Real Estate Investing is better today than it has ever been. Imagine getting a property for less than half of what it was valued at 10 months ago. The problem is getting the cash to close the properties. That is why investors have and always will rely upon hard money loans to get real estate deals done.
A hard money loan is a loan based on the after repair value of the property. The loan is not based on the actual credit worthiness of the borrower. If the deal is good enough, you can potentially get a real estate deal done with no money out of pocket.
When you are working with a short sale or bank owned property, you must present a proof of funds letter. Proof of funds shows your ability to actually close on the property if the bank agrees to the price. Hard money lenders are able to provide you proof of funds letters to allow your deals to get negotiated.
Now the rates are not the lowest rates available for real estate purchases. A typical hard money loan will require you to pay 5 points upfront and pay back the money borrowed at a rate of 15%. The 5 points means you pay 5% of the total loan at the time you borrow the money. For example: a $100,000 loan would require you put down $5,000. This typically is the amount of money that the actual lender will make on the loan as the servicer of the loan.
The lack of credit available for real estate in today’s credit crunch makes hard money loans even more sensible. Yes, the rate is high as well as the points. If you are going to make money on the deal, then it is worth it to pay the money.
The lenders will also allow you to borrow the money for the repairs in many cases. The total amount of money that they will generally let you borrow is 65% of the ARV after repair value. So if the property is worth $100,000 and you get the property for $50,000, you have $15,000 worth of room to get the project done. That is not that much an you will probably need to get the seller to come down on the price, or use your own money to get the projects done.
I have used hard money to get deals done for the past 6 years. I also have worked for a hard money lender allowing me to see the business from both sides. I have used my contacts to put together the most comprehensive list of hard money lenders nationally. Go to Local Hard Money and get the best local lenders to fund your deals.
If for no other reason, you need to at least have the option of using hard money lenders to close your real estate deals. The more exit strategies you have available, the more money you will make in real estate investing.
Author: Doug Powell
Article Source: EzineArticles.com
Digital Camera News
Comments are closed.