Using hard money is a great way to get ahead in the world of real estate investments. Here are some tips to help you along the way.
Not all hard money lenders will require the same amount of money down—and some may not require any at all. However, it is always a good idea to have saved some money first. Even if lender doesn’t require a large amount down, you’ll save money in the long run if you are able to invest your own money in the project. Hard money lenders like to see that their clients have money in the bank. Most lenders can fund the majority of the cost that includes both the sale price and the renovation cost. Generally, lenders will finance about 70% of the total purchase price.
Be prepared for higher interest rates than a conventional loan. For each investment deal, hard money lenders evaluate their risks. You should walk into the deal knowing you will be looking at anywhere form 7.99% to upwards of 16% depending on your lender. Typically, hard money loans fall into about 10% interest rates. Points can range from 3 to 6.
Understand exactly how much you will need. Make sure you walk in a lender’s office with a budget, appraisals and a business plan. A legit lender will not want to do business with someone off the street that has an “idea” and thinks it will cost “about this much.” They want solid numbers and to be confident that you know what you are doing.
Make sure that you are working with a transparent lender. Your hard money lender should provide detailed documentation that outlines the entire process you will be going through. Most lenders will give you a free consultation before you apply to make sure that you are confident in them. Be aware that there are many so-called lenders that aren’t truly lenders—they are brokers trying to party another’s investment. It is beneficial to do a little research on your lender before signing anything. Make sure they are established and you are able to see some of their success stories. There are also lenders out there that prey on the vulnerable with bad credit. Many people with poor credit will get themselves involved with anyone saying they will approve a loan for them. If a hard money lender tells you they will finance you at 6% and 2 points with your 510 credit score—they are not legit. And, even if they are, make sure you read the fine print. Because, if it is too good to be true—then, it most likely is not true.
Before signing your name of the dotted line make sure all your t’s are crossed and your i’s are dotted.
An honest lender will not pressure you. In fact, they will take the time to make sure what is at stake and that you have all the necessary information. Working with a hard money lender can aid in your success, but it is imperative that you find one you trust.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.