All Forum Posts by: Corey Dutton

To answer your questions (see below).

I think most hard money lenders are also looking for at least a 20%-25% down payment, same as a bank loan. On a rehab loan however, some hard money lenders will lend based on the After Repaired Value (also called ARV). This will sometimes provide you with 100% of the purchase price, and 100% of the repairs as a loan. Your cash is used for interest payments and loan fees. These loans can be pretty expensive because of the zero down payment requirements on them. Here are the answers to your two questions:

1. I think hard money lenders are a good option depending on your situation. Many real estate investors will use them to purchase buy and hold rental properties for 1-2 years. Once the properties are stabilized, they can later refinance with their bank at a lower rate for a longer term. Again, it depends on your situation. 

2. Yes interest paid is tax deductible.

3. If a property is vacant or in bad shape most bank lenders will shy away from it. Hard money allows you to purchase the buy and hold, stabilize it, and then go in for a bank loan once the property meets the bank's criteria. In other situations, a real estate investor may have bad credit so they use hard money loans to buy a property and will later refinance once credit scores bounce back.

Real estate investors can finance their investment properties with debt, equity, or a combination of both. However, there are many reasons why real estate investors go the debt route and seek out loans for their investment properties. Despite the higher interest rates associated with these loans, as compared with owner occupied, here are 3 reasons real estate investors decide to go with leverage:

1. Quick Loan Fundings: A typical hard money loan can close and fund in between 5 to 14 days. In contrast, a bank loan can close and fund in an average of 21 to 45 days. For a real estate investor who must move quickly to take advantage of a good price on a purchase, quick loan fundings are so important.

2. Lower Qualification Requirements: Because hard money lenders are willing to make loans against properties with low or no occupancy, it allows real estate investors to buy undervalued assets and stabilize them, taking advantage of the upside.

3. Opportunity Cost: To have all of their available cash tied up in just one asset would be unthinkable for some real estate investors. Investment property loans allow these investors to make their own cash go further, and thus, many of them were able to pick up a larger number of distressed assets during the Great Recession.

Have you had an experience where a hard money loan or other investment property loan was crucial to your on a real estate transaction? Please share.

Posted by Corey Curwick Dutton, Hard Money Lender

With an increasing number of mergers in the banking industry it’s no doubt that increased regulation under Dodd Frank has a role in it. Donald J. Mullineaux explores this topic more in a recent article from American Banker where he calls these new regulations an industry shock, “an unanticipated development or event that significantly alters the cost and or revenue structure in a particular industry.”

The increasing fixed costs that banks have seen in recent years in order to become compliant with new regulations under Dodd Frank have certainly spurred M & A activity. For smaller banks, as compared with the big banks, spreading increasing fix costs over a small asset base can be a challenge. Mr. Mullineaux believes that this may be the biggest reason for the increasing number of mergers in the banking industry. But with the disappearance of smaller community banks, as they are rapidly acquired by larger institutions, many industry experts are concerned that credit in local economies will disappear. In fact, Daniel Tarullo of the Federal Reserve is concerned about the economic effect these M & As in the banking industry will have on small business, “Community banks are of special significance to local economies….the disappearance of community banks could augur a permanent falloff in this kind of credit.”

In line with what many critics feared would result from increased financial regulation under Dodd Frank, will the availability of credit in local economies in the U.S. disappear altogether? With such a large number of mergers happening in the banking industry, it could happen faster than we think.

(Source: American Banker: http://www.americanbanker.com/bankthink/no-denying-dodd-franks-role-in-bank-m-1073771-1.html )

Posted by Corey Curwick Dutton, Hard Money Lender

With an increasing number of mergers in the banking industry it’s no doubt that increased regulation under Dodd Frank has a role in it. Donald J. Mullineaux explores this topic more in a recent article from American Banker where he calls these new regulations an industry shock, “an unanticipated development or event that significantly alters the cost and or revenue structure in a particular industry.”

