Financing real estate investments often involves choosing between traditional banks and private or hard money lenders. Banks require high credit scores, extensive documentation, and have lengthy approval processes, resulting in slower closing times. In contrast, private and hard money lenders focus on property value, require minimal documentation, and offer rapid approvals, often within days. They […]
Author Archives: Gianfranco Bonometti
Loan Approval
To secure a loan, it’s crucial to demonstrate both your financial health and the property’s potential profitability. Even if you meet all other loan requirements, an unprofitable property won’t get approved. To increase your chances, showcase your competence by providing detailed financial projections. This includes estimating rehab costs through methods like past averages, Zillow estimates, […]
Mechanics Lien
A mechanics lien is a legal claim filed by contractors, subcontractors, or suppliers to secure payment for their work. To file a lien, the claimant must notify the client within 20-30 days of the contribution, file a “claim of mechanics lien” in the property’s county, and potentially file a lawsuit if the dispute isn’t resolved […]
Judicial / Non-Judicial
Hard money lenders have a thorough process for assessing real estate investors, focusing on credit scores, income, experience, and state residency. States are categorized as judicial or non-judicial, impacting lenders’ decisions due to varying foreclosure laws. In judicial states, foreclosures involve lengthy court processes, whereas non-judicial states have faster, court-free procedures. Lenders often prefer non-judicial […]
Financial Health
Hard money lenders consider various factors when lending to real estate investors, including property condition and borrower financial health. Despite loans being asset-backed, borrower finances matter. Lenders rely on personal funds or investor pools for financing, needing assurance of timely repayment. A borrower’s strong financial standing mitigates risks, ensuring they handle unexpected costs. It also […]
Unique Lending Criteria
Every lender typically establishes unique lending criteria shaped by internal factors such as decision-making policies, corporate structure, and funding origins, as well as external factors such as prevailing real estate market conditions, economic fluctuations, and the characteristics and value of properties being considered for financing, among others. When considering funding for your real estate project, […]
Credit Score & H.M. Loans
When considering hard money loans for real estate investment, the need for an excellent credit score often arises. Unlike traditional bank loans, hard money loans prioritize the property’s value over the borrower’s creditworthiness, offering more lenient credit score requirements. While a higher credit score can provide advantages, it’s not always essential. Establishing good relationships with […]
The Draw Schedule
For real estate investors, leveraging private money lenders can fuel portfolio growth. Central to this strategy is understanding the draw schedule. Hard money lenders finance property purchases and rehab costs until the After Rehab Value (ARV) is reached. unds are held in escrow and released in stages based on renovation milestones. Inspections ensure quality work, […]
Personal Guarantees
In the wake of the 2008 financial crisis, lenders employ personal guarantees to mitigate risks in real estate lending. Personal guarantees come in three forms: unlimited, limited, and conditional, offering varying levels of liability for borrowers. Additionally, lenders may require guarantors with high credit scores to back loans, reducing risk. These strategies help private money […]
Loan to Value ratios
Private money lenders assess risk using various criteria, including LTV ratios. LTV represents the percentage of a property’s current value they’re willing to lend. For instance, with a 65% LTV on a $100,000 property, the lender may lend up to $65,000. Higher LTVs pose greater risk. Some lenders use After Repair Value (ARV), factoring in […]