Investment Property Loan – The 10 Top Reasons Why You Absolutely Need a Private Money Loan

With today’s very difficult lending environment it is very hard for most real estate investors to find a good consistent source of investment property loan money for real estate deals. This is where private lending comes in and offers many advantages over both of these traditional sources of money. If you want to be successful real estate investors you may need to consider private lending.

Banks Are Slow: Some deals don’t work with traditional bank financing or hard money loans. If you have to close quickly to get that great deal banks and hard money lenders will require lengthy reviews and lots of paperwork. The seller may be desperate and need their money right away, but you cannot close quick as you wait for the bank to approve your loan. Seller may accept someone else’s offer even if at a lower price just to get their money fast.

Cash Flow: You won’t survive the cash flow game if you use your own money. Between acquisition costs, marketing, holding costs, repairs and selling expenses, you may exhaust your personal funds after your first deal. Having ainvestment property loan lined up increases your ability to make all-cash low ball offers.

Quick Cash: Many sellers will need cash now to solve their personal problems and will need a quick “all offer”. Without access to quick cash you cannot make an offer and will lose another profitable deal to your competitors

Exit Strategies: With access to private money you will have numerous exit strategies available as you buy and hold or buy and quick flip. Private lenders may want you to hold so their money works long term or may want you to flip so they get their money back quick with a profit will be quicker and more profitable

Negotiation Power: Having a group of private lenders gives you the power to make “all cash” and use that power to get lower prices or better terms. Your competitions will not have that power if they only use banks. You can also negotiate flexible terms with your investment property loan. Private lenders are more flexible with payment terms, making it a win-win for both parties.

Low Cost: Private lending is vernally much cheaper money than hard money lenders. Hard money lenders will generally charge 20% to 25% all in cast versus private money at 10% to 15%.

Do Not Splits Profits: You do not have to share or split the profits with partners or hard money lenders. Paying 10% to 15% interest on borrowed funds is a lot cheaper than splitting 50% of your profit.

No Loan Limits: Fannie and Freddie have limits the number of loans you can take out to buy investment property. The limits were recently increased to 10 from 4 but it is still limit you not have with private lenders.

NO Personal Guarantee: Banks and hard money lenders ALWAYS require you to personally guarantee each and every loan. Private lenders will not require you to personally guarantee and look to the property as their collateral

Do Need a Credit Score: Banks and hard money lenders require minimum credit scores. The minimum scores is now somewhere in the 650 to 700. If you do have this kind of score you are out of luck. Private lenders will never look at your credit score as they based their investment decision on the property and renal rates.

So the work to get a investment property loan is the fuel that will light your real estate investment business on fire.

Zero Percent Financing Auto Loans: Are They Worth It?

Several television ads lately have been pushing the concept of zero percent financing for various new vehicles. One offer will allow consumers to finance a new SUV for a 72 month loan, interest free. On the surface, this offer looks tremendously appealing and it could be that way for you if you are the right kind of consumer. Have you considered buying a car with zero percent financing? If so, you need to fully explore just what you are getting with this type of loan or you could end up being trapped in one heck of a mess!

Buying any vehicle that has interest free financing should get your attention. What better way to buy a vehicle then to pay it back over time interest free. However, there are some pitfalls you must be aware of before choosing this type of new vehicle financing and they include:

Few Models Offered – Check the deal out closely and you may learn that only one or two big SUVs qualify for this special financing offer. Naturally, if this is the vehicle you want then keep on reading. If not, you’ll have to pay the market financing rate for your compact car or crossover vehicle.

Your Loan Term Is Too Short — Some interest free deals have loan terms that are too short. A 42 month term means that your monthly payments will be very high while a 72 month term spreads out the costs and lowers your monthly payments.

High Sticker Price, No Negotiation — To receive zero percent financing, the auto dealer may be less willing to dicker with the price. That $35,000 SUV already has an $8000 mark up in manufacturer and dealer profits; additionally, if you buy it at the end of model year its value has already decreased significantly. Ultimately, you may do better by simply taking the rebate along with negotiating a lower price. If you still need financing, you will probably find a decent rate somewhere else.