The increasing fixed costs that banks have seen in recent years in order to become compliant with new regulations under Dodd Frank have certainly spurred M & A activity. For smaller banks, as compared with the big banks, spreading increasing fix costs over a small asset base can be a challenge. Mr. Mullineaux believes that this may be the biggest reason for the increasing number of mergers in the banking industry. But with the disappearance of smaller community banks, as they are rapidly acquired by larger institutions, many industry experts are concerned that credit in local economies will disappear. In fact, Daniel Tarullo of the Federal Reserve is concerned about the economic effect these M & As in the banking industry will have on small business, “Community banks are of special significance to local economies….the disappearance of community banks could augur a permanent falloff in this kind of credit.”

In line with what many critics feared would result from increased financial regulation under Dodd Frank, will the availability of credit in local economies in the U.S. disappear altogether? With such a large number of mergers happening in the banking industry, it could happen faster than we think.

(Source: American Banker: http://www.americanbanker.com/bankthink/no-denying-dodd-franks-role-in-bank-m-1073771-1.html )

Posted by Corey Curwick Dutton, Hard Money Lender

Where conventional and government-back financing have remained difficult loans to qualify for, more and more borrowers are flocking to bridge lenders for loan approvals. Bridge lenders offer a non-traditional form of financing often referred to as ‘bridge loans’ or ‘hard money’ loans. These loans are typically sourced from non-bank lenders, or private money lenders. Because bridge lenders have less stringent requirements for loan approvals, these lenders have seen a sharp spike in loan applications since the start of Q2 2015.

Just because a loan has been declined by traditional sources, doesn’t mean it’s the right fit for a bridge lender either. Make sure you understand the unique lending parameters of a bridge lender before submitting a loan. For example, does the property type fit within the lender’s parameters? Does the property need extensive rehab, and if so, does the bridge lender offer financing for rehab properties? Be sure to understand the unique lending parameters and requirements of your chosen bridge lender before submitting a loan, otherwise you may be barking up the wrong tree!

Yes we hear that all the time that people just don't want to hassle with the banks, just want to close.

Where conventional and government-back financing have remained difficult loans to qualify for, more and more borrowers are flocking to bridge lenders for loan approvals. Bridge lenders offer a non-traditional form of financing often referred to as ‘bridge loans’ or ‘hard money’ loans. These loans are typically sourced from non-bank lenders, or private money lenders. Because bridge lenders have less stringent requirements for loan approvals, these lenders have seen a sharp spike in loan applications since the start of Q2 2015.

Just because a loan has been declined by traditional sources, doesn’t mean it’s the right fit for a bridge lender either. Make sure you understand the unique lending parameters of a bridge lender before submitting a loan. For example, does the property type fit within the lender’s parameters? Does the property need extensive rehab, and if so, does the bridge lender offer financing for rehab properties? Be sure to understand the unique lending parameters and requirements of your chosen bridge lenders before submitting a loan, otherwise you may be barking up the wrong tree!

You've missed the point. It doesn't matter what you "think" or "believe," it's about what the government is perpetuating. Yes you're right, I don't like the FHA. It wouldn't hurt my business, in fact, it would help it. I'm a private money lender. These artificially low rates, all they've achieved, is building another bubble in many U.S. Cities. If you guys think this is fine and good, keep on herding with the sheep. Bahhh!!!! This nightmare we experienced called the great recession is just going to repeat itself all over again. That's ALL she wrote!

Juan Diaz all it's doing is creating a bubble. 

That's not true. You can get a loan with 2 months paystubs (if you're in the same line of work). That's not a safe loan. Switching jobs is switching jobs.

Once again, home ownership is a privilege, not a right. FHA is trying to make it a right and they are using our hard earned tax payers dollars to guarantee these bogus loans. We are bailing them out. No other lenders will touch these loans but the government will back them. It's just greed...