Aspen Financial Services faces at least the fifth investor lawsuit filed since 2008. The company is a hard-money lender. Aspen has moved to dismiss a lawsuit filed against it in January by an investor who is a Las Vegas attorney.
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If you’re one of the people struggling to keep their business or their houses alive amid the many financial obstacles, then you might want to consider hard money loans.
One of the many good things about this is that a borrower’s credit record does not have that much effect on the loan. The loan itself does not depend on the capability of the borrower to pay but on the property’s worth. If the lender sees that the property has a possibility to sell, the loan is good to go.
Traditional lending institutions such as banks do not give loans like this since the risks are pretty high. This is one reason why hard money lenders charge a higher interest rate than that of a bank. They trust the property’s potential and not the borrower’s capability to pay, thus makes the whole process riskier.
Another good thing about this is it doesn’t take long to close the deal. After the lender has determined the property’s value, the process won’t take long. Usually, conventional loans take about three months to get approved, but not with hard money loans. It is called fast cash because it may only take weeks or days to be approved and released.
Investors who are on the flipping houses and rehabbing business can take advantage of this benefit. Real estate investing has never been this easy.
However, they are not the only ones who can enjoy the benefits of this loan. Obtaining hard money loan can give them more time to either sell the property or pay off their mortgage. In a case like this, a borrower’s income and capability to pay off the loan may be taken into consideration.
To successfully get and use a hard money loan, nothing beats a diligent research. Identify if the loan is fit for your needs. Make use of your time wisely in looking for the right hard money lender. Search real estate investing associations and ask for referrals. The internet is also a useful tool in searching for information and lenders.
One site that can be helpful in your search is www.RehabHardMoney.com.
Author: Daniel V. Mc Grey
Article Source: EzineArticles.com
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Most seasoned real estate investors face situations where they require more money than what the traditional lenders will lend, and here is where real estate investing with hard money loans given by the specialized lenders is useful.
The hard money lenders are actually private money lenders who provide money for a short term. These loans carry a strict repayment schedule. It is given the name as hard money on account of its strict nature. The rates of interest of such loans are also higher than the market rates, and the fees charged upfront, range between 4 to 10 points.
The money lenders of hard money give the investors the access to the capital that is asset based, wherein the loan amount is secured by way of a collateral security. The rate of interest ranges between 14 to 18 percent annually and the term of the loan is normally six to twelve months.
Along with the property as collateral security, the hard money lender requires can require credit reports and well as documented experience in previous deals you have done. The lenders indulge in inspecting the property and making appraisals, before approving the loans.
The lenders of hard money study the intent of the investment on part of the investors, the strategy of exit that is adopted, the information of the property that is provided such as the residential or commercial nature of the property and also check the credit ratio of the concerned borrower. The financial strengths of the borrowers play a vital role in securing the loan.
The fees that are charged are dependant on the risk factors and the quality of the real estate deal. The plans of using the money set by the investors are also carefully studied by the hard money lenders. Hence, it is recommended that the borrowers provide a proper business plan for securing the hard money loans. They need to convince the lenders about the low risk nature of the concerned investments.
The conditions and the terms of approving real estate investing with hard money loans, vary for different lenders. The investors have to find the perfect lenders suitable for them, and ensure that they keep a good relationship with them.
Such types of loans are useful for procuring or purchasing properties. They are also useful for the buyers having low finances, against those that are required for the project, but have good fixed incomes.
Some of the lenders of hard money have choices regarding the type of the real estate investments, such as rehabbing houses, purchasing houses and the options of lease purchasing.
It is easy to lose a potential deal for lack of finances and hence, maintaining proper relations with the hard money lenders is a priority for the investors. The support of such money lenders is very important for the investors if they want to complete the real estate project in a proper manner. Good relations with lenders are a blessing in disguise for the investors.
