Colorado Hard Money Info

Local Direct Hard Money Benefits

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Save money and time, and avoid scams and last-minute term changes using a direct local hard money lender

Introduction

What is hard money and what is a local direct hard money lender.

Hard money loans are underwritten primarily based on real estate (i.e., the hard asset) value. In contrast, banks often focus on additional factors such as borrowers’ income and credit. Therefore, the hard money loan process is often much easier and faster than navigating a bank’s loan process. Days or weeks instead of months. This is because hard money lenders are typically not concerned with factors like income and all the related documentation and verification. People use hard money loans when: (1) a bank is too slow for the quick funding required by the deal or situation or (2) a bank will not loan funds because of an income or credit issue.

A hard money lender provides hard money loans.

A local direct hard money lender means that:

  • the money is coming directly from a single source controlled by the individual(s) underwriting the loan, not from a fund, multiple people, set limited partners, a publicly owned company, other situations where more than one person is providing the money, and not a loan arranged through a mortgage broker; and
  • the hard money loan is underwritten by an individual residing relatively close to the collateral property.

There are hard money funds that are local, but their obligations,  and motivations are often different. A  local direct hard money lender can be flexible and practical. For example, funds may have contractual obligations to obtain an appraisal for every property. A direct hard money lender may not require appraisals.

There are brokers who work with multiple hard money lenders (including direct lenders and fund lenders with multiple investors). Such brokers might choose the lenders who pay them the most rather than the borrower the best terms. Also, brokers may not have local knowledge and could have much less incentive to ensure the borrowers or lenders don’t lose money in the end.

Save Money…

Skip the appraisal – Local direct hard money lenders often loan without appraisals. Many local hard money lenders do not require appraisals for one-to-four-unit residential properties. This can save you money and time. In contrast, hard money funds cannot skip the appraisal; they are contractually obligated to obtain one. That can delay closings and cost the borrowers hundreds of dollars.

Avoid upfront fees – Many local hard money lenders do not charge upfront fees (i.e., fees paid to the lender/broker before the loan origination). Often, these upfront fees are non-refundable. Some lenders will charge small application fees (less than $100) that cover costs like credit and background checks.

Avoiding losses on the back end – A mortgage broker or fund manager, will often make money just by getting the loan originated. That person may not take on any risk if the property is worth less than expected. That risk may fall solely on the borrowers, the fund investors, or the party providing the loan funds. A person may be much more concerned with risk of losses for the borrowers and lender, if that person is directly providing the money. Sometimes, the local knowledge can help you better estimate the current and future value of the property. Appraisers will sometimes not base their figures on comparable properties (which can occur for legitimate reasons, like no recent nearby sales being available). Local knowledge can involve knowing that a location is downwind of a brewery or factory, differences in schools, local government policy changes, or other local dynamics that can impact value. There is no guarantee that a local hard money lender will have important local knowledge, but there’s a better chance they will.

Avoid Scams…

Advanced Fee Scams – Beware of lenders requiring large upfront fees before the loan origination. Also beware of “release fees” or any charges to have the loan funds released. These types of schemes are commonly known as advanced fee scams. Borrowers should not need to pay advanced fees to a “lender.” Fees paid to third parties (e.g., inspectors, surveyors, structural engineers, etc.) may be legitimate; however, it’s important to first verify that those vendors are legitimate businesses. You can avoid some fake lender scams by verifying and directly paying vendors prior to the loan origination.

Other scams – Avoid additional scams by: (1) meeting with a loan decision-maker in person; (2) verifying that the person and company are real; and (3) verifying that your contact is the actual person they claim to be. Because scammers are often remote and don’t want to be identified they may be unwilling to meet in person. Verify the company by checking the company’s state registration. The Secretary of State usually maintains a database of company registrations, including addresses. Verify in multiple ways that the person you are taking to with is who you think they are: (1) call the phone number on the company website to reach that person; (2) the website might be a front, so verify by going to the Better Business Bureau (BBB.org) and checking for the rating and history for the metro area the property is in, as well as calling the phone number listed with the BBB to reach your contact; and (3) check public records for mortgages/deeds of trust and verify details such as the company’s address.

You can learn more about related scams here.

Avoid surprise fees and last-minute term changes…

Sometimes, a hard money lender is really just a broker who arranges loans from others. Such a broker can promise low rates and fees to get borrowers. However terms may change shortly before closing (when the borrower has little choice). The broker might claim their original fund source backed out or that some other unexpected situation arose. Local direct hard money lenders are less likely to use deceptive practices like this. Typically, local direct hard money lenders are concerned about their reputation in the community and highly value repeat business. Whether lenders are local or not local, look for honest and ethical people. Generally, involving yourself with people who highly value ethical behavior and care about others is a good practice. If the rates and fees are not clear on the website, ask for a written term sheet. The term sheet should include rates, fees, and conditions to close among other details.

Note: If an application provides materially incorrect information , it is likely and reasonable the terms will change. Example where terms might change or loan offer cancelled: The borrower states the property is in good shape with no issues, there are roof leaks, structural issues, or other issues that could affect the current or future value the property.

