Hard Money Lenders: Financiers You Can Count On
Hard money lending in South Carolina is just as well-known as it is in most other states, specifically with property investors. You may wonder why credit seekers would likely decide on private hard money lenders over usual loan organizations. You may already know or read that private funders impose extra or they are thought of as a last option for financing.
The fact is South Carolina hard money lenders offer many services that the bankers cannot or won’t. They accept more loans, in a timely fashion. They be aware of the needs of the investor, since almost all of them have invested in real estate. Numerous of them still do. Some of them are actually known as advisors, a very good option for the rehabber or reseller. The charges that they ask for are practical, typically, but to receive the ultimate package, it is best to search around.
The thing is, several states have laws in place that keep consumers from irrational loan rates and penalties. There are a number of legislation that affect the practice of hard money lending in South Carolina, but there is no max on the interest they can ask for; no maximum restriction on charges. Once you start shopping, you will see that there is a wide variety of charges. As with other issues, the best method to review is online.
You’ll see that South Carolina hard money lenders are ambitious. They desire your market, so they promote. One of the best methods to choose a service would be to just examine their website. Look for the information that highlight their approval system, transaction programs and extra services. The more upfront they’re about what they have to offer, the more likely it is that you have determined a dependable legitimate funding source.
It is likely you want to avert anyone that asks for an early repayment penalty. In the event you are reselling properties, your intention is to get the repairs done and find a customer quickly. You generate losses when a house is sitting empty. In case you are doing rehabilitation jobs, you should search for a South Carolina hard money lender who specializes in rehabilitation financing. They can provide funds for acquisition, closing fees and repairs, in the event the loan to worth ratio is suitable.
Lastly, you don’t have to limit yourself to hard money lending in South Carolina, specifically. For many years, most private lenders only worked in small locations, in order that they could travel to the property whenever they wished and look around. Today, you will find great companies that provide loans nationwide. Take them into consideration. They might be a good choice for financing your future ventures.
Hard Money Lenders: Solutions You Can Get From Private Money Lenders
Who does risk lending to someone in foreclosure? Who does advance cash to some borrower trying to acquire a big property whose price hasn’t been correctly established with a traditional evaluation? Can there be any person who would take a risk on re-financing somebody’s home loan in order for this individual can take away large amounts of cash?
This is practically nothing new for private cash loan companies or people in the hard money loans field; it is almost all in a day’s work. Hard money lenders are private individuals, groups, or small nearby businesses who work outside of the regular borders and limits of traditional financing institutions. They create loans offered to these short of funds and of course, the desperate, just like financial institutions do for their normal customers.
Private money lenders are inherently much more costly in terms of interest rates; but sometimes being the only ones in the spot to assist unfortunate borrowers save awful scenarios. There are private traders who, if the condition is favorable (rate of interest is sufficient and the risk is low enough), might put up the money for a borrower. There are actually brokers along with other agents who organize such hard money lender deals or private money loans.
If it all seems somewhat too shady and a little bit too much with the underworld, fear not. Private money lenders won’t send Chili Palmer following you if you forget a payment. They are not in the business of smashing kneecaps. There are no enforcers. However, this is business. They ask for interest rates that will make typical borrowers tremble and generally base lending decisions on regardless of whether there will be enough equity in their subject asset that they can foreclose and still make an income. Private money acts a unique market and clearly, fulfills a market in mortgage lending; it helps borrowers who’ve specific wants or credit problems that will obstruct the approval of their typical financing. That is, if you can find them.
Normally, private money lenders tend to function inside a specific geographical limit. They prefer to look at assets they are lending against personally and know the place of the land, so to speak. In case you’re trying to find these kinds of private lenders, check your local newspaper’s classifieds or search on-line for nearby mortgage brokers and ask around, it won’t hurt.
Shadow Invetory To Loom
If you conduct a search for real estate news you’re more than likely to find a number of articles referring to shadow inventory. Many of these articles have titles such as, “Shadow Inventory Causing Delay in Recovery” and “Shadow Inventory Hints that Real Estate Bottom is Near”.
Many of my readers have been asking me about shadow inventory, what it means for real estate investors, and how it’s affecting the recovery. As hard money lenders who primarily lend to real estate investors we have been watching this situation closely.
What exactly is shadow inventory?
