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No longer making hard money loans? What is note buying all about/

If you run across a seller who financed the sale of their real estate and now they are holding the note for the property buyer, give me a call.

Hard Money Loans: Secrets of past hard money lending.

Hard money loans, hard money lending, hard money lenders, hard money brokers, anybody looking for hard money:

A hard money transaction from the past can help in todays market...

HARD MONEY LENDING - SECRETS REVEALED!!

Today is May 1. This day marks a great anniversary in the annals of the hard money lending industry.

On May 1, 1173, a hard money loan was obtained for the land that the Leaning Tower of Pisa was to be built on.

The National Registry of Hard Money Loan Transactions has made available for a short time this fascinating history...

What follows is the recorded tapes of this hard money loan transaction:

The names have not been changed (no reason to protect the innocent).


Giovanni: Mr. Hard Money, I have recently acquired the most beautiful piece of dirt. I would like to get a loan of $1 million Euros. My plan is to build a most magnificent structure. It will be built to honor my favorite food: Pizza.

I will build a round building (pizza shaped), It will have 8 floors (symbolizing the 8 pieces to a pizza), I will adorn the building with various ornaments (the good stuff on top of the pizza), and I will cover the completed building in tomato paste.

I will call the completed structure, "The Most Magnificent Tower of Pizza."

How quickly can you lend me the million Euros?

Hard Money Mario: Sounds very interesting. It appears you have done a lot of planning for this project.

Giovanni: Everything is in place.

My Brother is the head planner at the county.
My Cousin is in charge of ground prep.
My one sister is in charge of vertical construction.
My other sister is very good looking.
My Uncle has a building supply company.
My other uncle (the one that had the head injury) is in charge of the foundation.

We are locked and loaded, when can we get the money?

Hard Money Mario: Patience. I have to determine if my money will be well secured if I lend it to you for this project you have.

Isn't that ground you want to build on the old Francesca property? I thought that was an old trout pond? What if the building has problems?

Giovanni: Problems? What problems could possibly happen? This is a slam dunk! Are you just another conservative banker? I thought you were hard money?

Nothing can go wrong with this deal...

I need a hard money loan, can you help?

After reviewing my website www.hardmoney.cc , I received the following email thread:

Bigtime broker: Tom, Do you do foreclosure bailouts? I also need a loan for about 65% loan to value? They have lived there about 3 years now.

hardmoney Tom: Sounds like this is a home. I don't do residential loans.

Bigtime broker: If we can get them caught up and get the NOD removed, then I have a deal for you. It's a nice 3 bedroom with view.

hardmoney Tom: If there is a house, mobile home,quonset hut or yurt on the property, then I cannot make a loan.

bigtime broker: Hey, do you lend in AZ, NV and NM?

hardmoney Tom: Yes I do.

bigtime broker: Currently, the borrower's parents are also living with them at the house, but they are willing to co-sign on this loan.

hardmoney Tom: <*&^#>

bigtime broker: I will forward you the existing appraisal I have...

hardmoney Tom: Great. I will send you the funding check right now.

Can we "gussy" up this hard money lending thing and make it more sophisticated?

A recent hard money loan I received via a "sophisticated newby broker:"

Sophisticated Broker: Mr. Tom, I have a sponsor package I would like to VOIP to you for your predilection of hard money loans.

Tom: Whu? Who? Hmph?

Sophisticated Newby: The opportunity is in the recasting of a note previously in forebearance. The note holder has conditional hypothication approval from Wachovia bank and is looking to supercede the carbunkle.

Tom: I make hard money loans.

Waste of time broker: Exactly. Please expect in the next few minutes a 458 page fax on this deal. The Phase I enviro report will be included, but I will not burden you with the Attorney General report on the riot act of 1887, which mentioned the county which this property abutts.

Tom: Whose butt?

Broker Idiot: The beauty of this deal is the LTV. The MAI appraisal was spot on in regards to the value of the property ($1,000,000 value).

The reason we picked this particular appraiser (even though he lives 3 states over) is because he also can value the natural gas and the potential radiant energy under the ground.

Needless to say, the natural gas and potential radiant energy available (if you drill far enough) is thought to be worth about $18 hundred dodecagon thousand...

<< transmission ended >>

Tom typing on his computer: This guy has been added to the blocked sender list.


Remember... Simple is better. Simple, straight forward deals are the only ones that I am interested in.

No carbunkles allowed.

My name is Monique - I need a hard money loan...

Hard money Tom: So, tell me about your hard money loan request.

Monique: I inherited a warehouse from my mom about 2 years ago. It is
vacant, and some vandals set a small fire inside, but there is
minimal fire damage. The property is worth $800,000. I only need
a loan for $200,000.

Hard money Tom: So the fire damaged warehouse will appraise today for $800,000?
Will there be "good comps" for this property? In other words,
has there been similar warehouses that have sold in the neighborhood
recently for $800,000?

