Hard Money Loans
A commercial rehab/investor can use a hard money loan for short term financing. Once a property has been renovated and sold for a profit, the funds are repaid and we can often allow the borrower to use the funds again on the next project. The average closing time for an approved loan is just two weeks!

Land Hard Money Loans
Land loans are some of the hardest loans to acquire. They are hard to value depending on their location and come with the greatest amount of risk to the lender. They typically do not exceed 30%-50% LTV.

http://www.hardmoneyhunt.com

Residential Hard Money and Private Money Loans:

Whether you're looking for Private Money or Hard Money for your personal residence or an investment home, you have come to the right place for information. Lenders can be found at http://www.hardmoneyhunt.com

Private Money and Hard Money financing is available for most properties. Also remember if you own multiple properties to tell the lender. Hard money and Private money lenders are likely to give a higher loan to value if they have other properties to cross collateralize. To find a lender in your state choose the link "Find a Lender".

How does Residential Hard Money Work?

A hard money loan is a real estate mortgage collateralized against the true as is value of the property for which the loan is made. Most lenders would prefer to usually fund in the first lien position, meaning that there is no senior mortgage holder. Many lenders will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien. These are harder and at times more expensive loans.

Most lenders structure their loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 50-75% of the market value of the property. This changes with the economy, strength of the deal and borrower. The LTV can also go much higher if you have other properties to cross collateralize or other assets the lender may see as desirable. We have seen instances of a large wine collection, art and coins to name a few. How to determine your LTV. Determining your LTV, the word "value" is defined as "today's purchase price." This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to three-month time frame. This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress.

Typically hard money or private money loans close quickly with localized lenders. This is one of the most important parts of the equation. A local lender knows your area and therefore has a greater comfort level. Many times a local lender can make a decision on the spot and forgo the appraisal and other due diligence factors a lender who is far away can't.