Colorado Direct Local Hard Money
Win with local direct hard money

Colorado Bridge Loans

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A bridge loan is a short-term loan prior to longer-term financing, sale, or other financial events.

Bridge loans are also known as short-term loans or interim loans. The “bridge” refers to the short span or gap of time. That span is often between two financial events.

Borrowers may need funds more quickly than a bank loan or another longer-term financing can be arranged. Bridge loans can often originate quickly and provide funds fast, while longer-term financing or other transactions are pending.

Borrowers may repay bridge loans with longer-term financing; However, repayment events may include: 

  • longer-term refinancing
  • collateral property sale
  • an equity investment
  • sale of another property
  • distributions from a business
  • distributions from other investments
  • sale of investments
  • receipt of a judgment or settlement (including divorce)
  • inheritance
  • other monetary events

Speed in providing the loan is often important.  To avoid delays, lenders may ignore income and other items. Verifying aspects of income can be time-consuming. Bridge loans may have higher costs. Bridge loan amounts are often limited by a loan-to-value ratio.  This avoids time spent on other items. Bridge loans that are asset-based may be described as hard money loans.

People often take bridge loans because they need the funds quickly. An opportunity may disappear if they do not act quickly.  Partner buy-out time limits. Sellers may take other offers. Price may go up. Sale may be canceled. People may need money to avoid other consequences.  People need money to avoid default, forfeiture, credit damage, lawsuits, etc. Often the advantages of a quick bridge loan far outweigh the costs.

We provide Colorado bridge loans for 2 days to 3 Years. Our bridge loans are secured by real estate. This avoids time on spent income verification.

A quick short-term loan origination can be valuable.We understand a speedy loan process is valuable.

Our loans are secured by real estate in the following:

  • Denver Area
  • Boulder Area
  • Colorado Springs Area
  • Fort Collins Area

Call (303) 500-3200. 

Investment residential and commercial real estate only.

Alternatives to Hard Money

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It is important to us to act to ethically and feel good about our business; therefore we want our potential borrowers to carefully consider all their potential options before deciding if hard money loans make sense for them.

Common solutions that may be less expensive than hard money include (this is not a comprehensive list):

  • Personal savings or personal investment accounts
  • Self Directed IRA
  • Home Equity Lines Of Credit (HELOC) or other loans based on a borrowers existing assets
  • Friends & Family Loans
  • Loans from traditional channels including national banks, regional banks, community banks and credit unions

When less expensive financing such as the above are not a good fit or will not work for reasons like the following:

  • Insufficient personal funds (savings, investment accounts etc.) available or insufficient to pursue multiple projects at once
  • Insufficient Self Directed IRA funds available or insufficient to pursue multiple projects at once
  • Insufficient HELOC (or other loans based on a borrowers existing assets) funds or insufficient to pursue multiple projects at once
  • Friends and family loans are not available
  • Friends and family loans are not an option for personal reasons
  • Traditional lenders can not make the loan fast enough to get the property
  • Loan will not be approved because the borrower has too many loans or properties with loans
  • Loan will not be approved because the property is not in habitable condition and requires repair
  • Loan will not be approved because the borrower does not have sufficient income
  • Loan will not be approved because the borrower has poor credit
  • Other reasons make the alternatives unattractive or unavailable, but the property is good investment

Hard money loan may be a good solution. However hard money is typically a relatively high costs loan and typically does not reduce your risks or obligations.

We are the Colorado hard money lender for experienced investors™. We provide our borrowers with flexible, quick and direct service and have lower rates and fees (compared to other Colorado hard money lenders).

We are not attorneys, accountants, or professional advisors and we recommend you consult your own advisors before acting. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information and none of the content should be advice or considered offer or agreement.

10 Overlooked factors that can make the property less attractive

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While not all Colorado hard money lenders may look this closely, the investor borrower can lose profits or even lose money when the after rehab value is lower than they expected. As a private Colorado Hard Money lender interested in having successful repeat borrowers, here are some of the factors that are frequently overlooked that may result in a lower after rehab value (i.e. sale price) that we consider in our after repair value estimate:

  1. Small first floor relative to other houses in the area (and comparable properties used for valuation)
  2. Low bedroom and bathroom count on the first floor relative to other houses in the area (and comparable properties used for valuation)
  3. Small master bedroom
  4. Relatively high traffic street where a family may be uncomfortable allowing children to play
  5. Nearby noise pollution (e.g. fire station within ¼ mile, close to a busy road, etc.)
  6. Visible eye soars from the property (e.g. direct views of trash dumps, industrial parks, etc.)
  7. Downwind issues (being close and downwind from trash dump, sewage treatment plant, factory, etc.)
  8. Being in flood plain or having bad drainage characteristics on the lot
  9. Garage or parking is not as good as the comparable properties used in the valuation
  10. Difficult to access (e.g. large blinds spots from driveways, steep drive ways, etc.)

This is not a complete list of all factors that may result in lower property value, but represents factors we frequently see overlooked.