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Why do people fail to Quality for Hard Money Real Estate Loans

What Are the Top Reasons Real Estate Borrowers Fail to Qualify for Private money (hard money loans)?
Call us: 415 680 3454
I receive calls everyday from Real Estate investors wanting to borrow private money (hard money) through my company and more often than not, I have to tell them no. Inexperienced borrowers often make the same mistakes so let's review them.

1) No down payment or too small of a down payment. 

Private lenders require a minimum of 35% down most of the time. If you are looking for a no money down loan or very little money down, the only place to go is to either friends/family/business associates willing to co-invest with you or to the banks. Regular banks have a product from the Federal Housing Authority called FHA where you can buy a house for as little as 3% down. However, these loans are difficult to qualify for and can only be used for personal residents and not for investments. 

2) The purchase price and loan for a home is just too small. 

In places like the San Francisco Bay Area of California and New York City, this is usually not a big problem but private lenders do not like to make loans for less than $100,000. If you are looking at properties for sale under $100,000, you should probably look elsewhere. Private lenders make their money on the points and if a loan is $100,000 or $1M, the amount of work is the same. 

3) Borrower is trying to buy at auction or at the courthouse.

Auctions require all cash offers and almost never allow for financing. If you are buying at the courthouse steps, a private lender cannot help you because the home will not be able to qualify for title insurance until the trustee's deed is delivered. (usually 1-3 weeks after the house is purchased)

4) Borrower is buying an REO or short sale and has made an "all cash" offer. 

90% of the time, banks (who sell almost all short sales) award a purchase contract not to the buyer offering the most money but to the buyer that can close the fastest. If a borrower states they are making an all cash offer and they really need to borrow some of the money, the bank will stop the sale and move to the next person in line that really has the cash to close. 

5) Borrower thinks their property is worth more than it is. 

This happens most often with refinancing. Please, if you are looking to get a loan on your real estate, spend a few minutes looking on websites like Zillow and see what the value really is. If every house within 6 blocks of your home is selling for half or less than what you think your house is worth, you are probably wrong and won't qualify for a loan. 

6) Borrower is buying in an area with an extremely high amount of foreclosure sales. 

Unfortunately, even if a borrower is getting a great deal, it will be very difficult for them to resell their property at a higher "retail value" even if they fix it up and a new buyer wants it. Why? The reason is that banks require appraisals and if there are no retail sales at the higher price near the subject property, the house will not appraise for the purchase price so the buyer won't get enough of a loan to buy your house.

Now that you know what not to do, if you still think you can qualify for a private money/hard money loan in California, Nevada, or Arizona, go to our website. 

To your Wealth!

Russell Roesner

415 680 3454

loans@equitycoalition.com

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Places I have Been Too

1. Saint Augustine, FL, USA

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Making Money with Adsense & Affiliate Marketing

So, I make about $50-$100 from my blog through just AdSense. Before you say, "gee, that isn't much", realize I make much more than that from business deals I get through people who read my blog. I get people/companies looking to borrow money, companies looking to invest money in my clients projects, consulting jobs, (at $250 an hour) and those looking for information about what my blog is about. (Raising capital and finding investors)

A level one company makes money through selling its product or services.
A level two company is level one but also makes money through online advertising as we do through AdSense.
A level three company does 1 & 2 but takes advantage of affiliate marketing too.

I'm going to post a link about option two right now. I'll revisit this post to explain option three in the next week or two.

Check out this blog that gave me the idea to write this article.

http://adsense.blogspot.com/2010/05/adsense-revenue-share.html

As I work on this post, you will be the first to know about the research I've done if you become a follower. Thanks.

To your wealth!
Russell Roesner
415 680 3454
rroesner@equitycoalition.com
www.equitycoalition.com


Equitycoalition by Russell Roesner is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 United States License.
Based on a work at www.equitycoalition.com.

How do I become a lender with deeds of trust?

How do I invest in deeds of trust?

One of the best investments you can make is in a trust deed. Simply put, you become the bank for someone looking to put a loan on real estate. Yields to you can range from 7-15% annually and you can even use money gathering dust in your IRA account too. Most commonly interest payments are made monthly creating a nice form of income.

What is the process?

Most investors use a local private lender/broker who already is set up to do deeds of trust or hard money loans. The company will market to borrowers and when a loan comes in, they underwrite the loan just as a bank would. However, instead of the loan being funded by a bank, the lender will use investors like you to obtain financing. What do these brokers look at before deciding to offer a deed of trust to their investors? First of all, they look at both the borrower and the property to see if the loan request makes sense. Here is a short list of items they look at:

Borrower	Real Estate
Credit Score	Condition
Income/Tax returns, W-2s, rents	Value
Assets-Cash , investments, Real Estate	Loan amount vs. value (LTV)
Experience-invested in RE before?	Title- liens currently against property?
Exit Strategy – How will loan be repaid?	Location
	Type - Commercial, residential, land, etc.
	Income – what is potential rental income?

After the analysis, the broker usually will decide to do the loan and send the borrower an offer sheet outlining the terms of the loan. If the borrower accepts, the broker will then notify his investors there is a new loan to fund and send them an offering.