Charles W. Moore, a U.S. Army Veteran began Real Estate Investing in 2001. He’s a Successful Investor, and Author of, “Million Dollar Rent To Own Real Estate Secrets Exposed.” Get his Free Report on Rent To Own Real Estate Investing [http://www.Rent2OwnExposed.com] at: [http://www.Rent2OwnExposed.com] – Learn Real Estate Investing, Stocks Markets and Internet Marketing, visit: http://www.REIeBooks.com
Author: Charles W. Moore
Article Source: EzineArticles.com
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If you own real estate whether it is single family home, condo, apartment building or a commercial property, in this economy, chances are you already know about Hard Money Loan.
Basically a hard money or a private money loan is a sub-prime loan. A lender puts more emphasis on the security rather than your income and credit. When you go to a pawn shop to pawn an item, the shop owner does not care what you do for living, how much you make, and what your credit score is like. He only cares for the value of that time and that too a firesale value.
Similarly, a private lender, looks more at the value of your real property and how much equity you have in it. If the property is worth a million dollars and you owe $300,000. You can borrow $200,000 to $300,000 more on it easily. The formula lenders use is called loan to value ratio. In most cases you can get a loan up to 60% loan to value ratio.
Qualifying for this kind of loan is less stringent as compared to a conventional loan especially when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has little consideration. If you had great debt ratios and good credit score why will you be applying for a hard money loan? So, if your hard money lender is asking you for your credit score, you need to call someone else.
The Pros are it is fast. In most cases you can get funds as fast as five working days. Qualifying, as mentioned above, is a lot easier. Without hard money loans lot more people will lose their properties. Hard money or private money loans fulfill an important need in the society. It is a bridge loan and can be a great relief. It is also called a band-aid loan.
The Cons are it is short term. generally no more than seven years. Mostly it is from one to three years. It is interest only. Interest rate is high, from 10 to 12%. Fees are high. Expect to pay three to 6 points.
Not everyone who gets a loan like this has credit or income problem. In this economy, more and more people who are borrowing private money have good credit and good income but somehow cannot get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from private investors; from retirement; hedge funds and Trust Deed Investors.
Get more information on http://www.saratogabancorp.com
Amarjit Ahluwalia is the author of Make Your Money Make Money For You – a step by step guide to Trust Deed Investments. The book shows you how to earn 10% or more on your savings.
Keep in mind money is not power, knowledge is.
For more information on Hard Money Loans go to http://www.saratogabancorp.com
Author: Amarjit Ahluwalia
Article Source: EzineArticles.com
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What is a Hard Money Loan?
Hard money loans are a specialized type of real estate backed loans. Hard money lenders or private lenders provide short-term loans based on the value of real estate that has been collateralized for the loan.
Hard money loans typically have a much higher interest rate than bank loans because they fund deals that do not conform to bank standards and have higher risks. Hard money loans are more expensive than traditional loans because they are not based upon traditional credit guidelines. Hard money lenders may not require the income verification, credit score, etc. that typical lenders do, but their interest rate and points are higher.
“Points” on a hard money loan vary widely, some lenders may charge 1 to 3 points, while other lenders may charge up to 7 or 8 points. Some lenders base the points charged on the rehab experience of the borrower with regular clients getting reduced points the more business they do.
New rehabbers should not do more than 1 project at a time, especially in this economy. You don’t want to be stuck with a couple of houses when you do not have the finances to maintain them until they are sold. Also, as a new rehabber, you should get yourself registered (qualified) with a Hard Money Lender first so you can act fast when you find a house to rehab. You will able to get a “proof of funds” letter quickly from your Hard Money Lender to be qualified as a cash buyer. It is important to be a cash buyer since the sellers of foreclosed or distressed properties want fast deals. In fact, most ads or MLS listings require a pre-approved buyer and request the proof of funds letter to be submitted with the purchase contract. With most Hard Money Lenders, it is not difficult to get qualified. Usually it takes a simple application, a bit of information about your experience or lack thereof and some personal information.
