What is Hard Money?

For many years, seasoned real estate investors have used hard
money lenders to finance real estate deals. Hard money lenders
are private investors  that have large sums of capital to lend to
real estate investors for a quick return.

They fund the purchase, closing and rehab cost of projects. The
most that you would put  in the deal is the appraisal fee. A hard
money company consist generally of 3-4 wealthy investors who
have set aside 2 - 3 million dollars simply for investing in real
estate projects. The only disadvantage is that these hard money
lenders are extremely difficult to locate because they are small
operations.

The advantage of dealing with these lenders is
that you are most likely dealing directly with the
person lending the money.

The second and most important advantage of hard money
lenders is that they --rarely focus on credit scores--
because their loan security is the equity in the house which
decreases their risk to nothing. This is why they're not
concerned about credit scores, only the equity. The loan is
generally short term, from 6 months to a year and they loan up
to 80 % ARV (After-Repaired Value).

Look at these real life deals below---

Deal 1)

Purchase price $25,000
Rehab cost $25,350
After-repair value (comparable market value) $95,000

Hard Money Lender  funds (53%) of ARV which is $50,350
giving you $44,650 in profit.

Deal 2)

Purchase price $35,000
Rehab cost $44,200
After-repair value (comparable market value) $99,000

Hard Money Lender funds (80%) of ARV which is $79,200
giving you $19,800 in profit.


These hard money loans will cost you more in interest and
points than a sub-prime lender but  regardless of this you make
a profit without hardly investing anything into the deal. Hard
Money Lenders hardly ever advertise and are difficult to find
because they only cater to investors with the lowest tier scores
who can't qualify for loans anywhere else.

We  took over 2 years to search and find these hard money
lenders We have over 106 contacts. Below are some features of
these programs.

Interest Rates and Terms   Hard Money

Interest rates are a average of 12% and are based on the
investors profile.  Payments of hard money loans are "interest
only" and generally due on a monthly basis. The first payment is
due around thirty days after closing. Typical funding terms is 6
months with extensions up to 12 months.  Extended terms are
available on a case by case basis.

Inspections & Funding Draws   Hard Money

Before funds for  the repairs of a property are dispersed, an
inspection will be needed before funds can be drawn. Draws
are based on a work/draw schedule that you have submitted
before funding. Once the work is completed per schedule an
inspection is done to ensure that the work is completed in a
professional manner. Funds from hard money loans are
available for release within 24 hours after an approved
inspection.  

Draws  Hard Money

Generally hard money lenders give  3 draws for a typical single
family home. The quantity of draws is determined by the size and
complexity of the project.

Lien Position   Hard Money

Hard money lenders generally require a first mortgage

Closing Cost  Hard Money

Generally up to $2000 of closing costs (i.e. title insurance,
recording fees, etc.) will be financed as part of the loan
proceeds.

Pre-Qualification Letter  Hard Money

If you are pursuing a lot of properties listed with real estate
agents you will need a pre-qualification letter to submit along
with your offers on many distressed properties, particularly those
that are owned by institutions. You can obtain a pre-qualification
letter from a hard money lender for this purpose, and in fact,
your offers will carry more weight when submitted with a
pre-qualification letter from a lender that is active in your area
whom most real estate agents - particularly the ones that
specialize in foreclosures will recognize.

"We primarily
evaluate the equity
share in the property,
not the clients credit."
Hard Money
Lender, Cleveland,
Ohio

"I closed 3 deals in
two months from using
hard money"
John Parker,
Bethesda, MD

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