How do I decide if this loan (deed of trust) is for me? Unless you are making a loan yourself, you are probably putting a lot of faith in the broker who sent you the offering. A few questions to ask yourself and the broker come to mind.

• What is the loan to value? The higher the loan to value, the riskier the loan because if something should go wrong, there is less equity in the property if you have to foreclose and sell it to get your money back. Typically, 50-65% is the maximum you want to go.
• Can the borrower make his loan payments?
• If the borrower cannot pay, could we rent the property?
• Is the property in a stable market?
• What is the exit strategy of the loan? This is by far the most overlooked but most important question. After the loan comes due in 1-5 years, how will the borrower pay us off? A few ways are refinancing with another lender or selling the property.
• Does doing this loan make sense? Why can't the borrower do a regular bank loan? Find out!

So you have decided to make a trust deed investment. Now create your own loan criteria that you can discuss with the borrower or the broker.

Loan size preferred or amount you want to invest?

What areas will you lend within?

What is your interest rate return minimum?

What is your minimum and maximum loan term? Less than 1 year? 1,2,3 or even 5 years?

What is the maximum LTV you will go up to?

Where do I find available trust deed offerings?

We can put you on our mailing list and when new deeds of trust come available, you will receive a deal sheet with everything there is to know about the opportunity.

I still have questions.

We are at your service. Our contact information is below.

Russell Roesner

rroesner@equitycoalition.com

www.equitycoalition.com

415 680 3454

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Hard Money: What is it and how to get it

Hard Money is a term for a loan product offered by private companies instead of the banks. It is also referred to as Private money, Private lending, and Bridge money. Usually the capital comes from private investors that live locally to where the loans are being made. Although the loan process is similar to a bank, there are distinct differences. First let’s compare bank money with hard money:

Bank Money Drawbacks	Bank Money Benefits
Hard to get	Low interest rates: 4-6%
Takes a long time (45-60 days)	Low Closing Costs: 1-2% of loan amount
Minimum Credit Scores Imposed	Long Term: Up to 40 years
Property must be in good condition	Small down payment: As little as 3%
Only 4-6 loans per person	Available Nationwide
Personal Guarantee is required	Money is always available
Borrower cannot be a company

Hard Money Drawbacks	Hard Money Benefits
High interest rates: 9-15%	Easier to get and to qualify
High closing costs: 4-8%	Quicker to close: 15-30 days
Short Term: 12-60 months	Credit not as big of a factor
Limited Area: Only lend locally	Borrower Can be a company: LLC, Corp
High down payment: Up to 40%	Personal guarantee variable
	Property can be in any condition

Why use hard money?

Most borrowers who use hard money do it for the following reasons:

• They personally cannot qualify or the real estate does not qualify for a regular bank loan.
• They do not have time to wait for a bank loan to be approved.
• They want to borrow money with a business entity and/or do not want to personally guarantee a loan

Even though the rates can be high, hard money can be quite useful when an investor has an opportunity to buy a property for a low price and sell it for a profit. Simply put, hard money even with its drawbacks can be a great tool in providing the capital necessary to be a real estate investor.

How do find a private lender and get a hard money loan?

Please review the loan programs section of our website where you can learn more and inquire about a getting a hard money loan. Our contact information is below.

Russell Roesner
Equity Coalition President
San Francisco, CA 94104
415 680 3454
www.equitycoalition.com
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Self Directed Ira's

There are a million posts about self directed IRA's already online. Most people by now already know what a self directed Ira is, but if you don't, here is a simple definition.

A self directed Ira is by definition an Ira account where you can make investments in non-publicly traded investment vehicles. Instead of being limited to stocks, bonds, mutual funds, etc., you can buy real estate, invest in tax liens, private placements, and much more.

So, what can't you invest in?

The IRS defines a prohibited transaction as follows: "Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of lineal descendant)."--Source IRS Publication 590

In other words, you can't make loans to yourself, your family, or buy real estate for personal use.

Why use a self directed IRA?

The number one reason for a self directed Ira is to invest in Real Estate. You can buy rental property, make high yielding loans on real estate to others, (deeds of trust), and of course join the millions of others in America making high returns in the fix and flip market.

How do I choose a self directed IRA company?

Although there are many to choose from in today's crowded market, I still prefer to go with companies that have been doing this the longest and offer the lowest fees. The annual fees and per investment fees can really get you so it is important to do your own research. I've found the following companies to be the best in my experience.

Equity Trust: http://www.trustetc.com/

Pensco: http://www.penscotrust.com/

Sterling Trust: http://www.sterling-trust.com/

How do I find good investment options for my self directed Ira?

My company offers deeds of trust and we work with a number of successful real estate operators who are looking for partners. Please review our website for more information.

www.equitycoalition.com

To learn more about self directed Ira's, I suggest going directly to one of the 3 Ira company links I posted above. There you will find lots of explanations and tutorials on self directed Ira's.

To your Wealth!

Russell Roesner

Equity Coalition President

San Francisco, CA 94121

415 680 3454

http://www.equitycoalition.com/

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