The advantages of using Hard Money Loans are:
THINGS YOU NEED TO THINK ABOUT WHEN PURCHASING A HOUSE FOR REHAB
Pricing your home is one of the most important aspects of your rehabbing. You should determine a selling price when you purchase the property. However, sometimes things change and the original price you calculated to sell it is not longer an option. Always remember that you make a profit when you BUY the property, not when you SELL it!! This means that if you do not make a wise and well thought out purchase, there is no way you are going to make money. It just doesn’t happen because you want it to happen. This is a process that needs to be calculated to the end and that includes the SALE of the property after it has been rehabbed.
Pricing: Realize that because of the economy and the current housing market conditions, there are many properties on the market. Some are in great shape, some need a little work and some need a lot of work. Also there are a lot of pre-foreclosures, foreclosures and short sales. Ask yourself some questions:
Test the neighborhood:
1. Are there many distressed properties in the area?
2. Are there a lot of vacant lots?
3. Do the neighbors keep up their properties?
4. Are there schools nearby?
5. Are shopping areas convenient? Within walking distance?
6. Are there streetlights and sidewalks?
7. What about transportation? Bus lines? Train Lines?
8. Do comps in the neighborhood. Have your Realtor pull rehabbed properties in the same area that have recently sold (within 6 months), or do drive-bys yourself and look up the comparables with www.zillow.com or www.realtytrac.com. These sites will give you approximate values and can help you make the decision whether this is the right house to buy for rehab. Don’t fudge the numbers. Make sure you comps are similar size, number of bedrooms and baths, design, frame or brick, etc. If one or more of your “test items” does not work out, then move on to another property.
All of this must be considered when making a purchase for rehab.
The actual funding of the deal, the paperwork and how it works will be discussed in my next article.
I have ten years experience in Real Estate Investing. As a Real Estate Broker with my own company, I have personally rehabbed properties and wholesaled single family and two-flats in the Chicago area.
I am currently writing E-Books on Real Estate as an Investment, Hard Money Lending and Rehabbing for Profit that will be available on my website at http://www.RealEstateRehabProfits.com. Hard Money Lending criteria is available on the website http://www.zdeinvestments.com
I will also continue contributing shorter articles on many subjects pertaining to Real Estate.
Author: Rebecca A Miller
Article Source: EzineArticles.com
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Post-crisis traditional mortgage and home equity lending is of no help when money is needed fast. That is why many people turn to non-traditional loans backed by real estate, commonly known as hard money loans. For many this seems to be the only option at a time, despite higher interest rates, points, and lesser loan amounts. Many people, not accustomed to dealing with hard money lenders, have many questions that they have no answers for. Below are some important must-do things necessary to ensure positive borrowing experience.
Do Not Forget To Ask If The Lender Is Licensed
Always make sure that your hard money lender has a state license. License is always a proof of reputability and history of complying with guidelines set by government. Being similar to banks, while not being so closely monitored by government officials, hard money lenders have to have a license. While license is not a panacea, it is definitely an added layer of protection from illegal lending and scams.
Always Perform Due Diligence
Checking your potential hard money lenders is important no less than checking any other business you are planning to deal with. Many people think that since they are to be the recipients of the loan, the lender experience, reputation, and connections are of lesser importance. Always check how long potential lenders have been in business, how experienced the employees are, and what their funding sources are. Collect any references they may have. Such background check may ensure you will get the best deal possible.
Check Your Local Real Estate Market
Well, real estate market is doing badly nationwide; however some areas are better than the others. This is quite important, since generally the better the market is, the lower interest you may get on your hard money loan. Sometimes this difference may be as high as 10 points on your annual percentage rate. Therefore, make sure you know what you may be facing in advance.
Try To Deal With a Reputable Broker, Or, Better, With Direct Money Lender
It is always better to get straight to the source, saving money by eliminating any middlemen. While this may not always be possible, it is highly advisable to look for direct money lenders first. Should you find a few, choose the one that is most reputable. Should your direct money lender search bring no results, it is time to look for a broker. Knowledgeable and competent brokers are as not easy to find, as you may think. Therefore, do as much research as possible before making a selection.