Shadow inventory in real estate refers to properties that are in default, foreclosed on, or already bank owned. Basically, any property that is or was distressed that will be on the market in the future, but not yet, is shadow inventory. The reason it’s called shadow inventory is because the properties lurk in the darkness of banks’ balance sheets waiting to be put on the market and sold. Banks either can’t or don’t want to sell them yet (I’ll explain why below).
Who is looking to buy the shadow inventory?
Once the banks do decide to sell the properties, they are most likely going to sell for just below market value and they will most likely need repair or rehab. (Many properties have been vacant for months or years.) Real estate investors have been chomping at the bit, waiting for banks to begin releasing the properties so they can get their hands on some and turn a profit. Once the banks are ready to begin letting them go in large scale, there should be an influx of properties on the market ready for investors to make them livable again.
Homeowners too would like to get their hands on cheap properties but financing and other restrictions exist that prevent many from buying directly from banks.
But real estate investors aren’t the only ones watching the shadow inventory closely. Economists are also keeping an eye of shadow inventory for a few reasons. They know that when the banks begin to release the properties in large numbers, the banks are signaling their prediction that the housing market has already hit the bottom and is on its way up. Also, because housing is such an important factor of the economy as a whole, shrinking shadow inventory means an expanding economy.
How can shadow inventory help recovery?
While it’s no secret that a growing housing market plays a huge role in the economy, the converse is also true; stagnant housing causes high unemployment and slow expansion of GDP. Each property sold can add tens of thousands of dollars to the economy just in the form of furniture, fixtures and labor.Loans help grow the economy too. It’s called fractional-reserve banking. (This is not a Macroeconomics course so I won’t bore you with the details but feel free to do some research on your own.)
So why don’t the banks sell the properties now?
The shadow inventory is so large now for 2 main reasons. One reason is out of the banks’ control and the other is a business decision made by the banks. First, many states and municipalities have enacted laws that slow the foreclosure process. Mediation and modification attempts are required before the bank or loan servicer can reclaim the property. In many areas this can take a year or more. In addition to local regulations, the banks know that holding the properties will allow home prices to rise and therefore they can get a higher return when they do sell.Banks want to get rid of their properties fast. Common logic would say that selling the properties and getting them off the books would benefit the banks. For the most part, this is correct. What needs to be compared is the price of a house if it sold today versus the price it will sell for in the future minus carrying costs. I haven’t independently verified the figures but if the banks are intentionally holding properties, the expected future price (minus carrying costs) must be higher than today’s price.
We don’t know when the banks will release their inventory but it should help the economy.
Read more about this subject at http://www.HardMoneyBankers.com/real-estate
How Do You Feel About HR 1526?
Bill Posey (R-Fla.) has introduced H.R. 1526 in the U.S. House of Representatives. Under the proposed law, early distribution penalties would be waived on qualified retirement plans IF the funds are used to buy a house that has been in foreclosure for one year or more AND the purchaser holds the property for 2 or more years.
Posey’s concept seems to be that this would promote homeownership and stabilize neighborhoods, rather than having an investor swoop in, buy the property, and quickly “flip” the home for a profit.
I certainly love the out-of-the box thinking, but I don’t think he’s thought this all the way through.
Has Posey actually been around homeowners? How ’bout conventional lenders?
In the world of consumer retail real estate, I have found 2 things to be true:
1. Retail homeowners don’t understand this market.. How many quality properties does he think remain listed for more than a year? Perhaps he’s in a State where that’s true, but that’s certainly not the case in my home State. Usually, properties that are in good, move-in condition sell within months as long as they’re priced correctly. Only the investor grade or bottom-end properties sit for more than a year. Why? Nobody wants them because they’re junk, over-priced, or mired in endless short sale red-tape.
2. Conventional lenders hate junk properties. Think about it - it’s tough enough to get financing on a good property. How is a retail homeowner going to get a loan on a property lying around for a year because it needs moderate to extensive rehabbing (which are the ones that sit around for a long time).Conventional lenders only lend on propeties that need only paint and carpet. Who will lend on properties that need more?? Hard money lenders? Oh, that’s right – our same government has over-regulated us out of the consumer real estate marketplace.
