Hard Money Broker Clears Some Confusion

Thanks for the post. I have been involved in "short funding" or transactional funding for a while now and it has been great. I have seen many people with bad credit and no cash be able to flip houses for margins of over $100,000. Many of these have come off short sales and REO's but some have just been good deals. Most loans I have seen cost around two points and cover 100% of the loan to cost. For any people flipping homes on back to back closings I would recommend looking into this kind of funding.

Eli
www.shortfunding.com

Thanks for the information

Steve and Veronica.

Respectfully I beg to differ you with Jimmy. Private money loans (PML) require some work up front. Usually you present to a potential private lender your company and your project and/or examples of projects. A PML is simply an individual acting as a bank extending financing to you without the limitation of a bank and can close within days. (Its the only way private money is like HML.)

Then you need to determine if the person qualifies as a private money lender. Then, you can set the interest rate, generally there are NO points unless you choose to do so, and you of course need to pay for title insurance, homeowners insurance, lender's title policy, appraisal and you set when you make payments with what you agree with your private lender.

This could be one lump sum after you complete the project and you pay the principal plus the interest in whole for the period of time you had the money, or monthly payments, or interest only payments, or quarterly payments; WHATEVER terms you work out with your private money lender that both of you are comfortable doing.

It is by far the most flexible financing out there, and a person decides whether to do funding with you based upon your project, irrelevant of you personal credit history. The most difficult part is getting out there and making the presentation to potential private lenders.

I have taken a pretty extensive course on private money lending and am learning much about it. I haven't gone out and done my presentation yet, but I am very ready to do so and I have my first prospect! Now, to get a babysitter and get out there and DO it!

When we bought our last home, we did not qualify with a regular bank because of our ratios due to having 5 loans and properties in my name. So, I did my financing with my inlaws. 5.375%. 30 year fixed. No points. Normal closing costs. No prepayment penalty. Because it was the inlaws, we only had to present the deal to them, and initially did it as cosigners; but in the end, we needed to have them as PML. I didn't realize this was the term for it at the time.

Why does it work? Because, people are out there investing in various investing tools like CDs, bonds, stocks, annuities and are looking for something that pays a higher interest rate. In today's economy, 5-12% is a high interest rate for an individual to receive.

I'm not against HML, may even need to use them myself, but I think that private money is the most largely misunderstood type of financing, and by far the most advantageous to us REIs! I really enjoy your posts Jimmy, just don't happen to agree with your opinion on private money.

Happy Investing! It is CERTAIN we will Succeed!

The scenario you spelled out sounds more like an angel investor, not a PML.

PML do not EVER take any % of your profit. They have principal and interest at rates and terms as YOU the RE investor set up.

Thank you for your comments, however, while you are studying and learning, I am out in the field everyday doing this business.

I have read your many replies and threads and I do not always agree with what you write as you do not with regard to what I write.

However, Please know that I have been doing this a very long time and am very good at what I do.

In reading many of your threads and posts, you discuss things from the stand point of being a borrower. I discuss things from the stand point of being the lender. There is a big difference.

I fully understand the significance of what you said and thank you again for the comments.

I want to be a HML too! In fact, my husband and I have money in self directed IRAs and would like to use it for HMLs when we know we won't need the money for our own investments.

But, as an investor, and the borrower, which many of us are on this site, its definitely more preferable to get private money , the kind you get from seeking out private individuals wanting a good return on their money, but not really wanting to be involved in RE. They are passive and that's the beauty of private lenders. They have nothing to do but get their check and know their investment is backed by RE so it is more secure than the stock market. T

I also have no doubt you are good at what you do in hard money lending, and have learned a lot from your posts about HML. I have no doubt that one day I will use a HML, but the option of private money is something I misunderstood for a long time myself, so I want to have others benefit from all the things I'm learning about PML as well.

I have 2 PML lined up for presentation, and I'm getting nervous about it for sure! We'll see how I do! Wish me luck!

I really enjoy the banter! I love Deans site. You get takes from every angle and Jimmy, I have read many of your posts you are great! I can see that you guys are being mutually respectful and that is what makes the site SO AWESOME and so very different from many others!!! People can come and agree to disagree, make their points and at the end of the day still be friends!

Great back and forth! Thanks guys! I have been involved in some of these things as well - YOU JUST GOT TO LOVE IT!

I did not see this mentioned in any of the posts.
There are two types of private money deals that I know of.
1. Dept partner, Your private money lender lends you money in exchange for a good interest rate.
2. Equity partner. They get a percentage of the deal.(net profit split) This is the best way I think. No interest to be paid while holding, ETC. But it all depends on the deal, sometimes interest payments may be better.

I really can not believe I heard something negative about private money. That is utter nonsense! That is what the most powerful and successful investors in the world use, with out question!!

Hard money has it's place for sure, like when you can't do it any other way!

Tammy, you are going to get there soon, keep at it, you can tell that you are doing some study! It will pay off for you!

Go out and make some offers!!!
Michael Mangham
MD Home Acquisitions LLC

Thank you for the comments. Private money has it's good points and it's bad. I have met many private lenders in the time I have been in the business.

