Hard Money for Hard Times

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What You Need To Know To Borrow Hard Money Now

Hard Money for Hard Times
By Scott C. Seckel                                     back. Small hard-money lenders with         repair value. Hard-money lenders are
                                                       lax lending standards went out of busi-     not as regulated as banks. They under-
    It’s a Dickensian time to be a real                ness.                                       write based on how they feel about a
estate investor. Buys of a lifetime line                                                           deal, not on set guidelines.
the streets, but money is harder to                    ACCIDENTAL REPO MAN &
come by than it’s been in years. Banks,                LANDLORD                                    LOCATION MORE IMPORTANT
never an investor’s best choice, have                      “Most of the hard-money lenders         THAN EVER
tightened their vaults. Lenders polish                 in town have foreclosed on so many               “They should be more selective
spectacles thoroughly before scrutiniz-                borrowers they’re becoming asset            about what they’re buying,” Reichman
ing deals. In times like these, investors              management companies,” Reichman             said. “Collateral quality is more impor-
need to know how to work with hard                     said.                                       tant to us. They should have more
money to make deals happen.                                Lenders who are still standing in       liquidity and be prepared to carry it
                                                       the wreckage now have stricter guide-       longer.”
LOANS AVAILABLE                                        lines. Some lenders went from 20 loans           The general demise of the market is
     Hard-money lenders make loans                     a month to two. In the last two months,     an advantage, Stevens said. “It’s hard-
in hours, not months, like banks. The                  AFG went back up to approving 60            er for the small-time rehabber. We can
term “hard money” comes from the                       percent of loans crossing their desks,      steer people to some areas and advise
usual tight terms and high interest                    Reichman said.                              them to stay away from others. We’ll
rates. Hard-money lenders will also                        “It’s difficult to lend in a price-     work with and talk to the hard-money
make loans on properties that banks                    declining market,” he said. “Our            lenders so we can have a smooth tran-
won’t touch, like crack houses and                     underwriting intensity has increased,       sition to conventional financing.”
other distressed properties.                           we’re much more selective. We’re mak-            Reichman said his doors are open.
     “We’re seeing huge opportunity,”                  ing the customer put in more money.”        “Our company has lots of liquidity
said Greg Reichman of hard-money                           AFG still does not require any type     and we want to put the money out,” he
lender Active Finance Group. AFG                       of FICO score or qualifying. REIN now       said.
finances deals in seven Western states.                requires a recent credit report, a 1003
“There’s more opportunity than there                   application (the standard uniform resi-        RESOURCES
has ever been. You just need to walk                   dential loan application), and a pre-
through a minefield to find it.”                       qualifying letter from a conventional          Active Finance Group
     Before the market turned, hard                    lender or broker.                    
lenders ranged from big national insti-                                                               602-252-1155
tutions to a guy in his basement with                  LOWER LOAN-TO-VALUE                            CSI Mortgage
a little extra cash, said Mark Stevens                 RATIOS                               
of REIN Mortgage, a Colorado-based                         “As a rule of thumb now, most              480-860-4028
hard-money lender.                                     hard-money lenders want to see $20,000         Marken Funding
     Flippers ended up in markets that                 of liquid cash for every $100,000 bor-
weren’t doing what they were sup-                      rowed,” Stevens said.                          602-252-0742
posed to or what they had predicted.                       Larger, national hard-money lend-
                                                                                                      Mortgage Banking 4 Investors, LLC
They defaulted or took out permanent                   ers and brokers typically look for about
financing to get a conventional loan                   65 percent loan-to-value of the after          866-971-4471
and rent the property. With the tur-                   repair value, according to Stevens.            602-748-3628
moil in conventional financing, inves-                 Most will include the purchase price,
tors ran into a wall trying to refinance               rehab costs, points and six months             REIN Mortgage
from a hard-money loan to a conven-                    interest into the loan, which must still
tional loan. Lenders took properties                   be within 75 percent or less of the after      303-770-2038

62   May - June 2008 . Personal Real Estate Investor                                             

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