Real Estate Investment Commentary REIC: hard money

Eventually a Real Estate Investor will hear about a deal that is too good to pass up but their CASH is all tied up in another deal. There are no funds to purchase or repair! Time to borrow money!

But before the phone call is made, Investors need to:

Act Quickly before the deal is sold to another investor.
Ask questions about:
- Will the owner accept "No Money Down?" If not, what is the minimum down payment?
- Can the down payment be something other than cash?
- Will the owner hold paper? If so, up to what percentage?
- What are the monthly carrying charges? (Insurance, utilities...)
Determine the properties Maximum Allowable Offer MAO so you can make an offer that is going to make you money quickly.
Make sure you have multiple exit strategies.

Once you feel comfortable about the terms of the deal, time to dial your Lender's number! Good Real Estate Investors always have funds available 24/7 to take advantage of transactions that magically appear.

Lenders are adverse to risk so here are some questions you should ask the funding entity:

What states are they licensed to lend money?
Will they fund the deal based on the After Repair Value ARV (good) or the contracted price on the Purchase Agreement (bad)?
Will they fund the repair costs?
Is there a Prepayment Penalty?
How long can the investor borrow the money for?
Up to what percentage will they fund? If your contracted price is $150K and they will only fund 70% what is the total amount that they will lend? Answer:$105K. That means you have to come up with $45K. OUCH!
If needed, can the investor get more time?
What are the repayment terms? Are these terms negotiable?
Are there any Closing Costs, Points, Etc.?
What are the Minimum and Maximum amounts I can borrow?
Are there funds available 24/7 to take advantage of NEW investment opportunities?

Every real estate transaction is unique so there are different type of loans you can use for each deal depending on the parameters. Here are a few names you have probably heard of: