What Type Of Financing Is Used To In A Real Estate Wholesale Deal, And Do I Need To Qualify?
Together, my partner and I have wholesaled a combined 450 Deals over the last 7 years
. And the majority of these deals were funded either one of two different ways and they are:1.) CASH ONLY DEALS. Where the Investor/Buyer brought all CASH to the closing to purchase the property. My FAVORITE type of buyer (cash is king:))!
2.) HARD MONEY (Private funding). Hard Money is "private money" meaning, there are no traditional institutional banking guidelines associated with the money. The money comes from private individuals who lend their own money directly to the wholesale buyer. The money is termed "HARD MONEY" because the point (4-10 points per deal) are high, and the interest rates are High (12- 20 %) and the term averages of ONLY 12 months! Now that's some HARD DANG money!
Hard money has some pretty "harsh" terms, but also has it's benefits! Here are a few of the GREAT benefits of using hard money as a real estate investor:
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* Your deal is usually a true "NO MONY DOWN" deal! You can't beat that! Hard money lenders can lend you your:
a.) purchase price
b.) repairs costs
c.) all of your closing costs
And roll it all into one mortgage. Also, Hard Money Lenders do not require you to put the typical 10% to 20% down on the property you are purchasing (conventional banks do!)
* Hard money lenders will usually lend on any property regardless of its current condition, whereas most conventional lenders (Banks) will not!
* Hard Money Lender do not report to the Credit agencies! So your debt to income ratio is NEVER effected regardless of how many hard money loans you currently have open! This means you can do multiple deals at once using different hard money.
* A lot of hard money lenders will even give you 3-6 months after closing on the property before you need to make your 1st mortgage payment to them. This gives you time to repair the property and rent it or sell it before your 1st payment ever comes due! This really lowers traditional "holding costs" tremendously!
So as you can see, Hard Money has been specifically designed to accommodate the special needs of the real estate investor. Even though the money has "hard" terms, it works so well for real estate investors. Typically, most investors who borrow hard money only stay in the loan for an average of just 6 months, before either refinancing-out, or reselling the property in question.
We as the Real Estate Wholesaler, NEVER own anything long term. The longest we EVER own is a few hours during a "double closing" more on "double closings" some other time). And if we are "assigning contracts" we NEVER own at all.
So, we never have to "Qualify for financing". When a deal is structured with a Hard Money Lender, and a "double closing is going to get the deal done, the same Hard Money loan being used for the deal, will close both sides of the transaction (between You and the Original Seller AND You and your Investor/Buyer). So, only your Investor/Buyer needs to qualify with the Hard Money Lender for the deal! This is because your Investor/Buyer is the "end user" of the money and is the one guaranteeing the loan, NOT YOU! Case Dismissed!
More Free FAQ Video about wholesaling houses here? WholesalerSmarts.com
by: Eddie Case