Online articles about Texas Hard Money Loans often cite that this type of financing entails a steep down payment, so is hard money is reserved only for cash-rich investors?
The first thing to discuss when it comes to hard money and down payments is LTV. LTV is the amount you can borrow, as a percentage of a property’s value. Most hard money mortgages have an LTV of 70, so if you wanted to finance the purchase of a property listed at a million, you’d need to have 300 thousand on hand for a down payment.
This steep down payment is one of the main gripes people have about hard money. As few but the richest among us have 300 thousand just lying around. But not every hard money provider is the same and some can even front up to 90 percent of the purchase price of your next property.
Say there is a down and out apartment investor, who lost big on his last deal. He scouts out an apartment block up for grabs, and he learns that leases are up for renegotiation. If he can raise rents even slightly, he can resell the property at a profit without spending much of his own money.
But he doesn’t 300 K to make the needed down payment. A quick internet search puts him in touch with another hard money dealer, who is willing to offer him 90 percent of the apartments purchase price.
Coupled with his limited savings this hard money deal lets him make a full cash offer on the apartments. He then boosts rents by a small amount, resells the property, pays back his loan, and earns a quick profit. His earnings allow him to get back into full swing when it comes to his real estate activities.
Now reading such a story might make you think, ‘hard money sounds like something only for real-estate investors,’ but you’d be mistaken.
Say someone is selling their home and while looking for their next residence, they stumble upon a property that’s 5 minutes away from their current job.
The open house was abuzz with offers from other buyers. If he wants to move into this new house, time is of the essence, and he can’t wait for his current home to sell.
He needs the bank to approve him for a second mortgage. But because his current home remains unsold, his application gets denied.
He’s heard about hard money, but all the lender’s he gets in touch with ask for a lot in the way of a down payment. It seems he’s out of luck, but then he finds a 90 LTV hard money provider online.
Coupled with his newfound hard money financing, and some money from his savings, he’s able to make a full cash offer on his new home. After he moves, his old house sells, which pays off the balance of his 90 LTV loan, and allows him to refinance to a long term, low-cost mortgage.
Now it takes him only 5 minutes to get to work so he can sleep in, and he might even get to live an extra decade without all the stress of a long commute.
So hard money isn’t just for cash-rich real-estate investors. If you are a real-estate investor and you got burned on your last deal or a cash strapped homeowner who wants to move quickly, a 90 LTV hard money deal could be just the help you need to make your dreams come true.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.