Monthly Archives: July 2015

Last Minute Hard Money Loan Denial

What Happens If You Get A Last Minute Hard Money Loan Denial?

We’ve all had it happen; a deal is made, you have it under contract and you’ve gotten a commitment from a private lender to get a deal done. It’s time to get to closing and all of a sudden your private lender gets cold feet. This situation can happen on a moment’s notice and for a number of reasons. From the funding not being available for some reason, to them just not feeling good about doing the loan; they just don’t feel like doing it anymore. Frustrating to say the least.

Risks Associated With Last Minute Hard Money Loan Denial

There have been times too where the Private Lender wasn’t exactly honest with you and strung you along until it was too late. This of course means that you lose your earnest money and worse, your projected profit. Nothing could be worse than knowing you got burned in either of these circumstances. However, there are ways to safeguard your “deal” from falling out due to a lender mishap.

How To Avoid Last Minute Hard Money Loan Denial

Let’s go through how you can do the most to ensure your deal is funded on time.

  1. Know thy lender – this may sound strange, but it makes sense to know who you’re dealing with. Whether they are a broker or a direct private lender or even an institutional lender, you will want to know who it is that either pulls the trigger or can help you figure out whether or not a loan is going through. Sometimes when you don’t know them well, they may not communicate so well because they are working with the ones they do know well and have good track record with. In that case you’ll have to be a squeaky wheel until you can prove your worth. Make sure you know what they’ve lent on and what their criteria are from the outset. Don’t try to be the interviewer, get to know them, they will tell you what they’re looking for. You find a deal like what they said they’re looking for, you know exactly who to take it to and what to expect when it becomes time to get the deal done.
  2. Format and organize your opportunities – Although there are a ton of templates out there, that doesn’t mean your lender will understand it. You may need to send them a couple of samples and or a prospectus for new lenders. This allows them to get to know you and show them how organized you and your team are. This should bring them a better level of confidence in lending to you. If they have questions or have their own format to fill out, don’t buck em; just do it. Remember you’re trying to get them to end to you, not the other way around.
  3. Communicate often – Sometimes to the point that it almost seems annoying. Don’t stop after the loan is closed and funded either, check in with them after the fact when the next payment is due. Even though you can check on third party sites, it’s good to check in with them so you’re at the top of their minds as well. They may have more funds that come back to make new loans with. Sometimes it’s a simple phone call, sometimes it’s a hand written note. Whatever makes them feel appreciated, do it.
  4. Day of closing – Make sure you follow up with your lender to let them know everything went well, or that there were some challenges and what is being done to resolve it. It gives them a sense that they are still in control and thought of well by their broker or borrower.

Last but not least, even if they do try to back out, you can go through the opportunity again. Sometimes, something didn’t click and they need to hear it one more time, or perhaps stated in a different way. Communicate and don’t get frustrated if they still back out. It happens.

NOTE: It’s always good to have a second lender on standby in case your primary can’t do the loan for whatever reason. Cover your bases, and you will find a way to get it done.

Michael Kaleikini: Hard Money Capital Group

If you are a hard money loan borrower and need a hard money loan or private money loan, contact Michael Kaleikini.  Michael Kaleikini is the President and Chief Operating Officer of Hard Money Capital Group and represents solid hard money investors and private money investors whom he had dealt for many years and does not change their minds once they conditionally approval a hard money loan.  Michael Kaleikini can be reached at mikanui@gmail.com.

 

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Blog Fix Rehab Flip Loans Hard Money Loans with Bad Credit Investing in Private Money Loans Investors Purchase

Cost Of Hard Money Loans

The True Costs Of Hard Money Loans

The Costs Of Hard Money Loans

Fees And Costs Of Hard Money Loans

I had an interesting conversation recently with a prospective borrower on the cost of getting a hard money loan. It went something like this: “ So, what are the terms and costs of you guys have for a hard money loan?”

I explained the standard terms were for 12 months interest only usually unless the amount got to be really large then we tried for 24 months max. The fees out of pocket are $300 for an interior inspection so that our investor has an independent unbiased opinion of value on the subject property, and then we can talk about the origination and processing. That’s the only fees we have. No other what are called “rubbish fees”.  “and how much are those fees?”

Cost Of Hard Money Loans: Upfront Points And Fees

I explained that the origination is a minimum of $4000 or 3%-4% points depending on the loan amount and the processing is $495. Interest rates are between 12-16%.

Then comes the pushback. “Wait, how much is this going to cost me?”

I re-explained the terms and fees. Then silence.

“Wow, that’s pretty steep.” (Gotta love how they want to try to devalue Hard Money lending, it’s actually kind of cute)

I asked why they would say that and they seem to think that borrowing money is cheap. It is, when backed by a bank that has Billions in assets. When you’re talking about a private money lender and a broker in the mix, there is a spread that is created so that they can earn a living lending. It is the epitome of investing. Banks have done it for years so they have enough that they can afford to make it cheaper. And then again there’s the whole banking system which we won’t get into at this time.

Cost Of Carrying Capital For Hard Money Lenders

What does need to be understood is that the cost of carrying capital needs to be figured in liberally into any formula that you use to “run the numbers” on your opportunities. If you’re trying to figure you’re getting a low interest rate simply because you think that’s how it should be, you will be disappointed more times than not and frustrated when it’s time to close and you can’t find a lender that will do your loan for less than 15% or 16%.

We work with numerous Active investors that figure their numbers on much higher interest rates so that they know no matter what happens short of the property burning down, they will have a good to great net profit on the back end of their deal.

