Bridge Loans: Getting You There From Here

This type of business financing is very aptly described by its name, Bridge loans or Bridging loans. This type loan is not a permanent or even long term loan. It is exactly as stated, a bridge between now and when the long term financing is in place.

Many times this type of financing is associated with real estate purchases, (office buildings, homes, raw land): the types of assets that a money lender can use without regard to the type of business that you have. A bridge loan Is considered to be somewhat riskier than either long term financing or Purchase Order loans so be aware that the interest rate may be higher than you would normally expect.

Sources for bridge loans come from many different places. There are many commercial sources for this type of loan. Do not overlook people in your industry who may be willing to help on a short term basis. They can make a nice profit on their money and you may find a new ally within your business community.

You do need to be aware that the contracts for bridge loans that are typically used for short term loans are very tight and heavily weighted in the lender’s favor. They are sometimes called hard money loans. The interest rates are very high on these loans. We have used a bridge loan when our money was tied up just as we were making the purchase of a home. It turned out to be a very good deal for us as the lender became interested in some of the financial contacts that we had at the time. He reduced the interest rate and actually arranged for bank financing for us. We were new in town and our old bankers wanted to keep us as customers but did not loan money outside their ‘area’. (Do not count on something like that happening; it is very rare.) Make sure that you understand the terms of the loan. Even if you arrange financing after the fact, you may be on the ‘hook’ for the interest for a certain number of months. (Say, you use the money for two months, but your contract said minimum interest of six months, so you will owe six months of interest, no matter what!)

If you are in need of such a loan, bridge loans are great and often necessary. Remember, you will be under a contract where the default penalty will be painful; so be sure that the benefit significantly outweighs the risk of failure to repay the loan in a timely basis.

Hard Money Lenders — “No Money Down” The Easy Way

Would it help you as a real estate investor to be able to
“Close For Cash in Days,” even if you’re tapped out
financially?

Hard money lenders are perhaps the best way to get 100%
financing with easy qualifying, money for fix- up, and fast
closings.

So what can hard money lenders do for you? Hard money
lenders make relatively short term (12-24 month) loans to
real estate investors for the purposes of acquiring the
property and rehabbing the property.

These loans are often funded by pools of private investors
that have been grouped together into a pool of capital by a
lender.

The hard money lender is looking for maximum return, and is
willing to take more risk for this return in the form of
easier lending standards.

If you strike the right purchase deal, you can even borrow
100% of the purchase price plus some or all of your repair
money by using hard money lenders. Here’s how it works.

Hard money lenders typically loan 65% of the ARV or After
Repair Value of the property when it is repaired or ready
for resale.

That 65% loaned by the hard money lender is calculated based
on the value of the property AFTER REPAIRS, not as it
currently sits, and not based on the price is being paid for
the property.

For example, Say that the owner is willing to sell me his
house for $60,000. The hard money lender’s appraiser agreed
with my assessment that the home could be sold for $100,000
once it was fixed up. That appraisal would allow me to
borrow 65% of the $100,000, or $65,000. I’m only paying
$60,000 for the property, so guess where that extra $5,000
goes?

Unfortunately, not into my vacation fund!

The extra loan proceeds go into an escrow account held by
the hard money lender, and I can draw it out as I do
repairs.

Remember, hard money lenders are not concerned with your
personal credit to the level that traditional lenders are.
They’re concerned with the property. They know that their
loan is fairly secure if you default.

What’s bad about hard money loans?

The fees are higher than conventional financing.

Hard moneylenders in my area charge 15% interest, and 5% of
the value of the loan in closing costs (“five points”).

Thus, on a hundred thousand dollar loan, there would be
$5,000 in fees to the lender to close the loan, plus
attorney’s fees and other charges.

Secondly, the loans usually are only good for 12-24 months.
After that time, you have to refinance. If you haven’t sold
it by then, you have to get a new loan, pay more fees, etc.
These are not loans to buy rentals with.

