Hard Money Loans For Real Estate: How to get funded, and find the best deal possible.
Hard Money Loans For Real Estate Investors:
In today’s market, there is a large inventory of properties available for you to buy, at attractive prices to fix and flip, or buy and hold as rental property. Once you have a property under contract, your next step is to secure financing for your new real estate investment. In the current economic climate, hard money loans can be an attractive way to fund your real estate deals.
Hard money lenders are widely available, contrary to popular belief, but only the most organized and prepared investors are taken seriously for a hard money loan.
You have to show that you are a serious investor. You need to have a proposal about the property. Explaining what your plan for the property is, what the costs are, and why it’s a good deal.
All the information detailed below should be gathered in a presentation binder.
Presentation Letter. This section should contain a FNMA 1003 loan application, a copy of your credit report, a copy of your driver’s license, and a brief resume of your experience. If you have no experience, at least put a list of books and seminars you’ve taken.
Sale Contract. A copy of the sale contract with addenda.
Appraisal or BPO. Ideally an appraisal, but at least a real estate broker BPO (broker’s price opinion) goes here.
Insurance Binder. A copy of a commitment to insure from your insurance provider goes here.
Title Work. A copy of a title letter report or the full title commitment.
Photos. Color photos inside and outside of the property go here.
Repair estimate. A repair estimate from a licensed general contractor.
Profit Projection Statement. Insert a spreadsheet of the breakdown of the numbers: your purchase costs, closing costs, holding costs, repairs, realtor fees, etc.
Timeline. An outline of your construction project goes here.
Once you have your proposal put together properly, you will have a much better chance of getting your hard money loan approved.
Hard Money Loans: Five tips for real estate investors seeking a hard money loan.
- Don’t get emotionally attached to a property. Hard money lenders are only interested in the numbers. They aren’t going to take your word for it. Even if this property is wonderful and special. They are going to do their own due diligence. Which means you better have your facts straight, in your proposal. Or you will look like a rank amateur. Be conservative with your numbers.
- Don’t waste their time. The numbers are simple, they don’t lie. Wasting a lenders time is one of the biggest mistakes you can make. Because it may burn your bridges with that lender, and damage your reputation in the industry. Successful real estate investors build relationships. Check the lenders website, brochure, or literature. Find out what their requirements are. A few minutes of research, can save a potential relationship. It’s always better to walk away from a potential deal, than to waste a lenders time, and yours.
- When it comes to hard money loans. NEVER pay any up front fees, unless they are nominal, and used to cover the cost of your credit check.
- Incorporate your exit strategy into the proposal you present to the lender. Convincing them you are a serious investor, with a good pool of qualified buyers. Will go a long way towards getting your hard money loan approved.
- Do your own due diligence. Don’t apply for financing with the first hard money lender you meet. Research 3-5 lenders, compare their fees, policies, and internet reviews. Ask them for references. Speak to others who have used them. You want to make sure you are getting a fair deal, from a reliable hard money lender.
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