One other point of contention with Posey – so what if investors are “swooping in” and making a quick profit? They’re taking the risk – they deserve the profit. It’s called c-a-p-i-t-a-l-i-s-m. Posey, like so many morons in Congress, fail to understand or appreciate that we investors, not them, are the engine to the housing recovery. We put properties back to productive use and increase job creation and tax income. We are vital to the system but, instead, are always portrayed as the villains.
Did Posy bother to read that over 35% of real estate transactions last year were cash or investor transactions? There’s a reason for that. Homeowners aren’t interested in grunt work. They’re letting the investors do the hard work (short sale negotiation or rehab), then buying them when they’re in good shape and priced correctly.
I have a better solution: Simply let anyone buy a property from his or her retirement account, regardless of the nature of the property. Investors already do this from self-directed retirement accounts. They buy properties from within their IRA’s and make profit tax-free or tax-deferred. If investors can do this, why not open it up to homeowners? Consumers would be super-excited to be able to buy their home and enjoy the appreciation tax free. And better yet, the home would be immune from creditors because it sits in an IRA.I would pass that bill.!
The 3 Keys To A Successful Wholesale Deal (guest Blog Post)
Many thanks to our guest blogger, Cornelius Henderson from Cooperative Solutions LLC, based in Washington, DC. Cornelius has a wealth of experience in wholesaling real estate and has provided a few very valuable tips in his post below.
Don’t forget to sign up for our FREE webinar this Thursday 3/31 with Vena Jones-Cox
“Earn a Six Figure Income Wholesaling Real Estate in 2011”
http://bit.ly/FlipMore –Sign up here
The 3 Keys To A Successful Wholesale Deal
Some people call it “flipping houses” while others call it “wholesaling.” New investors execute this investing strategy because they know it allows “newbies” to get involved in real estate without a lot of their own money or risk. Experienced investors execute this strategy so that we can maintain positive monthly cash flow to satisfy our bankers and pay the monthly bills. Regardless of your investing experience, the ability to execute a successful wholesale deal is an essential tool for any real estate investor. There are three fundamental steps to a successful wholesale deal: the motivated seller, the qualified buyer and the ability to provide a turn-key experience. I will illustrate each of these through a deal we completed in Washington, DC.
The first and most important step to a successful wholesale deal is to get a property under contract from a motivated seller. My personal favorite motivated sellers are personal representatives of estates, frustrated landlords and out of town landlords. This particular deal was with a guy in Florida who was the personal representative of an estate with a property in DC. The property was in fair condition and we determined that with about $50,000 in repairs, it would be worth about $330,000. Based on this information, we knew the investors on our Prime Buyer’s List would buy this property for about $165,000. Although the seller asked for $175,000, we successfully agreed to a purchase price of $150,000 which would provide us with a $15,000 wholesale fee. Once we had the contract, the most important part was complete but we still had two more steps to get our check.
The second step to obtaining our wholesale fee was to obtain a qualified buyer to assign our right to purchase the property to. We pulled a buyer from our list that said he was active in the area and we gave him the first shot at the deal. We had not worked with the buyer before so we requested a substantial deposit and verification of the hard money relationship that he was using. These are important steps in today’s current marketplace. The days of posting a deal on Craigslist and getting a buyer who can actually close on a deal are over. You MUST qualify your buyer! Do not skip this step or you may not get your check!
The final step to our deal is our ability to provide a turn-key experience. This buyer was interested in our deal because the numbers worked and we provided everything for him. We provided the comparable properties sold in the last 3 months, pictures, virtual tour, approved hard money lender, estimates from a licensed and insured contractor, closing attorney and title company PLUS a list of buyer’s agents in the area who have potential buyers. Essentially, all he had to do was bring the cash needed to close the deal, tell everybody “GO” and then cash his check at the end. In this market, providing turn-key customer service is critical to getting your wholesale check whether the investor uses the services provided or not.
In summary, a successful wholesale starts with a motivated seller. Once you have the deal, you simply have to locate a qualified buyer and provide a turn-key experience. Naturally, if you are looking for a quality wholesale deals, join our Prime Buyer’s List at www.DCMetroRealEstateDeals.com. Additionally, we provide a wealth of FREE information on our Facebook page at www.facebook.com/cooperativesolutions.
About the author…
Cornelius Henderson is the managing partner of Cooperative Solutions, LLC, a residential and commercial real estate development firmed based in Washington, DC.