I had a lunch meeting in NJ today with a private lender who informed me that he only wants to look at deals $10,000,000.00 and above, wants a credit score of 720 and due to the fact that he owns a factoring company and is very successful doing deals for his own profits and not his companies since he uses his own money, has the ability to pull credit or have it checked.

His terms were 10 years, 11.50 percent and wants to see skin in the deal from the borrower. He also said that he wants to be involved with the investment and wants a monthly report of the revenue.

Certainly we will do some business at some point. Private money can be a good thing if you know how to harvest it.

You are completely off base on private money. Private money is the only way to go. First, you don't have to qualify for a loan like you do with a hard money lender. Due to today's market conditions, most hard money lenders want skin in the game. That means you have to put your own money down. In addition, many of them will only go 50% to 60 or 65% loan to value making it more difficult to get repair costs covered. In addition, they want points up front. Finally, most of them charge well over 12% interest.

With private money YOU CALL THE SHOTS!! Most private lenders are thrilled to receive 8 to 12% on their money. In addition, many of them are investing through self directed IRAs. This means that they don't need monthly payments like hard money lenders expect. You can give a private money lender payment options. Example, if they wait to get paid out until you sell your rehab instead of taking monthly interest only payments then you will give them an extra % point. Now you have nothing going out in payments until your rehab sells. In addition, you don't need to put skin in the game or have excellent credit. Again, private money is the way to go. If you don't have private money then hard money would be second choice.

KimmyJ
Press on...
www.tagteampropertiesllc.com

Thank you for your comments. There is a difference between private money lenders and private money investors. I feel that many of us who have knowledge of this area has failed to bring this up.

You are absolutely correct when describing private money investors and I do agree that this is a great way to go and is relatively cheap. There is a difference between a private money investor and a private money lender.

Private money lenders charge all kinds of points, fees, etc. Private money lenders get their money from private individuals and entities and lend the money out. They make their money on points charged to get the money as well as either the entire spread or a portion of the spread. By spread, I am referring to the difference between the interest charged and the interest needed to pay back the provider of the funds.

In some instances, there is money to be made on the back end, when the loan pays off.

I have been making reference to private money lenders. Thank you for bringing this to light.

There is a big difference between hard money and private money, typically with hard money you are going to pay points (2 - 4), then the interest is typically between 14 - 16%, the lender will want you to have some skin in the game 10 to 30%. In addition some will only loan the purchase price and not the repairs. Also if they do pay for repairs they can hold back some money until they see some progress. The term is usually short term 6 months to a year. Basically a hard money lender is a professional private money lender. The loan will be based on the deal primarily and not your personal credit.

A private money lender typically will loan at 10 - 12%, no points, and will fund the entire deal, including purchase, closing costs and repairs. You have more control over the deal.

Chris you know more about private money that someone that is supposed to be in the lending business. That is because you have been working an actual Deal!
Good for you and keep it up.

Jimmybtx NO private money lender I know charges points. they are either dept or equity loaners. That means they make there money on interest or a percentage of the net profit made on the deal.

My private money lenders use just that, PRIVATE MONEY. They are the providers! (or it ain't private money) You should go to some REI meetings and meet and talk with these guys and stop posting BS. Try marketing your lending product some other way please. Sorry, don't mean to offend but just do your thing and don't worry about how we get our money!

Michael Mangham
MD Home Acquisitions LLC

Shall I begin listing them for you? I deal with hard money and transactional funding. I never once have said I deal with private money.

I deal with hard money lenders who actually get their funds from private individuals and relend those funds out.

They charge points this is how they get paid, there are other fees involved. As a matter of fact, why don't you list these sources of private money you use, so that those here who need it can have access to it.

What I find amazing is that you want to step on my toes when I have not done one thing to bring you to this point.

If you don't like what I have to say, don't read it, but I am not going to stop discussing what I choose to because you don't like what I have to say.

I am not an expert on private money, and never said I was. If I am not correct on something, and you can provide guidance to set something straight, than by all means, correct me.

I am very much in the lending business and I have so many deals on my desk right now. This is what I do. I do hard money and I do transactional funding, I do not do private money. I do not raise private money, I do not talk to those who have private money to lend out. When people here contact me about private money, I tell them I don't have access to that and don't deal in it.

If I was incorrect about something I said than I apologize to anyone who read what was said.

However, I don't advertise my services here. People contact me because I have access to what they need and my sources are not easily to locate. I don't google, I don't buy directories.

I personally don't care how you get your money. I don't deal with individuals who have access to what you do. I deal with those ladies and gentleman who have a need for what I do, which is hard money and transactional funding.

I have been reading for some time now , there is no difference between
HML , and PML , if you can get the same TERMS . When your uncle Joe loans
you money at 13% & 3 points that a HML. The guy jimmybtx talked about is a
Venture Cap.. and does not fit in this fourm,cashcall charges 139% (true)
and its not illegial. Go where you can get the best terms. The US Govt has
some outstanding programs for investors like us. You are all right in what
you stated , it depends on the lender. I like it. Tammy you are one strong
woman.

Mel

Hello:
I never talked about someone called cashcall. I don't even know who that is or who they are. I think you have me confused. I certainly do not talk to venture capitalists either because what I do is not of interest to them.

I hope that's a good thing! LOL