I Am Upside Down! — There is a financing term that many customers are not aware of that can hurt you later on, especially if you plan on trading in the vehicle at some point before it is paid off. Being “upside down” means that you owe more money on the vehicle than what it is worth. This can happen if you put little to no money down on the vehicle and are financing close to the full amount.

After two years or so, you may think that you are making great progress on paying down that six year long loan. However, you could be in for a rude awakening if you decide to trade your car in as the depreciated value has dropped faster than your pay off amount. Thus, your SUV could be worth $15,600 at trade in, but you still owe $18,100 on your loan. This deficiency of $2500 must come out of your pocket to fully satisfy the loan. At this point you may be able to roll that amount over into a new loan or simply pay it out of your pocket on the spot — either way it will cost you dearly!

Of course, if you are planning to keep your vehicle for more than six years than there is no concern for you as the loan will be paid off and your vehicle will still have some value to it.

So, is there anyone who can benefit from a zero percent loan? Yes, there is and they are the folks who have the money to pay cash for their vehicles. With zero percent financing available these are the types of consumers who recognize an opportunity when it has been set before them and decide to let the financing company fund their deal. Then, instead of plunking down the $28,000 for a new SUV they keep their money in the bank earning 5% or better interest which would result in a balance of more than $36,400 at the end of six years. Looking at it another way you could subtract the $9400 from the price of the vehicle and it would be like they paid $18,600 for their purchase! All they have to do is pay their monthly invoice and the extra money goes in their pockets.

Sure, most consumers cannot afford this option, therefore it is important for you to learn everything there is to know about your auto loan agreement before signing on the dotted line. If you can negotiate the lowest price and get zero percent financing on top of it, than you have a deal that is worth your pursuing.

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Hard Money Lender Real Estate – Financing Options For Investors and Borrowers With Bad Credit

Hard money lender real estate loans provide borrowers with poor credit the chance to purchase a home. These types of loans are considerably more expensive than traditional home loans financed through mortgage lenders. This type of financing is intended for interim use while borrowers rebuild or establish a credit history.

Hard money lender real estate financing is also used by investors to purchase commercial properties or realty intended for house flipping. Investors sometimes use this type of financing to buy properties that are not in marketable condition because this type of realty does not qualify for conventional financing through banks.

Hard money loans are referred to as ‘bridge financing’ because they bridge the gap for individuals who do not qualify for funding through a mortgage lender. Bridge loans can be used in addition to conventional loans and are often used with seller carry back financing.

Seller carry back is a lending option that helps individuals buy real estate by combining bridge loans with conventional mortgage loans. The property owner provides a portion of financing for one to two years and the balance is financed through a bank, credit union or mortgage lender.

For example, the Seller lists his property at $250,000 and offers to carry back 40-percent financing, or $100,000. The buyer obtains a conventional home mortgage loan for $150,000. The buyer has two mortgages against the property. The bank carries the first mortgage and the seller carries the second mortgage. Carry back financing is generally limited to 70-percent maximum of the property’s current market value.

Interest rates applied to bridge loans are substantially higher than interest applied to conventional home loans. Private financing interest rates are regulated by state usury laws. On average, bridge loans are charged an interest rate of 11- to 21-percent. At present, Florida has the highest usury rate which is capped at 25-percent.

Seller carry back real estate contracts often include default clauses which allow sellers to increase interest rates if borrowers become delinquent with loan payments or default on the loan and enter into foreclosure. Default interest rates can soar as high as 29-percent. Buyers can determine maximum hard money loan interest rates at UsuryLaw.com.

The amount of interest charged with bridge loans can vary depending on the amount of borrowed funds, as well as the funding source. Private real estate investors generally charge a lower interest rate than investment groups. Hard money loans for residential property typically carry a higher rate of interest than commercial property loans.

Bridge loans sometimes include a prepayment clause, penalizing borrowers who pay loans off early. One primary goal is to refinance hard money loans through a conventional mortgage lender as quickly as possible. A six-month prepayment clause is tolerable, while a two year penalty clause is unacceptable. It is highly recommended to consult with a real estate lawyer before entering into hard money borrowing.

Overall, hard money lender real estate loans are not the preferred method for financing. However, bridge loans allow borrowers with less than perfect credit the opportunity to buy a home and provide funds to investors for residential and commercial investment properties.