First of all what is hard money? Hard money is a loan that has the following characteristics;
- Short term loan usually 3-9 Months
- Although can be used sometimes just for 1 day – yes one day sometimes used in a double closing… what is a double closing? We will get to get that soon.
- High interest ranging from 10-14%
- Why in the world why I pay 14%??? Let me explain soon..
- Points charged at the closing of the subject property
- Ranging from 3-5 Points (percents), can be rolled into closing cost
- We can give you the money to buy the property as WELL AS loan you the money to FIX/Repair the property!
Hard money is used wisely can close you more deals, and make you money then you can have ever imagined. Here is the KEY !! Remember this and etch this into your brain.
THINK OF HARD MONEY LENDERS AS YOUR PARTNERS – YOU MAKE MONEY – WE MAKE MONEY – AND WE KEEP DOING IT OVER AND OVER
What to look for in a property that works for hard money loans…
in a NUTSHELL – A DEAL !!!
Ok what is the definition of a deal? Glad you asked… first lets talk about some definitions.
- A.R.V. = After Repair Value
- L.T.V. = Loan To Value
- Repair Cost which is self explanatory
- Holding Cost = Closing Cost + Interest Payments
Now that is explained… let imagine you know a certain area very well, or analyzed a home and found out it is worth $200k, for sale for $100k with some repairs of about $30k. Let’s break it down mathematically.
100k (cost) + 30k (repairs) + 10k (holding cost) = $140k
200k/140k = 70% of ARV
200k – 140k = 60k Profit, as you can see there is money to be made on this deal. And this is what we are looking for, deals that are hard to fail… deals that will sell, and it makes sense.
So as you can see, you make money and we make money. You can do multiple properties at a time, as we see your track record. Essentially in some cases we will lend you the money to buy it, and fix it. So you wouldn’t have to pay for anything. We even have contractors you can work with that we know do an awesome job. So it’s a win-win for everyone.