Private Hard Money Lender
A private hard money lender has a profile that includes being a local area loan provider, an entrepreneurial type, having the stomach for risk and a penchant for tough negotiating. This cash provider will typically lend money based on knowledge of a local situation. For example, if a business in the area suddenly gets into financial trouble, the hard money loan provider will probably have known about the business for years and have some firsthand knowledge about the owner or perhaps workers at the business. Often times private lenders of venture capital have a strong community spirit and want not only to make a profit but also to strengthen the local economy through the application of venture capital. In this case, the cash provider will negotiate a loan to the business, usually for three years or less and at an interest rate set by the loan provider.
In most cases, the private hard money lender will charge much higher interest rates than those charged by a bank. The reason for that advantage is because in most every case, the borrower already has financial difficulties and may be a borrowing risk. In the case of the local business cited above, it is simply a pay it or shut the doors deal for the owner. The hard money loan would be a seventy percent asset based lending agreement, meaning that the building(s) and equipment would become the collateral for the transaction. This seemingly low loan to value ratio gives some extra security to the lender in case of a bankruptcy or foreclosure.
In the case of the distressed company, the private hard money lender structured the loan in such a way that he funded seventy percent of the needed money, and the borrower put up his personal home's equity for the remaining amount. This second factor of a personal property lien was very important to the hard money provider who saw it as an extra incentive for the borrower to make good on a recovery plan. Since the private cash provider can structure the loan in any manner of his choosing, the request for the borrower to put up personal property as a lien is not unusual. Many people use the phrase, "everything has a purpose" with a shrug of the shoulders, meaning they hope that is true. The Bible says for the Christian that is an absolute truth when it reminds us, "And we know that all things work together for good to them that love God, to them that are the called according to his purpose." (Romans 8:28)
In the case of the real estate developer, the private hard money lender is often the most integral part of putting together a multimillion dollar land development transaction. Again, the use of a local private lender is essential because of the personal knowledge this individual will have regarding the property under discussion. For example, a prime piece of property such as a farm suddenly comes on the market, or is about to do so. A developer gets wind of its existence and knows that the property will be a fabulous location for high market home sites. The developer approaches a private hard money lender living within twenty miles of the potential property who is well aware of the land under consideration. The lender believes in the developer's potential plan and agrees to a seventy percent, one year loan at twenty two percent based on the appraised value of the land. But that's not all because the loan also includes a three point origination fee that in this case amounts to about forty thousand dollars.
But the developer then has a down payment on the property and enough cash to put in roads and utilities to start construction. The private hard money lender has none of the restrictions that a bank has on it when crafting lending agreements so it becomes critical for the borrower that an attorney look over every legal document signed with the lender before signing. Sometimes a developer is looking for a bridge loan to cover remodeling expenses for a worn down strip mall. A private hard money lender is often willing to provide sixty to seventy percent of a property's value and not call for the loan to be repaid until the property is fully redeveloped and resold or up and running at full capacity. Because of its close proximity local lenders are far more willing to invest in projects with which they are personally aware, as in the case of the strip mall redevelopment.
The term hard money refers to the very strict guidelines under which cash is lent. In some cases a private hard money lender will not care about a person's credit score, but will not be sympathetic to a borrower's inability to handle the loan wisely or the failure to pay back on time. Even paying a loan off ahead of time is often met with financial penalties drawn up in the lending agreement. The use of hard cash is costly, much more so than from banks, but one of the advantages is the very quick turnaround time in receiving it. Soft loans from banks may take thirty days or more to receive, and in the meantime a prime property or opportunity may vanish. The hard cash lender, if he so desires can go to his bank and withdraw the funds in hours or a few days and a prime opportunity is saved. To find a hard cash resource, talk to mortgage houses, title companies and real estate agencies.
Private Money LenderThe private money lender offers an opportunity for investors and borrowers alike. Finding a loan can result in frustration. Borrowers seeking financing run into lenders who say they will help but weeks later say they cannot help. If a person is seeking immediate help, waiting weeks and then encountering a setback creates added stress to an already stressful situation. Finding a private money lender who will be upfront and honest from the start is a relief and a blessing for anyone seeking financial backing. The Internet provides an opportunity to do research on a lender and their company. Knowing borrower to lender compatibility information before the application process allows for smoother development. If a borrower requires specifics that a financier cannot offer or if the financier only deals in specific areas, the match is not good and pursuing the relationship further is pointless. A person seeking assistance can save them self and the financial institution time and money by knowing what they need before entering into a consultation. The key to finding a good financier is to find one with similar goals.
A private money lender provides a loan through immediate funds. The process of financing, loan application and processing, cash is a very fast process. Because the monies are not from traditional lending entities but from private investors, less personal information is required for the application approval. For many mortgages or other financial backings, a look into a persons credit and at their credit score determines whether a finance is approved or not. The credit score would also determine how much of a down payment is required, and how high the interest rate on the advance will be. Since approval from a private loaner comes based on present and not past history, a persons ability to repay the loan relies on their stability and length of residency and/or on the equity of the property.
Each advance by a private money lender is independent. Most loaners offer quick funding, usually within 10 days. The terms such as the size of the loan, years of payment, and interest rate varies. These terms vary from state to state and from agency to agency. The terms also vary depending on the investors backing the lender. Various loan products are available and include the following: commercial, residential, land, and construction, as well as others. The security needed for approval can range from commercial buildings to commercial businesses such as mobile home parks. The needed security would also encompass land and residential property.
As a person seeking a private money lender, he or she need to have questions prepared to ask the financier. Many financiers will offer free consultation. The consultation will be more like an interview. While the person seeking to borrow will be interviewing the financier, the giver will gain useful information of the borrower from the questions asked. The following are a few sample questions an individual can ask during the interview process. Who long have you been investing? How available are the funds for dispersal? What qualifies you as an investor? What is your net worth? What type or types of investing have you done, do you do, and are you familiar with? These questions should help a person looking to borrow find a person suitable to their needs or cross out a private money lender not suitable for the borrowers needs.
People seek out a private money lender or know someone who has received help from one. Word of mouth is an excellent way to keep a business thriving. Word of mouth helps the consumer and the giver. While word of mouth may seem negative, word of mouth infers positive communications whether face to face or via email, phone, or text message. A good lender will use existing relationships to leverage new relationships. The goal will be continually to add new relationships to their establishment. Another goal would be for the relationships to be successful. A happy consumer will also be a repeat customer. A happy consumer will spread the word to friends and family. Word of mouth is very popular especially since today is such a technology age. Information can spread and spread quickly. Let them shout for joy, and be glad, that favour my righteous cause: yea, let them say continually, Let the LORD be magnified, which hath pleasure in the prosperity of his servant (Psalms 35:27).
For individuals interested in becoming an investor for a private money lender, now is a perfect time to get started and begin reaping a monthly return. Investments with a money lender are secure because the loans carry title insurance. The advances have varying rates, which sometimes enables a better, higher return. The opportunity for investors is nice because the investment is in real estate, which offers a greater stability than investing in stocks or other financial methods. In the last few years, a popular real estate investment is flipping houses. Flipping a house requires no money down and only the effort that a flipper wants to invest. However, house flipping may not be as easy as it appears. A house may look structurally sound but upon investigation, after closing, a person may find all kinds of structural challenges. With any form of investment, a person needs to be aware of where he or she is investing their money. Investing with a reputable money lender is a sure safe way to invest ones money.