There are 5 things you need to know about hard money loans:
1) Hard money lenders are just like regular people; the difference is that they lend their money quickly at high rates and requirements.
2) They should be used rarely; you CAN raise your own private capital.
3) They can be hyper-expensive and charge points you won’t find attractive.
4) Their rates are going to be way higher than market.
5) They offer flexibility when you really end up needing to use them.
The good news is that you do not need a hard money loan. You can raise all the private capital you need.
All you have to do is get the right skills.
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Jay Massey here, with the CashFlowDiary.com and in this video I am going to explain to you about hard money lenders and more importantly the five things you must know in two minutes or less.
First of all what are hard money lenders actually look like?
Well they're really just regular people in a lot of cases who have managed to go through some specialized training to know how to live their funds on a very, very short term.
They look like you and me.
• They often can be found inside your local newspaper advertising or a simple google search for hard money lender or asset base lender in your city typically, we'll find them. Now you also need to know that their terms are usually high; meaning that they're going to have high requirements in terms of things like loan-to-value. They don't want to land too much money but they do often land very, very quickly which is usually their advantage.
• When a speed of execution, when you've got to get the deal closed and get clothes fast, you need the money fast this is the way to go. One of the things to understand is that in my opinion though, hard money lenders should be used in limited quantities.
• They’re almost not necessary if you know how to raise your own capital. They do fill avoid in the marketplace but it's typically for those individuals who don't know how to go out there and build a database of investors, so that they have access to the capital that they need when they need it.
• And one of the big downsides, in my opinion, is that they can be hyper expensive. You’re going to find things like points. What a point simply is as a percentage of the entire balance of the loan that's typically paid up front just for consummating a beginning the relationship and excess of the interest rate. So you've got a typically a higher-than-normal market interest rate where if market interest rates are probably around five or six or even four percent the hard money lender maybe seven, eight, nine, or ten in the same situation and sometimes higher.
• Now the other thing to understand is that they have flexibility. Not always, not all the time but if you get yourself in trouble they can help you get out.
Thanks for watching.
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