Boost Real Estate Commissions With Hard Money Lending
If you're real estate professional that relies on commissions, the current state of the real estate market has probably put a real dent in your commissions.
Banks are making it increasingly difficult for investors to obtain traditional financing to purchase properties and this inability to close for lack of financing probably has you jumping from deal to deal with nothing to show for your time and effort and only pennies in commissions.
Consider adding hard money financing to your repertoire of client offerings by becoming a private money lender. Since banks are saying "no" many more times than they say "yes" there are a host of opportunities for hard money lending profits.
Add private hard money as a niche product to your menu of options gets deals done otherwise won't close at a bank or through conventional sources and create a win-win situation for your seller and buyer.
As a real estate professional you will already know the quality of the deal and should have a good idea of whether or not it will be eligible for traditional financing. Rather than wasting your time negotiating with a loan officer in another state what couldn't care less about your commission.
You could finance the deal using private funds. In other situations the deal may qualify for some financing through traditional means but the investor may still need additional financing that the bank won't cover.
This is often the case in situations of distressed properties. The private lender is currently the backbone and the engine driving the economic real estate recovery.
The beauty of this solution is that investors who can't obtain financing through traditional means or need to understand that they will have to pay a premium for a loan with such a streamlined underwriting process - they are happy to pay that premium.
It doesn't take hundreds of thousand dollars to get started as a private money lender. An investment as small as $25,000 can get the ball rolling and with a return of 15% or more within nine months you may soon decide that slaving for commissions isn't necessary.
Higher Rewards Means Higher Risk in Hard Money Lending
Distressed, foreclosed, and short sale properties are usually prime candidates for hard money loans; because of their higher perceived risk or the condition of the property they don't qualify for traditional financing. However if you have the right attitude and the desire to make a higher-than-average return on your investment dollars, becoming a Hard Money lender for these deals may be the opportunity for you.
Although the possibility for double digit returns is much greater than with other traditional types of investment, you must consider that this type of investing can be risky. Since you will be dealing with distressed properties there are many ways that these types of deals could go south.
You should learn your marketplace and how to analyze neighborhoods, borrowers and deals. This is the first and best way to protect yourself and your investment. Seek the help and experience of someone that blazed the path ahead of you.
Of course even with careful due diligence, there is the possibility that someone will default. It is the downside of this business and you should prepare for it and know exactly what you will do if it occurs.
One of the first things you should do to protect yourself on the business side is to ensure that you have enough security cushioning on every deal. Always keep your loan-to-value ratio at 65% or less of the properties estimated end vale unless you have some other assurances regarding the borrower, meaning additional collateral, etc.
Since the borrower will enjoy the benefit of a streamlined underwriting process and quicker funding they will expect to pay a higher interest rate. Certain states may place a maximum on interest rates so be sure to consult with a real estate attorney about the relevant regulations governing private money lending in your area.
It is also wise to take a course or read e-books about becoming a lender; an experienced mentor can show you how to minimize your risk while realizing your desired returns and where to seek out the advice you may need.
Banks are making it increasingly difficult for investors to obtain traditional financing to purchase properties and this inability to close for lack of financing probably has you jumping from deal to deal with nothing to show for your time and effort and only pennies in commissions.
Consider adding hard money financing to your repertoire of client offerings by becoming a private money lender. Since banks are saying "no" many more times than they say "yes" there are a host of opportunities for hard money lending profits.
Add private hard money as a niche product to your menu of options gets deals done otherwise won't close at a bank or through conventional sources and create a win-win situation for your seller and buyer.
As a real estate professional you will already know the quality of the deal and should have a good idea of whether or not it will be eligible for traditional financing. Rather than wasting your time negotiating with a loan officer in another state what couldn't care less about your commission.
You could finance the deal using private funds. In other situations the deal may qualify for some financing through traditional means but the investor may still need additional financing that the bank won't cover.
This is often the case in situations of distressed properties. The private lender is currently the backbone and the engine driving the economic real estate recovery.
The beauty of this solution is that investors who can't obtain financing through traditional means or need to understand that they will have to pay a premium for a loan with such a streamlined underwriting process - they are happy to pay that premium.
It doesn't take hundreds of thousand dollars to get started as a private money lender. An investment as small as $25,000 can get the ball rolling and with a return of 15% or more within nine months you may soon decide that slaving for commissions isn't necessary.
Higher Rewards Means Higher Risk in Hard Money Lending
Distressed, foreclosed, and short sale properties are usually prime candidates for hard money loans; because of their higher perceived risk or the condition of the property they don't qualify for traditional financing. However if you have the right attitude and the desire to make a higher-than-average return on your investment dollars, becoming a Hard Money lender for these deals may be the opportunity for you.
Although the possibility for double digit returns is much greater than with other traditional types of investment, you must consider that this type of investing can be risky. Since you will be dealing with distressed properties there are many ways that these types of deals could go south.
You should learn your marketplace and how to analyze neighborhoods, borrowers and deals. This is the first and best way to protect yourself and your investment. Seek the help and experience of someone that blazed the path ahead of you.
Of course even with careful due diligence, there is the possibility that someone will default. It is the downside of this business and you should prepare for it and know exactly what you will do if it occurs.
One of the first things you should do to protect yourself on the business side is to ensure that you have enough security cushioning on every deal. Always keep your loan-to-value ratio at 65% or less of the properties estimated end vale unless you have some other assurances regarding the borrower, meaning additional collateral, etc.
Since the borrower will enjoy the benefit of a streamlined underwriting process and quicker funding they will expect to pay a higher interest rate. Certain states may place a maximum on interest rates so be sure to consult with a real estate attorney about the relevant regulations governing private money lending in your area.
It is also wise to take a course or read e-books about becoming a lender; an experienced mentor can show you how to minimize your risk while realizing your desired returns and where to seek out the advice you may need.