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February 12,
2004
By: Weston A. Jones,
Principal Broker,
Mentor Financial Group
Institutional Lenders (ILs) (i.e. banks, savings
and loans, etc.) fill a need for cheap money. Everyone
is glad they exist and fulfill their need. We would
all love to use them on our real estate deals. However,
there is a market out there that ILs cannot fund.
That is why Hard Money lending exists. It fulfills
a need that ILs cannot fill due to government regulations,
stricter underwriting guidelines, lower risk profiles,
etc.
What is Hard Money? We define it as asset based lending
where the collateral is real estate. Since Hard Money
is more expensive than traditional sources (10%+ interest
rate and 4 points+ in origination fees) borrowers
should have a significant financial upside for using
these sources which out way the cost. Mentor Financial
Group (MFG) can help you decide if Hard Money is right
for you. MFG is commercial private hard money mortgage
specialist. If you are trying to decide whether to
fund your opportunity with a Hard Money Lender here
are the top ten reasons you should consider;
#1
Speed - Hard Money Lenders (HMLs) can fund
in less than 2 weeks after receiving all the documentation
while most Institutional Lenders (ILs) can take 60
days or greater if at all.
#2 Low
Documentation Requirements - HMLs still require
some documentation but they fund based on the value
much more than stacks of paperwork required by ILs.
#3 No
Credit Issue - HMLs typically do not require
you to have good credit. At MFG we have worked with
one client and got him funded with a current bankruptcy,
foreclosure and a FICO score of under 500. ILs almost
always require decent credit.
#4 Flexibility
- HMLs give you maximum flexibility in structuring
your loan (i.e. term, interest reserve, draw schedules,
cash out, financing carry, etc.) ILs typically have
much tighter terms.
#5 Gap/Bridge
Financing - HMLs are usually very experienced
real estate investors that understand that projects
do not always follow the well-laid plans. If a gap
in funding exists and the story makes sense HMLs will
typically fund. ILs guidelines most times tie their
hands if borrower get off schedule.
#6 Loan
to Foreign Nationals - HMLs will loan to foreign
nationals as long as they are secured in the property.
ILs have difficulty lending to non-US citizens.
#7 Higher
Risk Profile - HMLs will fund predevelopment,
Church, Non-Profit and other riskier loans due to
their understanding of the process and value of the
collateral. ILs typically will not fund predevelopment
loans or make loans to institutions which impact their
profile in the community. For example, no IL wants
to foreclose on a Church the publicity is terrible.
#8 No
Personal Guarantee - Most HMLs do not require
personal guarantees. Loans are made based on the value.
ILs almost always require personal guarantees.
#9 Flexible
LTVs - HMLs decide what Loan to Values (LTVs)
they will accept based on their affinity for the project,
cross collateralization, possible equity participation,
etc. ILs have very strict underwriting criteria which
turn down loans from the beginning if the LTV is too
high.
#10
Subordinate Liens - HMLs will make loans in
a first, second, third or lower position as long as
the value is there. ILs might do a second almost never
a third. They typically want to be in a first position.
So next time you need a loan keep in mind these 10
reasons to look at Hard Money and call Mentor Financial
Group at 866-Mentor5 (866-636-8675) ask for Weston
Jones, email me at weston@mentorfg.com or fax me at
866-291-1065.
At Mentor Financial Group (“MFG”), our business is
to fund investments secured by trust deeds on commercial
real estate, including income producing properties
(i.e. apartments, office buildings, etc.), land and
development projects (i.e. construction loans, rehabs,
condo conversions, etc.) and non-owner occupied residential
properties.
Don’t waste time! Call us today at (619) 987-9477
and ask about our referral fees.
Click here for the printable version of this article.
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