PS-
Don’t forget to sign up for our FREE webinar this Thursday 3/31 with Vena Jones-Cox
“Earn a Six Figure Income Wholesaling Real Estate in 2011”
http://bit.ly/FlipMore –Sign up here
You’re Using QR Codes For Your Real Estate Business By Now, Right?
I should probably begin by saying that I’m a self proclaimed and unapologetic Internet and technology junky. The latest technological marvel rarely escapes my grasp. The combination of screens, keyboards, mice, and other communication devices in my office draws comparison to mission control at NASA.
My tablet with 3G access is the newest addition to my accessibility arsenal (I had to brag a little).
And of course I never leave home without my smartphone (you’ll see where this is going soon).
But that’s enough about my devices for now. Let’s talk about my newest infatuation: QR codes.
You know what QR codes are, right? If you don’t yet, you will. And after reading this, you’ll begin to notice them everywhere.
QR codes, or quick response codes, are basically square images with black and white dots that link to a specific web page, image, song, document or anything else on the Internet; kind of like a 21st century bar code. Users scan the image using the camera and a reader on their smartphone (free apps are available on all platforms) and are taken to the target destination. It’s quick, simple and highly effective.
Here is an example of one I made recently. It references one of my favorite inspirational posters. If you already have a code reader, go ahead and scan this code:
Recording labels often put them in magazines so that readers can download a free MP3 instantly. Hard Money Bankers recently had a booth at a real estate expo. I printed out a large QR code that referenced our website and displayed it on the table. As patrons stopped by, they could scan the code and be taken directly to our home page where they can get more information, fill out an application, or simply make note of the webpage to view later.
And the best part, QR codes are unlicensed and FREE to use. Finding free QR code generators on the Internet merely requires a search using your favorite search engine. Enter the URL into the QR code generator and you’ll be given an image that you can save or print and place anywhere. I’ve seen and scanned QR codes on business cards, fliers, bandit signs, listings distributed to potential buyers, for sale/rent signs, food labels, beer bottles, sides of buildings, t-shirts, tattoos… OK maybe not tattoos yet, but I wouldn’t be surprised.
Imagine the head start you could have if a potential buyer scans your QR code printed on a listing sheet and can pull up endless information, pictures, and data that you simply can’t fit on a single piece of paper. Without a QR code, your potential buyer would have to go home, sit down at their computer, remember your URL, and then get the additional information. This could be hours later and they may have seen many properties since.
You can also place QR codes on for sale signs in the front yards of your listings. Anyone driving or walking by can stop and scan the image and go directly to a video walk through of the property. It’s like having an open house 24/7. Brilliant.
Before I get too excited and blab on and on about my love for QR codes I should probably wrap this up.
Advertisers in Asia have been using QR codes for years and it looks like the technology is going to become extremely popular here too. Getting involved now would put you ahead of the curve (and your competitors).
Now go open a new tab, find a QR generator, put your website’s URL in the box, get a code and start using it. Maybe one day I’ll scan your code too.
Let me know if I can help in any way.
~Ben
Don’t Accpet Candy From A Stager
I know it’s tempting.
They dangle the “low cost” carrot in front of you.
They say, “Come here, Mr. Rehabber. Step into my van. I charge less than anyone else. Hire me!”
You’re on a tight budget. The electrician charged you too much and the market sagged another 2%. So to cut corners, you give in to temptation.
S-T-O-P!
STEP AWAY FROM THE CREEPY STAGER IN THE VAN!!
Cost is certainly a factor, but don’t hire any stager until you ask 7 critical questions.
In my previous post on staging (read here), I commented on how important it was in this market for rehabbers to hire a top-notch stager to properly stage their properties for resale. Staging your property correctly can result in your property being sold 80% faster and for a 7% higher price. That means a big difference to the bottom line, so it’s worth the expense if you have the right stager. But how do you find such a stager?
I asked a staging expert, Karen Lawlor, to put together a list of questions for our readers to make sure they’re not wasting money on an unqualified stager:
1. What’s your average days on market?
This speaks for itself. If he doesn’t know the answer, be worried. It means he doesn’t properly track the results of his work.
