financing secrets of a millionaire real estate investor.pdf

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CHAPTER6 Hard Money and Private Money A loan shark is simply a thief without a Wall Street office. —Lyndon H. LaRouche, Jr. An often overlooked and very valuable source of funding is private money. Small companies and individual investors called “hardmoney lenders” are an excellent resource for quick cash. Private lenders are often known as hard-money lenders because they charge very high interest rates. I have personally borrowed at 18 percent with 8 points as an origination fee! These rates may sound outrageous at first blush, but it is the availability of the money not the cost that matters. Emergency Money I recently won with the high bid on a condominium auctioned by the Department of Veterans Affairs (VA). I made the bid in the name of a corporation rather than my individual name. I was assured by my mortgage broker that the lender that had my loan application would 83
84 FINANCING SECRETS OF A MILLIONAIRE REAL ESTATE INVESTOR permit me to finance the purchase in a corporation. At the 11th hour, the lender changed its mind, requiring me to close in my individual name. I asked the VA for permission to amend the purchase contract to name me, rather than my corporation. The VA refused, and I now had less than five days to close or lose the deal. Because my winning purchase bid was an excellent price, I opted for using hard money to purchase the property. I paid 14 percent interest for a few months, then refinanced the property at a good interest rate. All in all, the high cost of the hard-money loan was worth it and saved me in a pinch. Hard-money lending criteria are based on the collateral (the property) rather than the financial strength of the borrower. For this reason, hard-money lenders are often referred to as “equity” lenders. A hard-money lender looks at a loan, thinking, “Would I want to own this property for the amount of money I lend this person” Hardmoney lenders generally go no higher than a 75 percent loan-to-value. The goods news, however, is that many hard-money lenders will base their loan on appraised value, not purchase price. So, if you negotiate a very good purchase price, you may end up with an 85 percent loanto-purchase ratio. Hard-money lenders can be expensive but also easy to deal with if you are in a hurry for the money. In many cases, the availability of the money is more important than the cost of borrowing it. Where to Find Hard-Money Lenders Hard-money lenders are fairly easy to find, once you know where to look. The first place is your local newspaper, under “money to loan.” The ads will usually look something like this: Stop Foreclosure! Real Estate Loans. Fast and Easy. No Credit Required. 48-Hour Funding. Call Fred 555-1134.
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This publication is designed to pro
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vi CONTENTS Government Loan Program
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viii CONTENTS 8. The Lease Option 9
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CHAPTER1 Introduction to Real Estat
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1 / Introduction to Real Estate Fin
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CHAPTER2 A Legal Primer on Real Est
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2 /A Legal Primer on Real Estate Lo
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Page 118 and 119: 8/The Lease Option 107 The house ne
Page 120 and 121: 8/The Lease Option 109 your option
Page 122 and 123: 8/The Lease Option 111 • whether
Page 124 and 125: CHAPTER9 Owner Financing If you’d
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Page 128 and 129: 9 / Owner Financing 117 a corporate
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9 / Owner Financing 133 of each mon
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APPENDIXA Interest Payments Chart 1
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APPENDIXB State-by-State Foreclosur
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APPENDIXC Sample Forms Uniform Resi
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SAMPLE FORMS 145
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GL OSSARY abstract of title A compi
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GLOSSARY 181 improvements. Also use
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GLOSSARY 183 applied towards the pu
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GLOSSARY 185 security instrument A
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RE SOURCES Suggested Reading Altern
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IN DEX A Acceleration clause, 118 A
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INDEX 191 blended, 73 Federal Reser
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INDEX 193 W Washington Mutual, 22 W
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