Monique: Yes. That shouldn't be a problem. I was going to list and sell the
property, but with the down turn in real estate, I would be better
off just getting a hard money loan.

Hard money Tom: If you were to sell the property today, how much could you
sell it for?

Monique: Oh, I could sell it for around $200,000 - 220,000. It used to be
worth a lot more, and I am sure that as soon as this real estate
market turns around, it will be worth a lot more.

(click)

Monique: Tom? Tom? Hello? Can you hear me...?

"Hey, Mr. Hard money smarty pants. Do you still need an appraisal given the sub prime mortgage debacle?"

Good question.

Should I still get an appraisal to verify the collateral for my loan is
valued appropriately?

Since appraisals are somewhat expensive and they take a long time to receive, I
think in 2008 I will try a few hard money loans without getting an appraisal.

Whatever the borrower tells me the property is worth, I will just believe
him and make a loan off of his value figure.

I will tell you how this all works out later.

Credit. Let's talk about Credit scores as it relates to my hard money loans.

What is the story with credit and credit scores of the borrower?

Final answer: I do not care what the credit score of the hard money borrower is. Credit alone will not kill a deal. I am happy to make a loan to a "credit criminal" as long as the property has a ton of equity (which usually means I am at 40% LTV or less).

Please understand: Credit score will affect the interest rate, Loan to value, and points charged for any hard money loan I would make.

Lending is a risk based game. The more risk in a deal, or the more "perceived" risk involved in a potential loan, then the loan will be priced accordingly.

What does this mean? It means that a "good" borrower (700 score), will be offered a loan with a lower interest rate (11.95%) and lower points (4-5) than what would be offered to a "bad" score borrower (14.95% interest rate) and 6-7 points for the money.

I am a real estate millionaire in the making. The seminar I just attended said, check out the hard money lenders.

"I am checking you out. Can you help me?"

Probably not. My hard money loans usually don't help the real estate investor (whether or not they are new or experienced).

The problem for me as the lender is that I am usually always going to base my loan off the LOWER of purchase price or appraisal value.

But, every real estate investor has been told that they need to find a lender willing to make a loan off the higher appraisal value NOT the lower actual purchase price of the property. this is something I don't do. It all comes down to the risk involved in the loan...

Also keep in mind, that nearly every single real estate investor call I get is from someone who is trying to buy a house ( or some 1-4 unit residential), I DON'T make residential loans. I only make loans on commercial property OR land.

I always recommend that you take the hard money test to see if your deal will work with my money.

I heard Paris Hilton was going to jail. Would you make a hard money loan to her?

Yep.

Note to Paris,
these are the typical loan terms I offer:

10.50% - 14.95% interest rate.

40-60% loan to value. (note: I do not care what the future value may be.I am only concerned with the current "as-is" value.

Minimum loan size is $150,000. Maximum loan size is $3,200,000.

No pre payment penalty. 1 to 3 year balloon date.

4 to 8 points for the money deducted at loan closing, depending on property type and borrower.

PS - I can have the documents delivered to your cell.

I come with great greetings Mr. Tom. I am Prince Nwwilli from a small African nation...

Extending my sincere request for many dollars to help my situation.
My Father, the late Grand Emperor Tofungalatee, died with over $9 Billion USD hidden in a safe place that only I know about...

If you can see it in your heart to wire the small sum of $100,000 to my
completely safe banking institution located in Haiti, I will give you 50% of the
$9 Billion dollars.

STOP. STOPPIT NOW!

Get off my website. Do not come back for 1 year.

NO LOAN FOR YOU!

Hey, I see you make no doc hard money loans for commercial property and land. Do you also make residential home loans?

No.

Hard Money lending or the twilight zone?

Recently overheard on my phone:

Borrower: I am calling about a hard money loan on some land in Arizona.

Hardmoney Tom: Sure, tell me what you have. I'm interested in hearing about the property and the borrower.

Borrower: The property is in Arizona, but I cannot tell you where it is. I can say that it is about 90 acres. It was bought about 4 months ago, and now we are wanting to pull some cash out to do some development and some other investing.

Hardmoney Tom: Why can't you tell me where the property is? Also, I want to know how much you paid for the property when you bought it just a few months ago. You mention the word "we." Who is the deeded owner of this land?

Borrower: For confidentiality reasons I cannot tell you where the property is located. Also, I must tell you up front that the price we paid for the property is private information. But believe me, the property is worth at least $15,000,000 dollars now. There is no debt on the property, and the actual owner of the property is a private trust. Also please note: The trustee and beneficiary of the trust will remain undisclosed.

Hardmoney Tom: Sounds like a loan I want to get involved with. I can appreciate the need for secrecy and non-disclosure...

