Reiwired: The Helping Hands Of Hard Money Lenders

span>Share:

Hard money lenders may be considered a last resort by some borrowers but to house rehabbers, they are a helping hand. They are a major factor in short-term real estate investing, especially for investors who fix and flip houses. Also known as private money lenders, they help investors close deals fast.

Many investors are adamant on tapping this line of credit because of the high interest used. Some are also uneasy over the points system used by many hard money lenders. Under this system, the borrower will repay the loan plus some points. A point is equivalent to one percentage point of the borrowed amount. After all, who wants to give away a part of the profit you worked hard for?

Those who use private money financing, however, view things from a different perspective. They do not mind losing $5,000 in interest to these lenders if they will be able to earn $30,000 from the loan. This philosophy is known as investing using OPM, or other peoples money. Hard money lenders help investors earn money through OPM investing.

Lets take the case of house rehabbers for an example. If a rehabber went to a bank or another traditional lender to borrow money, he will receive enough cash to buy a property. However, let us remember that rehabbing houses is not only buying properties, it is also repairing and selling them. If you dont have other sources, will you be able to rehab a house using a bank loan alone? Chances are you will just give the project a miss. Thats a wasted opportunity to earn huge money.

Because of the different system used by hard money lenders, rehabbing houses with zero or little capital has become possible. Instead of basing the loan on your capability to repay and on the value of the property you are buying, they determine the amount based on the ARV. The ARV, or after repair value, is the value of the property in a good condition. Hard money lenders across the country use varying percentages but most of them fall between 60% and 70%.

For example, a lender agreed to grant you 65% of the ARV of a property that is worth $100,000 in a good condition. The property is priced $45,000 in a bad condition and will need around $15,000 repairs and improvement. You will need another $10,000 for interest and other expenses. All those expenses will be shouldered by the loan and you will end up taking home $30,000 from zero personal money down.

Amazed with the system used by hard money lenders? Learn more about it at REIwired.com today.

by: Daniel Mc Grey

POST COMMENT

Rehab-real-estate: Hard Money Lenders And Creative Financing Facts About Hard Money Lenders Rehab-real-estate: Getting Addicted On Fixing And Flipping Properties Rehab-real-estate: Staying Professional When Rehabbing A Home Rehab-real-estate: Seeking The Assistance Of Hard Money Lenders Hard Money Financing: Get Hard Money Loan For Fast And Easy Cash A Guide Into Makati How To Search For The Perfect Real Estate Deals Taxing Questions Review: Orange County Commercial Properties And Orange County Apartments Greece Real Estate Scenario Finding Comfort And Luxury At Dallas Apartments Investing For Beginners: Is A Real Estate Investing Career For You?