Always Read The Fine Print
Hard money loans mostly feature an extensive fee structure, besides interest rate itself. They usually come loaded with points, sometimes as high as 4-8, and heavy prepayment penalties. While these may be tolerable if you intend to keep your hard money loan for a full duration, they are true money wasters once you decide not to keep your loan for a full term. If that sounds like your situation, and you only need the money for a short period of time, then proceed with caution: always try to find lender that charges minimal points and prepayment fees, if any.
Mary Wise is a personal loan consultant who has been associated with Bad Credit Loans and has more than thirty years of experience in finances. She has helped a lot of people to obtain Fast Unsecured Loans, and many other products regardless of their credit situation. If you want to learn more about Personal Loans you can visit her at BadCreditLoanServices.com
Author: Mary Wise
Article Source: EzineArticles.com
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You’ve decided to get a non-traditional loan. A hard money loan seems to be your best option at this time. Here are a few ideas and questions to ask designed to help aid your search for a reputable hard money commercial lender, broker, or referring source:
State License: Make sure the hard money lender you choose has a state license. Even though they are not as closely regulated as banks, it can safeguard you from scams and unethical lending procedures. Ask if they have a state licenses. Every hard money lender must have one. Make sure they do.
Money Lender Experiences: Ask how long they’ve been in business. How many successful deals have they made? How long have they been in business? How many collective years of experience do all the people at the company have? Look for a hard money lender that has “direct hard loans lender” in their advertising. It’s a good sign.
Industry Connections: How many hard money lenders and investors does this company work with? Go with one who has several funding sources (Hedge funds, Mortgage pools, Private Equity Groups, etc.). The more connections they have to direct hard money lenders with ready cash, the faster – and better they’ll get the job done.
The Commercial Real Estate Market: How is the market in your area? The better the market’s doing, the lower your hard loan interest rates may be. Probably abound 20%. If the market is slow you may end up paying up to 29% in interest. Make sure you know the market in your area.
Brokers: The company or referring source that helps you with your search for your hard money loan will have a lot of influence. Make sure they are competent. How? Ask someone who has dealt with hard loans before. Ask your lawyer. Do as much research as you think you’ll need. Hard money brokers will help you shop many investors and lenders to find a loan that works for you.
Direct Money Lender: Some hard wholesalers or direct lenders can fund your loan directly. Direct money lenders are a more direct way to get your loan underwritten and eliminate the use of a broker or referring source but, may have to start the application process all over again if you started with a broker. Either way, make sure you are working with a reputable company who has a proven record of success with hard lending.
Prepayment Penalties – Ask if there is a prepayment penalty. These are fees you’ll have to incur if you if you pay more than the agreed on monthly installment. This usually happens when you can refinance or sell the property quicker than expected. Try to find a hard lender loan that does not charge these fees at all.
Are you looking for the best deals and rates on Money Lenders? Visit http://directmoneylenders.com/ today for more information!
Author: Scott Bowens
Article Source: EzineArticles.com
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Why A Hard Money Loan.
The reason real estate investors choose to use hard money loans is that they are a source to purchase and rehab property to make a substantial profit that they may not have without the use of this expensive money. These short term loans are expensive and even if they were legal for a home owner to borrow from the private lenders offering these loans it would never be advisable. So how hard are these short term loans, you ask? The answer is threefold. They are restrictive in loan to value, they are high in rate and high in fees.
Restrictive in Loan to Value.
The maximum loan to value for most private loans range from 50% to 75%. No deals are done at the higher loan to value for two reasons. First the hard money lender requires lots of equity in case of default they can list and sell the property quickly because they will in theory be below market value. The reason I say in theory is because there are so many REO’s, Short Sales and foreclosure properties on the market today that what was normally considered an exceptional deal is common place. Therefore, private lenders are more particular about the properties, borrowers and loans they choose to fund.
