I talked to one “businessman” who wants to borrow money at 100% interest rate. He says that in California there is no limit on hard money loans. Is he trying to scam people?

I need some free or cheap ways to market my loss mitigation business? Any good real estate groups? Craigslist? Backpage? Or?

Most people get scared when they hear the term Hard Money Commercial Loans. 15 years ago, they were not as common and very hard to get, but in the modern age, they are much more common. However before you get a loan like this, there are certain dynamics you must be made aware of before you go on the net and offline searching for your angel investor or lender.

Why Would Someone Want Hard Money Commercial Loans?

The main reasons are that these types of money financing solutions are so honored is the pliability. I’ve heard of companies proposing this type of business loan collectively unsecured, with zero collateral. But these loans are under 500k. Business Cash Loans of 500k to One Billion are most often backed by Real Estate.

People tend to use these Hard Money Commercial Loans as Procurement or “Bridge Loans”. They want to close the hole meaning they will tend to use this commercial finance loan while they wait for their traditional financing kicks in. The issue with these loans is that they start at rates of 11-16%. This is approximately 5 points higher than a conventional loan.

What Types of Hard Money Loans are out there?

You can acquire a loan like this for commercial property. This can be anything from a Strip Mall to a Grocery Store to a small office suite. You can also use them for a residential investment such as a tract home development. I’ve heard of loans $100,000,000 and more just for one loan of this type. The Industrial Hard Money Commercial Loan is also very popular.

Hard Money Commercial Loans cover everything from Office Land to Technology Parks. Technology parks are becoming more popular in urban and suburban areas. These are basically warehouses and factories. If you’ve ever been in an area where you’ll see a computer warehouse, next to it a warehouse selling motorcycle parts, then next to that a carpet warehouse, that’s a technology park.

Hard Money Commercial Loans also go by special factors such as a Favorable Credit Score, Preferable Proceeds and other determinants. This obviously affects rates as well. The higher your score, the higher your LTV. LTV stands for Loan to Value Ratio which is the combination of the value of the property the bank is assenting to loan on. When applying for a exorbitant loan of this type your Credit Score and tangible history isn’t weighted as much as how long you’ve been in business. Is your organization is victorious, massively victorious or failing?

The reason the rates on Hard Money Commercial Loans are so heavy is because they have to entertain the possibility of the borrower going into default. These financial loans don’t shield the Investor or the Banks from the large failure rates on behalf of the borrower.

But it’s important to note that these types of loans are closed everyday. Business moves on and the world moves on accordingly. When attempting to find a lender that will help you acquire money financing of this type, make sure you at least setup an conference. This doesn’t have to be an in person interview, since many lenders are nationwide now. A telephone interview should be adequate in most cases.

Before you make the final decision, there are a couple more things you need to consider. Number one before you contact your first lender, work the profit numbers on paper first. If they are adequate for you, then contact a lender that will help you get what you want and that will help you get the best rates. An over the phone interview should be adequate since many lenders these days are nationwide.

Whether you’re looking for Hard Money Loans or Money Financing there is definitely a viable solution for you.

Any one know how bad a short sale effects your personal credit? I talked with a gentleman who specializes in short sales and says it only effects your credit for about a year and up to 40 points. I have excellent credit, so that doesn’t worry me too much. I’m more worried that he is just telling me this to get my business. Thanks!

If you get $50,000 of debt relief from a short sale (lender accepts $20k on a $70k note) is there a tax implication? How is that different from just forfitting the property through foreclosure?

Please don’t answer if you are just guessing - I can do that on my own

I have a temp agency who is trying to set me up with a temp to hire position in inside sales selling loan modification products to homeowners whose homes are about to go into foreclosure. I know there are a lot of homes right now going into foreclosure, but should I consider this opportunity? This is a new business getting started with seven reps that eventually will eventually expand to 30 reps. I may have the opportunity to get into management if I do well to begin.
In reference to first answer, this is one of the concerns I have had about the position.

Temecula Valley short sales are most often mistaken as foreclosures or reside in that unknown area between knowing and understanding for quite a few agents, homebuyers, and homeowners. To begin this post I am going to provide a definition of what a short sale is:

Definition - A short sale is when the total loan or debt burdens on a real estate property are greater than the overall total value of the home as measured by the direct market comparables.

A lot of people think foreclosures and short sales as the same thing but they are actually very different. Foreclosures are when loan payments are not being made and consequently the bank sends out a Notice of Default. The notice is the first step of the financial institute’s foundation for a foreclosure process. Foreclosures usually take between 4-6 months with the owner of the home losing possession and taking a tough credit hit.

However, this circumstance can often be worked out in that 4-6 month time period. This is often why there has been confusion separating the two since they are frequently intertwined. Once a financial institution has started a foreclosure process, the current homeowner has a limited time to either bring the payments current or leave the property.

