Hard money loans gaining popularity among many as an alternative to bank financing in these days. There are a number of issues that have led to this rise in popularity, but at the root of it all is the collapse of real estate market and subsequent credit crunch. Money are difficult due to its nature blooms loans in these more stringent financial markets.
The nature of the alternative financing is much different from the structure that you can find for an institutional credit. The banks and other traditional institutions have different rules to play by. You are subject to capital requirements, which is regulated by the Government for one. These capital requirements were given the financial crisis, which means many small community banks, which must hold their cash, once the source of funding for small commercial real estate, instead it loan out loud. This does not apply to hard money.
With hard money (or private money, often the terms are used interchangeably), you have to do with an individual or a group of people. These persons are subject to no such government regulation, they are free to invest money deeds in first trust, and they do this, make a much better return than what they can earn in a CD. The fact that no loans make the banks, or they have tightened up, their standards so much that the loan can get many "bankable" borrowers, which you need means that investors have now excellent risk levels in terms of the return on investment that make them. It is not uncommon for an investor to 10 to 12% return on their money, secured by a piece of the property, which has 40% or more in equity to earn.
Moreover, when dealing with residential real estate, most are Freddie Mac loans these days only on Fannie Mae, sold, or FHA or VA-type loans. Secondary market for residential loans has practically vanished. This means that if a file with the strict underwriting guidelines that require these entities not fit, the can get a loan borrower. Again, our private investors do not have this restriction. If the transaction makes sense, is often a loan that can be financed.
With low interest rates, there are a lot of private money to fund of Nice conservative real estate transactions. While banks have bound their hands, are private investors with deals make progress, that make sense. This creates a win-win situation, where the investor makes a great return on the money borrowed, and the borrower is able to obtain financing that would otherwise be unavailable. It can be more expensive than a bank loan, but it is much less expensive than having a partner to take!
Chris focuses on California hard money loan and rehab loans. Him for more information please visit on the Web!
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