Secondly, any real estate investment that has less than 30% equity are not good investments for the investors unless they are purchasing the property for the cash flow. In that case they are long term investments and not suitable for the short term nature of these expensive bridge loans.
High Interest Rates.
Whether as n real estate investor buying and or rehabbing commercial or residential investment real estate the interest rates are much higher than conventional commercial or residential investment lending. The rates are higher much because the risks are much higher and there source of these funds are limited. Risk and Reward. Supply and Demand. The risks are higher because these loans are not underwritten based on the standard conventional guidelines and there is a very limited or no secondary market for private bridge loans. This is generally not an issue because the borrowers know these are only short term loans. The terms range typically from 3 to 24 months. Therefore, the higher interest rate is of minimum importance because both lenders and borrowers know that the borrowers have an exit strategy to quickly payoff these high interest rate loans. Most lenders require a viable and verifiable exit strategy before they make will the loans.
Higher Points.
Because these loans are short term in nature the hard money lenders always charge discount points. They may charge 1 to 5 points. In addition the private money brokers will charge 2 to 5 points. An average a borrower will 5 to 10 points. Plus closing costs. These are high fees. They only make sense when an real estate investor will make substantially more money and they have no other way to fund the deals.
Why Use Hard Money Lenders.
Simply to make money. As a real estate investor you have choices in financing your deals. You can choose conventional financing that requires at 30% to 35% down payment for properties that are in good shape. There are many other conventional mortgage criteria including credit, cash reserves, seasoning of funds and property. These all make conventional financing almost impossible.
Another option is to use your own funds and not finance a deal at all. But, most astute real estate investors know that if they can make a net profit of $25,000, $50,000, $100,000 or more using a hard money loan they do not like the fees but they we pay them versus not making any money because of lack of financing.
Louis Jeffries has been a Mortgage Banker for over 20 years. A Investor Rehab Specialist Louis will help you fund you next rehab or construction project. Contact Louis louisj@alldominionmortgage.com 708-299-3244 Visit The Blogs Investor Rehab
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Author: Louis Jeffries
Article Source: EzineArticles.com
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One of the best scenarios for commercial hard money loans is when the borrower has an opportunity that he knows he will make a substantial amount of money on, needs to move on it immediately, and regardless of the fees the hard money lender charges. With this scenario the profit the borrower will make will easily offset the fees the borrower has to pay to the commercial hard money lender.
Commercial Hard Money Loan – Scenario 1
For example, we have recently worked with a borrower that had an opportunity to purchase a fleet of trucks for his business at a 50% discount. Total purchase price on the trucks was just over a million dollars with a value over $2,000,000. On the commercial hard money loan the borrower had to pay 3% in fees in order to get the loan or $30,000, to be able to save over a $1,000,000 of needed trucks for his business. He collateralizes the commercial hard money loan with his building and was able to close in 3 weeks. So $30,000 in fees to save over a $1,000,000…
Commercial Hard Money Loan – Scenario 2
Another similar example is when a borrower wants to purchase a property from a distressed seller at a substantial discount. Typically the seller can’t wait 60 to 90 days to close a conventional commercial real estate loan and instead needs to close in a few weeks or will not offer the discount.
So say the property is really worth $2,000,000 but the seller has agreed to $1,500,000 a $500,000 discount. The buyer would get a commercial hard money loan at 60% of the purchase price or a loan amount of $900,000 and pay say 5% or $45,000 in fees to the commercial hard money lender. So the borrower would save $455,000 by taking advantage of the opportunity. In this case most borrower wouldn’t care (at least that much) about paying the commercial hard money lender their points because of the amount of money they make off the deal.