Talking with a different potential borrower today I had to share that unless they see their way to a 30% net profit AFTER carrying costs, rehab costs and purchase price which should already be at a discount of at least 30%, I wouldn’t even make an offer. What got me to do that was the wife saying that they were ok just making $15,000 net on the deal. In my head after I heard her numbers I could only see them losing about 5,000, or more on that same property. There were costs that weren’t truly figured into their opportunity. She was thankful and they passed on the deal anyway.

Here’s the bottom line: It’s ok to shop for a deal, however remember that the same as you can say no, so can a lender, and if there isn’t an agreement there isn’t a loan and you could potentially lose money getting hung up on costs. Figure your numbers high and when you get them better at a lower rate, it’s a pleasant surprise that you can use to increase your net. Make it a profitable week.

This article was written by Michael Kaleikini, President and Chief Operating Officer of Hard Money Capital Group.  Michael Kaleikini is known as the Godfather of Hard Money Lending due to his expertise in originating, processing, underwriting, funding, and servicing hard money loan transactions.  Michael Kaleikini represents hundreds of hard money investors and originates more hard money loans in the United States than any other hard money and private money loan originators.  Michael Kaleikini is a financical writer and teaches hard money lending to attorneys, real estate agents, mortgage brokers, title agents, and other mortgage professionals.  Contact Michael Kaleikini at mikanui@gmail.com if you have any questions or are interest in becoming a hard money investor or are interested in hard money loans.

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Blog Fix Rehab Flip Loans Investing in Private Money Loans Investors Loan Servicing Mortgage Processing And Underwriting Purchase

Searching For A Hard Money Lender

The Etiquette Of Searching For A Hard Money Lender

Searching For A Hard Money Lender

Searching For A Hard Money Lender

Here’s another one for the “stories from the dark side.” It really lends to what kind of Business Etiquette you need to exercise when seeking funding in our industry.

Someone approached one of our affiliates recently looking to get funding for a deal in an area of Wisconsin that wasn’t exactly an easy place to get good values over $100K. This was a challenge admitted by the prospective borrower. In this area of Wisconsin it is pretty easily seen by even the “Z” word website that values were not quite what we would normally like to see. However, it was close enough that we could still see a way through to a deal.

Searching For A Hard Money Lender That Suits Your Project

After quite a few emails and phone calls, we were able to finally come up with something that underwriting was able to settle on as a viable risk to present to our investors. An LOI (Letter of Intent to Facilitate Lending) was generated and sent to the affiliate so they could pass it on to the prospective borrower. The Borrower apparently received the LOI, and then didn’t get back to us over a weekend.

Letter Of Intent

Letter of Intent, also known as LOI,  that we generate have generally a four or five day offer limit. (obviously we can’t just leave offers on the table; our investors wouldn’t appreciate it) This one had until the first of July to sign and make deposit for inspection so we could move forward with process and get to a close. Not a word over the weekend and when we reached out to the affiliate, they said the last they heard was that the prospective borrower would be calling last Friday; only, there was no call.

This left us with a bit of confusion and curiosity of course. Realizing that this is still a run of numbers before we find a viable opportunity to lend on, we figured this one had finally gotten to the point that everyone could win on this deal. After having spent a few hours researching the property and finding enough evidence to back up the value enough to make an offer, an offer is extended. Most times, borrowers who truly understand what they are getting return LOIs immediately and make deposit so inspections can be done.

Hard Money Investors

This however is not your normal borrower. This one decided that “shopping” was a better offer than what we gave. Please note, we are fairly standard along with most competitors that work with challenged credit or challenged equity investors. Many of our seasoned investors have a reserve to work with so they can put skin into the game as our investors desire. We explain that this is necessary in order for a loan to occur. This person decided that our offer wasn’t enough and when our affiliate finally got a hold of them, they at that time said they were going to look further and may come back if they can’t find more favorable terms. This was met with a bit of rebuke by our Affiliate on the fact of time wasted doing our due diligence and them not having the courteousy to at least call and discuss terms to see what can be negotiated. Instead this person decided to just leave our offer behind.

Hard Money Lending Process

I can tell you, this has resulted in us raising our rates and fees next time around. Because we will go through the process again. We’re not the only ones that would do this. Many would double what end up raising rates or fees to. We’re actually one of the nicer groups.

Here’s the point to this story: If you are seeking more favorable terms and may need to shop your deal around, let the hard money lender/broker know what you’re up to. Then they put time and effort into it to get to a point of making a generic offer over the phone. Enough for you to see if it’s something you would like to pursue with them. If you do as the above person did, you can expect to meet with resistance to do business the next time around. Remember, they have the capital you need. Treat them with respect even if you’ve run into a sheister or two. You never know when you find the right one that will work with you, if you treat them wrong, we all talk, your reputation will be sullied and you will find it harder to get funding.

Searching For A Hard Money Lender: Michael Kaleikini

This article was written by Hard Money Lending Expert Michael Kaleikini.  Mr. Kaleikini is a 15 plus year private money lending expert and the President and Chief Operating Officer of Hard Money Capital Group. Michael Kaleikini can be reached at mikanui@gmail.com.  If you are an investor looking to diversify your investment portfolio into private money loans and earn 10% or more in annual returns secured by real estate, Michael Kaleikini and his associates is your man.  Michael Kaleikini has a stellar national reputation among professionals of the real estate industry as well as hard money loan borrowers.  Michael Kaleikini is a household name in the hard money lending industry.  Michael Kaleikini also has a team of residential mortgage loan originators who are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, and Jumbo Mortgage Loans.

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