When a property becomes distressed, borrower emotions may run the gamut
from logical to a complete denial of reality.
However, doing the same thing repeatedly and expecting a different result is insanity."
Hard Money Funding tips:
Do’s and Don’ts when you are seeking Hard Money
Do: To arrive at a reasonable estimation of value, please make sure that the appraisal is no more than 6 months old.
Do: Appraisal that features a value that can be derived in a 3 -6 months sale of the property. I have seen many cases when borrowers submit the appraisal that shows the future value of the project, when the improvements are already in place. Hard money underwiter's, are asset based thinkers and they need to know what is the value of your asset NOW and not in the future. The reason they won’t take a future value in consideration, because due to varies micro and macro economic factors the development of the project might be postponed or never materialize. Therefore, hard money investor's tend to be risk averter's.
Don’t: Outdated appraisal and expectations to get funded off the old appraisal will not get your deal funded. Real estate prices (this especially pertains to land prices) went down in many areas of the USA.
Don’t: Don’t submit an appraisal that features “future” value after the improvements are made.
Relevant and Accurate Documentation:
Do: Have all your papers ready to allow for quick and efficient funding of your project. Gather all necessary facts and documentations that accurately reflect the current value of your assets. Private hard money lending is an asset based lending and it is typically based more on the value of the underlying asset than any other factors.
Don’t: Don’t assume that we will read your mind in regards to your company’s and / or project’s collateral and other relevant information on the project and the borrower. We need to understand the value of your property to assess how much we can reasonably obtain for you. When you submit all necessary documentation supporting the current value of your asset, it will expedite the lending process.
Exit Strategy:
Do: Have a solid exit strategy outlining how the investor will receive their interest and principal back. This is one of the most important elements that the investor takes into consideration when they lend their money.
Don’t: Don’t assume that we will figure out your exit strategy for you. In order to expedite the lending process, please have a clear and viable exit strategy for your loan. We need to make sure that we can make them feel comfortable that they will get their money and interest back in a timely fashion.
Owner’s Equity in the project
Do: The better capitalized your project is, the better the chance to get it funded at favorable rates and terms. When you have equity in the project, the investor has more security that you will manage your project well, since you have your own equity to loose in the deal.
Don’t: Never assume that you can get a 100% funding for your project. This constitutes too much risk for the investor and is not realistic. In fact, we insist that all of our borrower's have a minimum of 10% of their own "skin" into a deal - or, available to work with. And, for a hard money investor, you are not likely to receive any more than 70% - probably more like 55-60%. But, then we work to still get you into that deal with only 10% through other means - usually seller financing, or cross-collateralization.
We do offer a no money down solution for Eastern seaboard properties between $1,000,000 and $3,000,000 - call us for more information. Be sure to ask about this special program!
If you have any questions, you can always call us to discuss. We look forward to working with you if you are seriously seeking funding and willing to adhere to basic funding guidelines, such as outlined above.
We look forward to working with you!
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