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I got this question off a survey a couple days ago that I thought was interesting and on the mind of a lot of people visiting my website:

“Which is more important, to find a good property at the right price OR to get pre-qualified and have financing lined up?”

Here’s something really important that you need to understand about hard money rehab loans – it’s a totally different game than getting a traditional mortgage!

Hard money loans should primarily be based on the credentials of a specific property – NOT you the borrower (although some lenders place an emphasis on credit).  So an HML can’t possibly guarantee you financing prior to you having a property either under contract or that you feel strongly you will have under contract soon.

Very few people really understand this and they think that it’s important to have a pre-qualification letter prior to making offers, when in fact, you don’t need a pre-qualification letter – period.

You can’t give it to the borrower to serve as a proof of funds when you are making offers either.  You might be wondering why we have a pre-qualification letter system on our site…

Well, there’s a couple of reasons.  First, most people think they need one so we created to help people feel better and more comfortable about going out and making offers.

Next, we wanted to make it clear what the guidelines are in terms of your personal credentials that can dis-qualify you for a loan with DoHardMoney.com.

When you look at our pre-qualification letter, you’ll see that it states the pre-qualification is contingent upon inspection of the property.

As long as non of these situations apply to you, you are qualified for a loan:

1) An active bankruptcy
2) A bankruptcy discharged in the last 12 months
3) Current foreclosure(s)
4) Current judgment(s)
5) Current federal or state tax liens

So to sum everything up, it’s not possible for you to “have financing lined up” prior to having a property picked out because whether you can get financing and how much you’ll actually get are determined by the property itself.

When you are playing the real estate investment game, everything is about the property.  You can’t get financing if you don’t have a good deal and you certainly can’t make money without one either.

Here’s another piece of advice with getting hard money rehab loans…

Don’t bother even applying for a loan until you have a property under contract or feel 90% certain you will get it under contract.  Because in order to get a final lending decision, the HML has to send out independent evaluators to the property.

These people submit reports back on what repairs need to be done to the property and what the ARV (after repaired value) will be.  The HML uses this figure to determine how much they can lend.

You will be required to pay for these evaluations, which are typically $550.  If you think you can put in an application to just find out exactly how much financing you’ll get, I’m sorry but it doesn’t work that way.

Paying $550 to see what you’ll get is also a sure way to run out of money fast… if you even have the dough for these evaluations in the first place.

You may have heard the old adage that “in real estate, you make your money when you buy a property, you realize your money when you sell it”.  It’s totally true.

Now if you need help with finding the right properties, we put together a comprehensive training, coaching and partnership program that can give you the guidance you need.

One of the pieces is our Property Concierge service, where you’ll get personal help finding and evaluating properties.  You’ll also get access to additional financing that can help you get into your deals without having to spend any out of pocket money.

You can view the details of this program and enroll if you feel it’s a good fit for you by clicking on the button below:

I just read an interesting article over on DSNews.com that corroborates what I’ve been saying here on my blog for the entire year so far…

They cite some statistics from Clear Capital’s latest Home Index Report that show after the robo settlement was decided last month, there have been a wave of REO properties hitting the market as the banks were holding off processing them until the case was over.

Consequently what this has done is create stiff competition in the investor market, causing bidding wars over properties.  I’m hearing this exact scenario all the time from our clients.

The Home Index Report shows that this competition has had a positive effect on overall home values, lessening the declines most markets have been seeing.

It’s blatantly obvious that the housing market and subsequently the overall economy benefits from the activity created by real estate investors.

There’s just tremendous opportunity for people to make good money doing fix and flips and others to make killer money funding these investors’ deals.

We are continuing to see insane amounts of loan applications come through our website – in fact, at the time of writing this post, we’ve had 31 since Saturday!

My biggest problem right now is that I’m running out of funds available to fulfill these loan requests.  If you have capital in a self directed IRA or any other liquid source, you could easily be making 15.21%… 21.45%… or 26.14% returns funding these short term investment loans.

It’s safe and secure too.  My team and I put together a short video that explains exactly how our existing financial partners are getting those incredible returns right now (and over the last 4+ years) along with the turn key system you can plug into to make it happen for you.

Just visit this page: http://dohardmoney.com/fi3/

After you watch the video, if you want more info, you can request a personal appointment with my by filling out the form underneath it.

Talk soon,

Ryan

I got an interesting question through one of my surveys just yesterday, so I decided to delay my normal weekly question and answer to today in order to formulate a response.

Here’s what I got:  “If we are keeping our deals @ or below 65% LTV why are hard money lenders being so harsh?”

My assumption here is that you are having a hard time getting a hard money loan right now and that is what you are characterizing as “harsh”.  Let me give you the short answer to that question followed by the long answer…

The short answer is that there is more that goes into underwriting a hard money loan than just the loan to value.

For example, at DoHardMoney.com we send out independent evaluators or a certified appraiser to inspect all properties.  We talk to them to find out more about the area that the property is situated in.

One of the things in particular that we want to stay away from are bad neighborhoods.  By “bad” I’m talking about several factors.  Crime rates, average time of resale, percentage of ownership vs. rental, etc.

That’s just one of several underwriting factors that we look at before we’ll lend on a deal.

Now here’s the long answer to your frustration with getting hard money.  Most hard money lenders need to be very conservative with the loans they make.

You have to remember that the hard money lending industry is totally different the traditional lending institutions.  Again, I’ll give you a personal example from DoHardMoney.com.

The funds we use to loan to our clients come directly from a small group of private investors.  These investors want to see a return on their money – I mean, can you really blame them for that?

It’s our job to provide them that return, which is why we carefully evaluate all potential loans.  If we wrote a bunch of money losing loans on bad deals, these investors would pull out and we’d have nothing to lend you or anyone else for that matter.

Now on the flip side is that our job is also to put our borrowers into situations where they have the highest probability of being successful with their investment.

I’ve personally been involved in more than 398 successful real estate transactions from every conceivable angle:  Investor, agent, broker and lender.

I can tell you that no system is 100% perfect, however it’s pretty rare that we lend on a property that doesn’t work out for our borrower.  I’m very confident that we have the best way of evaluating deals available in the marketplace!

Another angle you could be coming at with your question has to do with fees.  To explain the fees, you need to understand more about the hard money lending process.

I can’t say this about all HML’s, but this is true for DoHardMoney.com.  We don’t make any money on the interest charged on your loan.  Let me repeat that, we don’t make anything on the interest you pay on your loan.

All of that money goes straight to the private investor who funded your deal.  We make all of our earnings on origination points that are charged on the loan.  This is the biggest items that is usually classified as “fees”.

Any other fees – doc prep fees, processing fees, etc. all cover expenses to outsource services or overhead to have it done in house.  The common misconception is that all these fees are just a way to “screw the little guy”, but that simply is not the case.

Let me ask you a serious question:  Are you in real estate or getting into real estate to lose money?

I can guarantee that your answer to that question is a resounding “NO!”

In order for us to be here to lend you the money you need to get your deals done, we have to be profitable too.

Now the last piece of advice I’ll provide here is this.  It sounds like you may need help with finding better properties or have access to additional funds that can help you get deals done.

I’ve put together a one of a kind program that solves these two common problems for real estate investors, along with several other biggies we haven’t discussed today.

To get the details of this program and see if it’s a good fit for you, click here.