Another disadvantage is the fact that most hard money
lenders don’t figure the payments on a 30-year basis. The
longer the payments stretch out, the cheaper the payment.
They figure these loans on 15 or even 10-year terms. Thus,
the monthly payment that you must pay is much higher than it
would be on a conventional 30 year amortization schedule.

Also, hard money lenders are often more difficult to find
than traditional funding sources. As a gift, I have
compiled a national list of hard money lenders at my site to
solve this problem for you.

Finally, most hard money lenders require a pre-payment
penalty that must be paid if you refinance or pay off the
mortgage before a given amount of time. Fortunately, this
time period is often fairly short. For example, the hard
money lender that I use has a two month pre-payment penalty
period. Even if I am not going to do much work on the
property, and have a contract on it quickly, I can just set
up the closing for after the pre-payment penalty expires.

In conclusion, hard money lenders present an attractive
option for investors to succeed without having to resort to
the late night TV creative hype that we’ve probably all been
exposed to. If you can qualify for traditional financing,
and your seller is comfortable with a longer closing window,
you may want to stay with conventional financing.

However, if down payment money is tight and your credit is
not perfect, or you need to close very quickly, hard money
lenders may be a viable solution since they will allow
almost anyone who can find a good deal to purchase a
property extremely quickly, with less red tape, get money
for rehab, and have virtually unlimited access to cash.

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New Wood Floors With Private Money Loans

Decorative fads come and go, but there is one feature in homes that is absolutely timeless: wood. Wood flooring has been around for about as long as the art of flooring itself, and is a very coveted and attractive feature in any modern home. But wood flooring is not nearly as simple as it used to be. Today, there are countless options that are extremely attractive to any deign-conscious homeowner. But there is one unifying factor that influences every style: cost. It’s not secret that hardwood flooring can be expensive, and many people encounter frustrating barriers when trying to secure financing. But if you have had trouble with bank loans in the past, or just don’t want to deal with the hassle of bank loans in the first place, you might consider getting a private money loan instead.

Many homeowners find it is much easier to acquire a hard money loan for a number of reasons. Firstly, they come from private lender funds, and as a result they are not tied up by red tape and underwriting guidelines that can make bank loans more challenging to acquire. They are also based upon your property, rather than your credit score, so you can easily get one even if you have had credit problems in the past.

If you are considering installing hardwood floors with private money loans, take a look at these three popular options

Solid Wood Flooring – The king of all the wood flooring types is solid wood flooring. Though it can be a tad pricey, and therefore require a larger hard money loan, its warmth and beauty is unmatched. It can also add real value to your home should you expect to ever put it on the market again. An increasing number of people are choosing to use several different woods for a patchwork design, rather than using the same style wood throughout the house.

The two main styles of hard wood flooring are strips and planks. Strips are made from strips of wood that are between 1 ¾ and 3 ¼ thick and connect together with a tongue and groove system. Planks are thicker, between thee and seven inches wide, and connect together with screws and plugs.

Bamboo Flooring – If you want to go with something that is a little more exotic, you might consider bamboo wood flooring. One of the best advantages of bamboo wood is that it is much less likely to dent than other kinds of wood. So if you were to drop something on a bamboo floor, it might not even show up, while it might mean that you have to refinish if it happened on a hardwood floor. It also is a lot easier to maintain because it resists moisture more easily than hardwood floors. For the environmentally conscious, it also has the advantage of being very eco friendly. Because bamboo can grow faster than other kinds of trees, it is a much more renewable resource.

When installing the hardwood flooring, it’s best to leave the raw bamboo strips out in your room for about three days before installing to allow it to get accustomed to your particular climate.

Laminated Wood Flooring – If you want the look of a wood floor, but want to spend a little less of your private party loan, you might consider laminated wood flooring. Laminated wood flooring is just a thin layer of hard wood that is combined with thicker layers of less expensive wood. Besides being less costly, it also has the advantage of being a lot easier to install, which as a result can save you even more money in installation costs.