The other way to go is a short sale if the banks agree and thereby mortgage forgiveness. When taking this route, the seller lists the Temecula or Murrieta house, makes an deal with the bank or banks and sells the encumbered property before the complete foreclosure process. The financial agreement the homeowner makes with the banks is for the financial lien holder to take a smaller amount than is owed on the property but grant full debt forgiveness for the owner.

Now, why would a bank take less money that is owed? Because, that is all they are going to if they foreclose. The banks often receive more money via a short sale since the homeowner is maintaining the Murrieta or Temecula property and it sells for a higher price. The financial institute also sidesteps the expensive foreclosure process while worrying about one less property in its portfolio. Financial institutions have a tough challenge monitoring all their properties. And, homes that have been foreclosed on often get abused and vandalized losing the lending company even more money.

So in quite a few cases the short sale a solution that works out for the current owner of the home who gets debt forgiveness versus a foreclosure and the financial institute who usually takes less of a loss financially. It also often works for the new home buyer as well because they get a home that is in nice shape many times at or below foreclosure pricing.

It isn’t always a walk in the park though and there are two issues to short sales. The first hurdle is time. Financial institutes often take a long time to the file in order and submit it to a closer and unfortunately a lot of buyers will not wait. As an buyer’s advocate, it is much easier for me to sell a banked owned home or a traditional seller owned home over a short sale.

The second worry is possible tax liability. In the event a bank grant debt forgiveness it is obligatged to report that financial forgiveness as income via a 1099 IRS form. What most of sellers won’t check into is the real situation of their taxes.

Many homesellers are thought of as financially destitute and are thereby relieved of these tax burdens. Sellers in this circumstance need to have a CPA calculate their net worth utilizing the proper IRS form and very well could be pleasantly relieved.

Wrapping up, there is some good news on the horizon. The House of Representatives just overwhelmingly passed a recent bill to reduce the tax negatives on bank forgiven debt. This action further augments the benefits of a short sale over a foreclosure and really reducing the long term financial shock for someone caught in what has become a very normal situation.

 

Commercial hard money should only be thought of as an option after you have exhausted all other sources and have come to the conclusion that you just won’t qualify for a conventional loan.  The choice, though hard for many borrowers, is normally simple.  Either lose your business or building or accept the terms offered by the hard money lender. 

It’s a survival tactic.  You’re giving yourself something very valuable in exchange for the expense of the loan - time.  Time to repair, time to restore whatever the issues are.  Whether it’s getting the business back to profitability, paying down debt, time to continue leasing out the property, restore personal credit, etc.  We see so many borrowers let the egos get in the way and end up turning this into something it’s not.    

What it really is is an act of courage that you are facing the problems head on and doing everything you can to solve it.  And no matter how bad it is, you can still have some pride in that.  Many people simple hide and let the problems overwhelm them.

Remember the old sales saying of comparing apples to apples.  You just cannot compare a hard money loan to a bank loan you may have been eligible for 3 years ago.  You have to be realistic and compare it to your current alternatives.  And here’s what they are 1. Take on a partner 2. Lose the business 3. lose the building. 

Say you have a building worth $2,000,000 and owe $500,000.  You have $1,500,000 of equity you stand to lose vs. paying for an expensive loan.  Or say you take on the wrong partner because you are pressed for time and need cash.  Now you stand to lose whatever equity you have in the business, building and have additional legal issues by having to get rid of the partner.  And even if it works out with the partner you will likely have to give up much more to the partner than pay in fees to the lender. 

Most hard money lenders charge 6% on the front of the loan, which is obviously very expensive.  Say, using the numbers above you wanted an additional $500,000 to bring the total loan balance to $1,000,000.  You would pay $60,000 in fees…  Versus losing $1,500,000.  It’s hard, but simple.  Don’t let your ego get in the way of this one.  Face the problem head on, and fix it.   

 

 

Looking for a Home Construction Loan can be a daunting task and needs to be approached with a open mind. When you receive a Construction Loan for a Home you need to know some facts so you fully understand how it works.

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Basically you get the loan then when you get work done on the house then you funds are taken form the loan account with is a draw on the account. This is so you can pay for the materials and contractors that you need to complete the job. When working with a lender they will usually have there own set of rules for taken a draw against the account. Many will let you do your draw from the account on line and other will require that certain papers be filled out. Also the lenders will on occasion come around and do inspections on the work to make sure it is being done.

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A construction loan has more factors to it that a purchase loan because they will take into account the budget of the project, the contractors that are being used. Also the appraisals are looked at for accuracy and that they are not inflated. Usually these types of loan will have a higher rate of interest because of there risk factor.

Usually a home construction loan will have a time frame which is usually form 12-18 months to finish the construction. All interest is paid through the loan however there is something called a interest reserve in which an amount is set aside to pay the monthly loan payments. This is done because usually doing a construction can be time consuming and this will allow the borrower to be on time.

What is the percentage of a deed in lieu of f foreclsure that are approved? What are some reasons that they are not approved? What can increase your chances of getting approved for one?