Hard Money Lending Doesn’t Have To Be Hard

Hard money lending doesn’t have to be hard…………

……IN FACT, IT’S NOT!

Many of the hassles, delays, strict underwriting guidelines, red tape and numerous items requested by traditional banks are eliminated with a hard money loan.  Since hard money loans are funded by private individuals or companies like Private Financial, Inc, using their own money, they have far less regulations to contend with.  Hard money loans are an alternative to the strict and narrow traditional bank (conventional or institutional) financing.

Hard money lending is known by many different names, such as Private Money Loans, Equity Loans or Asset Based Loans.  These private equity loans are secured by a recorded first Deed of Trust against the subject property and/or collateral in another piece of real estate with at least 35% to 40% or more equity in the property.

Private Money Lenders base their loan decisions on the amount of equity in the property, its marketability, the ability to repay the loan and the Borrower’s exit strategy.  The bottom line is, “Does the deal make sense.”

Many of the hassles and delays and strict underwriting guidelines of the institutional lenders are eliminated, such as credit scores and income verification.  Funding is very fast – usually 5 to 12 days after receipt of the application – which is a true advantage over traditional bank financing.

Private money loans have a higher interest rate for the borrower for the simple reason that they also pose a higher risk for the lender.  They are most often a temporary solution that opens doors for a more permanent financial solution or exit strategy.  Hard money lending offers a degree of flexibility that is just not possible through traditional lending sources.

Jeralyn Sommers
Private Financial, Inc.
Real Estate Broker
CA. BRE # 01952914 / 01047826
NMLS # 1172916 / 290528

EQUITY! EQUITY! EQUITY!

Equity, Equity, Equity
Oh so important, when investing in trust deeds!

Looking back at the different cycles throughout the years of the California real estate market, sometimes it shoots up faster than a speeding bullet.  Other times, it plummets before we realize what is happening.  Knowing that trust deed investing is based on a real estate market that’s beyond our control, people often wonder if trust deeds are even a good investment.

While risk is inherent with any investment, my experience in the past 18 years that I have been investing in trust deeds is, that I personally consider Trust Deed investing to be one of the safest investments that one can make as long as there is at least 35% to 40% equity in the property.  I cannot stress EQUITY, EQUITY, EQUITY enough.

Yes the California real estate market does go up and down, but that is the reason the main requirement with any Trust Deed Investment is the amount of EQUITY in the property.

Due to the amount of equity in the property, if the market does go down, by having 35% to 40% equity in the property you have less risk of losing your principal – or you lose very little principal, and this gives you the peace of mind to hold the trust deed if the Borrower is making timely payments.

But if the Borrower decides that he cannot make the payments to you any longer, the Borrower can sell the property and retain whatever equity is left in the property after paying you whatever money and fees he owes you.

Even if the property does go to foreclosure in a good or bad market, there is enough equity in the property to cover any foreclosure costs and lost payments and interest and fees you may have.  But let’s say you do happen to acquire the property, you can rent it out until the market regains its strength and you regain your full equity.

In my opinion, trust deeds are not just a good investment, they are a great investment!  Yes, even when the real estate market suffers.

If you would like to learn more about investing in trust deeds  and why it can be a very smart investment, give me a call at (818) 782-6398.  I would be happy to answer any questions you may have.  Looking forward to speaking with you.

 

Jeralyn Sommers
Private Financial, Inc.
Real Estate Broker
CA. BRE # 01952914 / 01047826
NMLS # 1172916 / 290528