| Contrary to popular belief "hard money" loans are not | | | | property owners or developers who don not have a |
| called hard money loans because they are hard to get | | | | significant cash investment in the target property. The |
| or because their expensive terms and conditions are | | | | days of 90-100% financing through seller financing or |
| hard on borrowers. The name comes from the fact | | | | large 2nd mortgages are long gone. I don't care what |
| that hard money loans are loans that are, by definition, | | | | they told you in that on-line, real estate riches, |
| backed by a hard asset such as a piece of real | | | | boot-camp, seminar; you can not get a hard money |
| estate or another asset like a bulldozer or a piece of | | | | loan with none of your own money invested in the |
| manufacturing equipment. | | | | project. |
| In the recent past hard money loans had a bad | | | | Realistic Exit Plan |
| reputation but today the term hard money simply | | | | Private loans are short term loans. To secure an |
| refers to private, non-institutional, asset based lending. In | | | | approval and close a deal, it is imperative that |
| fact with, the onset of the worldwide credit crunch, | | | | borrowers have a viable, realistic plan to pay back the |
| private lending has become main-stream business and | | | | hard money on schedule. Private lenders are very |
| is, in-fact, the fastest growing segment of commercial | | | | aggressive in collection situations and usually demand a |
| real estate finance. | | | | personal signature guarantee on every loan; you must |
| Private lenders usually offer short term (12-36 month), | | | | have a workable exit strategy or you risk losing the |
| high interest (9-15%), bridge loans against commercial | | | | property financed plus your personal bank account. |
| real estate. Private lenders might be wealthy individuals, | | | | Experience |
| small firms organized to make loans or real estate | | | | Private lenders tend to be successful business people |
| divisions of hedge funds or private equity firms. | | | | who want to work with other successful professional |
| Qualifying for a private commercial mortgage loan is | | | | people. Today's real estate environment is much to |
| not difficult if certain requirements are met. | | | | challenging and much to risky for lenders to take |
| Low Loan-to-Value (LTV) | | | | chances on rookies and dreamers. It is very possible |
| Most private lenders will not lend more than 65% of | | | | to get a private loan for the purchase, development or |
| the value of an income producing building that can | | | | refinance of a commercial property but you will need |
| cover its own mortgage payment. Underperforming or | | | | to demonstrate a track record of success. |
| vacant properties should not expect LTVs over 60% | | | | Commercial property owners and investors who meet |
| and commercial land assets will not receive loan offers | | | | the lenders criteria will find that they have no problem |
| of more than 50% LTV. | | | | securing a private, hard money, commercial mortgage |
| Cash Investment | | | | loan. |
| Private lenders today will not partner with investors, | | | | |