2. Do you have before and after pics of your work?
Staging is a very subjective art form. How do you know this stager has tastes similar to you or, more importantly, your buyers, unless you see and analyze the results of his or her work?
3. How many properties have you staged?
It’s tough to knock someone just because she lacks extensive experience, but how do you know she’s good without experience? Your rule of thumb should be the less experience she has, the more she should have to prove results to you, and for less money. The person with experience and proven results should ask for and get higher compensation. Like it or not, expertise costs money.
4. How many other investors do you work with?
Working with homeowners is one thing – investors another. Your stager should understand the differences. Ask the stager what services he or she has provided to other investors.
5. Can you describe your experience with building material selections?
Related to Question #4, a good stager will be able to consult with you even prior to beginning your rehab to help you select building materials, kitchen cabinets, flooring, fixtures, etc., that properly map to your budget and buying demographic.
6. What is your fee and specifically what does it cover?
Many people do not ask this question, thinking all stagers charge for the same exact service. But stagers can provide many different services for you, and you will want to know what services are being offered. For instance, does the “flat fee” cover shopping for accessories, or meeting with the kitchen people to help lay out the look and feel of the kitchen? Make certain you tell the stager exactly what you need and that the fee covers what you expect it to.
7. Where do you get your inventory?
Some stagers are able to charge less because they have storage rooms full of furniture that they use in every house. This may save money on furniture rental, but there is a down side. How much furniture could one person have? Is the good stuff already being used elsewhere? Moreover, each house you have will likely appeal to a different type of buyer. Will this “stock” furniture appeal to every type of buyer? If budget allows, you may want to have the furniture hand-picked from a rental furniture store to make certain the decorations flow properly with the neighborhood, as well as the colors and style of house.
One other very important point on hiring a stager: Make sure you get at least 3 referrals from any prospective stager and call them all. At least one referral should be a property investor. Ask the referrals about their experiences with the stager and what services they felt were most important to have.
Thanks to Karen for these great questions!
Next week Karen will appear in a low budget yet exciting video on proper staging for investors, and will share lots of free information. Don’t miss it!
For more real estate investing articles, please visit http://www.HMBCribs.com
Interview With The “Pitbull” Himself– Leonard Rosen
If you have been around hard money lending for any time at all, you probably know Leonard Rosen. And if you have thought about getting into hard money lending for yourself, you have most likely considered going to Leonard’s private lending training seminar in Las Vegas.
In fact, that is exactly how Hard Money Bankers got started back in 2007. Shortly after forming our company and closing a couple loans, we were on a plane to Vegas to meet up with the best private lenders in the country and to learn how they ran their businesses.
We are happy to say that was a very good decision.
We owe a lot to Pitbull Mortgage School and Leonard Rosen for teaching us at the beginning and for continuing to lead the industry today.
I gave Leonard a call not long ago to see if he would be interested in sharing some of his knowledge with our blog’s readers. He happily agreed.
Please watch the video below to find out:
-How HMB first met the Pitbull
-Why hard money lending is such a great business model
-How HMB has fared in its first 3-4 years of business
-How did hard money lenders make out during the market crash…and why
-Leonard’s insights on the industry today and in the future
-The 3 ways you can get involved in hard money lending now
And if you are considering diving in (like we did) check out Leonard’s conference below. It’s happening on March 3rd so time is running out! Plus, aren’t you looking for a reason to go to Vegas?
Sign up here:
http://www.pitbullconference.com/
PS– To get a FREE seat upgrade tell them Hard Money Bankers referred you!
Good luck with your investments!
All I Want For Christmas Is My Free Con-doh, My Free Con-doh.
By: Jeff Shiller, Esq.
Or, the alternate title: How To Own a $240,000.00 Prime South Beach Condo For $4 Per Year.
Ever since the 1980’s, I’ve been trying to figure out ways to buy a cheap retirement home in Florida so I could wear white clothes year-round and solve crimes in my Ferrari (hold on a sec. I’m looking for a cheesy picture. Okay. Got it. I’m back).
After much deliberation, I think I’ve finally figured it out, and I’m sharing my top 2011 investment strategy with you.
The collapse of the Miami/Palm Beach County real estate market is legendary. And now, to add insult to injury, a large south Florida law firm caught up in the robo-signing mess had many of their FANNIE and FREDDIE foreclosure files pulled and re-assigned to new law firms. The resulting confusion between lenders, trustees and the local courthouses led to many Palm Beach County homes being sold to investors at foreclosure auction this month for as little as $200. Yes, that’s correct, 200 bucks.