In general these type of scenario are much easier to close than the bankruptcy/company turn around/debt consolidation type situation. Many commercial hard money lenders no longer look at deals like this.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial real estate loans or Commercial Hard Money Loans
Author: Jeff Rauth
Article Source: EzineArticles.com
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There are tons of loans available for real-estate investors. One type of loan commonly used by investors is the Hard Money loan. These loans allow investors to buy and fix investment property. If used correctly it can definitely put money in your pocket right away. But, be aware because there are some pitfalls you will need to avoid in order to be successful. Below explains how a Hard Money works and what to look out for.
1. Scope of Work- for these specific types of loans lenders will require the investor to provide a scope of work worksheet. Every repair you plan to make needs to be written down on this sheet. The scope of work worksheet is what the Hard Money lender will use as a guide, in order to pay for the project. If repairs are done that are not on the worksheet, then you may have trouble getting reimbursed by the Hard Money lender. The lender will want to see everything written down to be sure everyone is on the same page. Lenders will normally allow investors to change the scope of work in the middle of the project if able and necessary.
2.Requirements- Most Hard Money lenders now want 20% down from the investor on all projects. The lender will also want to see reserve money sitting in a bank somewhere. The investor’s monthly income will play a big role with the lender in approving the loan. Credit score is a factor, but they do not require a stellar score to be approved for a loan. The last Hard Money lender I used did not even pull my FICA score, they just wanted to see a copy of my credit report-which I was able to order for free. There will be requirements for loan to value, but each lender will have their own set of guidelines.
3. Over estimating repairs- Repairs on an investment property is always just an estimate. When rehabbing property nothing ever goes as planned. Over-estimate the repair that needs to be done to cover yourself if any repairs are added later in the rehab. If you did a good job with the initial inspection, and no additional repairs were needed then you can return the money or keep it. If you decide to keep it do not spend the extra funds. Keep the extra money as additional reserve.
4. Process- The process of receiving money for repairs is called a draw. After your contractor finishes a percentage of the work you will call your Hard Money lender, and tell them that you are ready for an inspection. The lender will send an inspector out to verify the work has been done and completed within code guidelines. Once the inspector gives the lender an o.k., the lender will release the funds that equal to the amount stated for the cost of work. For example, if you listed carpet repair $1500, paint $1200, and new light fixtures $100; when the inspector checks all the items off: the lender will cut you a check for $2800. Now you can understand why it is important to have all repairs and cost listed on the worksheet. If the repairs are not listed then they will not pay you. Normally the lender will give you 3 to 7 inspection dates depending on how large the project is. Unless you can convince the contractor to start working without putting money down, you will have to put the money up to get things started. Expect to get reimbursed from the Hard Money lender through your draw checks.
5. Refinancing- This is the most important part in rehabbing property using a Hard Money lender. Hard Money loans are short term loans with high interest rates. These interest only loans will have an interest rate of somewhere around 15%. That may seem high, but these types of lenders understand how important it is to make their money and get out. We need these companies in order to rehab properties if we cannot fund our own projects. Hard Money lenders realize the risk they are taking, so lenders ask themselves “WIIFM” (What’s in it for me). They compensated with a high interest rate for the risk they take. Hard Money lenders expect you to either sale the property quick for a profit, or refinance into a long term loan and rent it out to a tenant. Whatever your exit strategy is, be sure to do it quick. Hard Money loans are normally due in full 6-12 months after origination.
Hard Money lenders have allowed many investors to make money in real-estate. These types of lenders are more flexible when compared to traditional ones. They allow investors to make things happen when no other lenders want to take the chance on them. Their guidelines are loser and allow an investor to spread his wings. These types of loans are expensive, but they can allow more deals to be done due to the amount of money they have access to.
Watch this video on hard money loans—–> http://www.youtube.com/watch?v=6KcUGPxM0cA. Get a Free Report “How to Buy Wholesale Property Without Any Risk” at http://www.AssetPropertiesATL.com/cheapproperty
Author: Khalid Johnson
Article Source: EzineArticles.com
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