Hard Money Loan- credit, cash, and debts

[Kay M.]

Hello, I'm a newbie in the learning stage of investing. I've always been interested in investing in real estate and just bought my first house and will be renting it soon. I though that was the end of buying until I saved up more cash, but when I learned about HML, I got so excited! I've been reading these forums for a couple of days now and have learned so much and I'm so grateful and excited that I found this site.

Ok, so my question is about getting a HML. What are the general requirements for getting a HML these days? I know you need certain equity in the home etc. but what about credit score, and debt to income ratio? Do they check the debt to income as well or are they mainly interested in how you will secure the loan?

[Jon Holdman]

That's unfair. I've both borrowed and lent hard money. Its a win-win for both people involved. Without the lender, the borrower couldn't do the deal.

If you think hard money is expensive, do your research. If you are trying to fund a business, hard money, even at double digit rates and a handful of points, are one of the cheapest funding sources around. Getting a "money partner" on a real estate deal is almost always more expensive. If its not, you have a crummy deal. Look at the rates on equipment leasing. Those are up in the 20-30% range. Factoring receivables is a way some small business fund their operations. Also north of 20-30% once you include the up front fees and the discount for the receivable. If you get into equity financing (angles, venture capital, IPOs), you can easily get into what are effective interest rates over 100%.

After doing some research on funding source for small and start up businesses, hard money doesn't look bad at all.