Here’s the article:
http://www.sun-sentinel.com/business/fl-stern-foreclosure-sales-20101209,0,784272.story
According to the article, “56 percent of winning offers were from investors or individual buyers who in some cases spent no more than a month’s mortgage payment to get homes that sold for upwards of $240,000 during the real estate boom.”
It doesn’t take a rocket scientist to figure out that those investment numbers work. So if you’re like me and have thought about buying that dream 2nd home that could also generate rental income, get off your rocking chair and start thinking about purchasing some south Florida real estate!
Here’s the catch – you’ve got to get your location right and time your exit for maximum profit, so I’ll give you my formula for that.
According to Al Gore and the other global warming crackpots, sea levels will rise by as much as 0.7 meters by 2060.
So here’s the solution. Go down to FLA when the next bulk auction is scheduled. Buy your dream condo for $200. Make sure you buy above the 5th floor. Hold it for 50 years. Sell when the water hits the 2nd floor.
Voila… a Florida condo for $4 per year. And you get to sell for at least the insurance money. What a deal!
In all seriousness, look for my upcoming posts regarding condo investments. I’m going to address the dos and don’ts and pros and cons of buying a condo as an investment, and even speak with a real, live south Florida condo expert on the state of the market. Then we can get the bottom of this global warming problem.
Merry ChristmaKwanzaKa.
Til next time, Jeff
P.S. One of our readers sent the following article to me about the SAFE Act. It’s a good summary of my other SAFE Act articles. Thanks Kevin!
(4 FREE Commercial Videos) Are Investors Overcrowding The Residential Real Estate Market?
I found a nice rehab in my area the other day listed at $289,000.00. I calculated the ARV at $425,000.00. It needs $70,000 +/- worth of rehab. I offered the bank $249,000.00. The agent told me they already had multiple offers and turned down a cash offer over $265,000.00.
Without getting into a bunch of calculations, I determined that I’d be risking almost 350K to make less than 50K. Not a good trade-off. I passed.
Speaking with several local real estate agents and rehabbers, I learned this is a common story right now. What happened? I thought banks were desperate to get rid of properties?
This is purely my opinion, but here’s what I think…
The government has put most of the bad banks out of business and has bolstered the balance sheets of the remaining banks through TARP funds, etc.. Additionally, by cutting lending, banks have sufficiently protected their remaining asset bases and understand the market is in recovery mode. What does this mean for you?
First, banks don’t seem to be in any rush to get rid of inventory. They are either quietly releasing properties bit-by-bit, or selling large blocks of them to REIT’s and hedge funds (meaning you don’t have access to them – you don’t have $200MM to spend).
Second, because we are more efficient and computerized than ever, and real estate data is easily obtained on the internet, investors are evaluating deals quickly. This, in turn, allows them to make tons of offers each week (I know some making 50+ offers/week).
Finally, banks have access to this same data and can easily evaluate inventory in local markets. They also see the multiple offers coming in on their properties. Thus, in active markets banks are holding out and demanding top dollar.
Are there good deals out there? Certainly. But banks right now are not “giving away” properties like we thought they would, and it seems all this activity is cutting margins and making it more difficult to find home-run deals.
Do you agree with me? I’d love to get your stories or comments to post. Are you killing it right now or having a hard time finding deals?
If residential investing has become overcrowded in your market, commercial investing may be a better play for you. And, as promised last week, here are 4 more FREE training videos from Peter Conti, a commercial mentor:
Click on each title to view the video
Finding Great Deals on Commercial Property
Contacting Brokers – How to Sound Like a Pro Even if You’re Just Getting Started
Commercial Offers That Get Accepted, But Allow You OUT if You Don’t Like the Deal
We also have a free webinar with Peter coming up on February 17th.
We’ll send some emails out ahead of time so you’ll have plenty of notice. Peter will cover:
- How to get your first apartment building in 90 days or less.
- How to use other people’s cash or credit to buy commercial properties.
Peter is the author of “Commercial Real Estate For Dummies.” He is a 20 year real estate veteran. He currently mentors a limited number of students throughout the Country.