Tell ya what, I have great news! am happy to make you a loan on this deal. I can actually fund this loan on Friday of this week.

Borrower: Wow! I am glad I called you. Tell me about the loan terms.

Hardmoney Tom: The loan will be for an undetermined amount. The interest rate cannot be revealed. The points for the money will be kept private. The loan will be due within a reasonable time. I am glad we had a clear meeting of the minds, see you Friday...

Note: Someone once told me that people will like you if you speak and act like they do.

I was looking for a hard money lender on the internet...

"I want to purchase a mixed use property. Barber shop and flower store on the street level (both leased out). There is a vacant bar/grill next to the barber shop. Upstairs, it is a 3 unit apartment that was being used as a day care center prior to the fire.

The seller is motivated to sell it way underpriced! I can pick it up for about $400,000, and it was easily worth about $650,000 before the fire ruined the top level.

Question:

I was searching the internet and saw your info at www.hardmoney.cc, but it seems to be pretty high interest rates. A couple spots down on my google search, I found another hard money lender.

I called up this lender and told him about this property and he told me that he was very interested in lending on this deal. He said he could get me 100% financing with extra money for the rehab work needed upstairs.

The best news was that he thought with my 585 credit score that he could get the money at around 6.25% interest rate on a 30 year term.

He did mention that to get this loan I only need to "front" $4,500 for their due diligence on the property (appraisal will be on top of this fee). Why should I consider you and your expensive money?"

Which of the following answers did I give?

A. "Bummer. I was hoping you wouldn't call that guy, I can't compete with his rates."

B. "Only $4,500 non-refundable up front? Not bad for that nice of a loan."

C. "Dude, what's this guys number? I have a combination gas station/night club/dry cleaner property that needs a low rate"

D. "Nobody likes me."

E. "Bwahahahaha."

F. "Another one bites the dust." (sung to the Queen melody)

Is your local lender "chicken" to make a hard money loan?

Some lenders will only lend if the deal is a juicy "T-bone."

Some banks will only make a loan if the borrower and the property are "Prime Rib."

I made a loan on 55 acres of dirt with a "Chicken coop" on it, located in rural Tennessee.

Make sure you are dealing with a lender who won't chicken out. (Of course the deal has to make sense...)

"How fast can you fund this deal? I really need to move fast..." Want to know what every hard money lender is thinking?

Every borrower wants a fast funding.

I have yet to meet a borrower who says, "Hey, I have no problem being put at the back of the line, and if there are other loans that are more important than mine, please feel free to move them ahead of my hard money loan. I have no problem being stuck at the end of the line. Just get around to my loan when you get a chance."

Every borrower wants a loan that can fund by the end of the week.

Every hard money lender wants to say this to every borrower, "Look Mr. Borrower - apparently for whatever reason you have dinked around with this thing. You have chosen to fumble around with getting this loan. Mr. Borrower, you have chosen to make it less than a high priority up until now...

... and now you expect me to solve your money problems by the end of the week."

Sure, I have no problem dropping every other loan I have in progress. I am sure the other borrowers will understand that your loan is more important than theirs.

Fund your loan by the end of the week? I would if I could. Remember, I will need to order appraisal, and title insurance...

Hard money loans usually have a 1 year balloon date - Plan accordingly!

I just received a call from Bob.

One year ago, I made a $490,000 loan secured by Bob's 17 acre piece of dirt in Texas.

This is how the call went:

"Hi Tom, this is Bob. Hey, I wanted to extend that hard money loan I have with you for another 3-6 months. A few things have come up recently, so I wanted to touch bases with you on this."

Today is Oct 27th.

Bob's loan is due on Oct 29th.

Don't be a Bob.

Why are you only willing to lend against the "as-is" value of the property?

"Why are you only concerned with the "as-is, where-is" value of the property? This is really screwing up my money plans. Right now I have a nice 12 acre piece of land zoned Agriculture (because it was part of an old farm). The local people I have talked to say that it should easily be rezoned to residential and I think I could make 24 lots and build 24 houses on it.

Half acre buildable lots are selling for about $50,000 a piece in the city. My land is easily worth at least $1,200,000. I am only looking for a $600,000 loan against it.

I am in foreclosure on my trailer, and really need the money, hopefully by the end of the week.
How quickly can you close this loan?"

HOLD ON SKIPPY!

This is exactly the typical scenario I get every day...

The value in the eyes of the borrower is $1.2 million based on the above "conclusions."

This is freak'n "PIG in a Blanket" logic as far as I am concerned. Let's analyze from the eyes of the hard money lender:

1. You say it can be easily rezoned from Ag to residential: Maybe it can and maybe it won't. Who were the "people" that gave you such words of wisdom? Was it the local barber? As-is means I am making a loan based on the current condition of the property. If it is currently zoned AG, then the property is valued as AG ground. Because sometimes, even though you would like it to be rezoned, it doesn't get rezoned by the powers that be.

