Hard Money Lending
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Commercial mortgage brokers and others often consider hard-money loans as an alternative to traditional financing. A commercial hard-money loan is an appropriate avenue for a borrower only when the deal’s particular circumstances are a match for the lender. For instance, if a borrower lacks sufficient funds for a down payment, that will still be a problem. Hard-money lenders require 30 to 40 percent down. In general, reasons for bank declines, e.g., lack of experience or weak sponsor financials, will also be deal-breakers for most hard-money lenders. The most common mistake made in loan submissions is a failure to tell the story behind the loan. Hard-money financing comes at a high cost, is short-term in nature, and is used as a means to an end, not an end in itself. Hard-money lenders want to know the end and the means. The story can be fully explained in a few sentences or in a couple of paragraphs, in an e-mail or by letter. Here is an example: “Douglas Slain, the borrower, is seeking to purchase a distressed office property. The borrower is an experienced commercial real estate investor with more than 35 years of experience with this property profile. This property does not qualify for conventional financing because of low rental and its need for rehabilitation. Slain intends to use a commercial bridge loan for the purchase of the property. He seeks a loan for 60 percent of the purchase price for a term of 16 months. Once the property is rehabbed and stabilized, Slain will refinance within 12 to 15 months or pay back the loan and give away investor equity.”
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Commercial mortgage brokers and others often consider hard-money loans as an alternative to traditional financing. A commercial hard-money loan is an appropriate avenue for a borrower only when the deal’s particular circumstances are a match for the lender. For instance, if a borrower lacks sufficient funds for a down payment, that will still be a problem. Hard-money lenders require 30 to 40 percent down. In general, reasons for bank declines, e.g., lack of experience or weak sponsor financials, will also be deal-breakers for most hard-money lenders.
Transcript of Hard Money Lending
Commercial mortgage brokers and others often consider hard-money loans as an alternative to traditional financing. A commercial hard-money loan is an appropriate avenue for a borrower only when the deals particular circumstances are a match for the lender. For instance, if a borrower lacks sufficient funds for a down payment, that will still be a problem. Hard-money lenders require 30 to 40 percent down. In general, reasons for bank declines, e.g., lack of experience or weak sponsor financials, will also be deal-breakers for most hard-money lenders. The most common mistake made in loan submissions is a failure to tell the story behind the loan. Hard-money financing comes at a high cost, is short-term in nature, and is used as a means to an end, not an end in itself. Hard-money lenders want to know the end and the means. The story can be fully explained in a few sentences or in a couple of paragraphs, in an e-mail or by letter. Here is an example:Douglas Slain, the borrower, is seeking to purchase a distressed office property. The borrower is an experienced commercial real estate investor with more than 35 years of experience with this property profile. This property does not qualify for conventional financing because of low rental and its need for rehabilitation. Slain intends to use a commercial bridge loan for the purchase of the property. He seeks a loan for 60 percent of the purchase price for a term of 16 months. Once the property is rehabbed and stabilized, Slain will refinance within 12 to 15 months or pay back the loan and give away investor equity.Forman Capitals Nancy Hirschbach recommends, If you want to get the attention of any hard-money lender, initially send a simple one-page overview or e-mail that highlights the deal basics along with an executive summary, source and uses, and trailing 12 months form, if applicable.A loan summary should include the amount being requested, the property address, a property description, the loan-to-value ratio, the purchase price, value information, and anything similar. Mike Giannone of Revere Capital LLC, says, A well-organized presentation goes a long way when we are looking at 10 deals a day. Having to continuously ask for information in order to get the whole story is not the most efficient way to work on these transactions.Loan packages should be accompanied by a brief, well-organized loan summary.
Private Placement Advisors LLC has a team available to help you design and implement a securities-compliant action plan to find investors interested in early stage opportunities.
Contact us at 808-238-0398 or visit us at:
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