2. You say you could cut it up into 24 lots: Again, maybe you can and maybe you can't. In some communities it is quite easy to subdivide land. In other communities it is virtually impossible. Regardless, I am NOT going to make a loan against this piece of land ASSUMING that it may be eventually legally subdivided. Because sometimes, even though you would like it
to be subdivided, it doesn't get subdivided...

3. You say 1/2 acre city lots are selling for $50,00 a piece: Well isn't that nice. It probably doesn't mean squat, because your 12 acre piece of farm ground is located in the country, about 18 miles outside the city...

4. You would like to close this loan by the end of the week: I would by happy to close a loan by the end of the week. The problem is that I will need an "as-is" appraisal of the property, and I will also need clean, insurable title insurance on the deal from the local title company. The reality, is that I doubt this can happen in the next day or so.

Summary: Do you really have a 24 lot subdivision? Or, do you really have a 12 acre piece of farm ground? I am happy to make a loan, but my loan is based on "what it is NOW, not on what it possibly may be at some time in the future."

Hard Money For Land or Commercial Property

Hard Money For Land or Commercial Property

Appraisal? Why the need for an appraisal? It's a hard money loan...

Yes, an appraisal of the property is necessary.

Moan, groan, bellyache, whine, roll around on the floor...

Almost every borrower asks me if an appraisal is really necessary to make a loan against their property. The answer is YES!

A lot of problems with the "hard money lending game" could be answered and understood a lot easier if the borrower simply looked at the situation from the eyes of the lender.

Let's say you live in beautiful Odessa, Texas, and someone called you up and asked you to make a $750,000 loan against 10 acres of ground near Kallispell, Montana.

Let's also assume that the potential borrower on the phone really sounds like a nice guy. He seems very sincere, and he reminds you of good ol' Uncle Bob. Do you feel comfortable sending off $750 thousand dollars to this "nice" guy based on his 5 minute phone call about this piece of dirt that is "absolutely worth $1.5-2 million easy."

My guess is that you would probably want a local Kallispell, MT appraiser to verify the current "as-is" value of the real estate being used as collateral for your money...

Most borrowers (because they are familiar with the property) just assume that the lender should believe them as to the current value of the real estate.

"But an appraisal will cost $900 dollars (said in a borrowers whining voice). And, it will take about 2 weeks for the appraisal (more whining)."

OK, Mr. nice guy borrower, I see your point. I will just wire off $750,000 to you based on your opinion of this dirt. I wouldn't want you to have to wait another 2 weeks to have a local appraiser verify that my loan makes sense...

Matter of fact, I don't think I even need to bother with title insurance either, do I?

I have said it before, and I will say it again, "Hard Money does NOT mean STUPID MONEY."

Boy, I wish I could have the domain name: stupidmoney.com.

Back to the hard money lender site

Why is it called Hard Money?

"Hard Money" is the name given to a loan scenario when the parameters of the deal is outside the typical bank lending guidelines.

If the bank will not make a loan due to problems with the property or the borrower, the loan will fall into the "hard money" realm of lending.

Unfortunately, many people think that the term "hard money" means the same thing as "stupid money." This is not the case.

It's called "hard money" because it is a hard/difficult/impossible loan for the average bank to do.

Often times a "hard money" loan is far EASIER to obtain than a normal bank loan, because most hard money lenders will NOT require all the financials/tax statements/bank verifications/employment verifications blah, blah, blah...

Got a land deal or a commercial deal?

How come Hard Money Lenders check the credit report of the borrower?

"I thought this was hard money?"

Many times I get the same question from borrowers or brokers, "why do you need to check credit, I thought this was a hard money loan?"

Of course it is a hard money loan, but as the lender who is being asked to make a $850,000 loan against the Chicken restaurant with attached Beer Garden, I would like a "snapshot" into the borrowers past history of making debt payments. I also want to know if my potential borrower likes to "fudge" his numbers...

Checking the credit report of the borrower is one way to tell if you are dealing with an honest borrower.

I am happy to make an equity based loan to a 432 credit score borrower (as long as there is mucho equity in the property)...

What I do not like to see is a borrower who tells me that they make $30,000 in monthly income but when I look at the credit report, it shows that they are delinquent on a $28 visa bill?!?!
That does not make common sense.

The problem with lying/fibbing is that now you don't know what is true and what is a lie...

No doc loan on raw farm ground?

103 acres in Florida. Old family farm recently inherited by the kids.

Most local lenders want full doc, verified income and assets etc. - Same old story, "those that need money, cant get it, and those that have money, are always having loans shoved down their throats."

How nice to find a lender that will look at the property/collateral instead of the debt and income level of the borrower.

Common sense hard money loans...