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A friend of mine wants to buy a condo but can't get financing because of the situation of the condos: - Most of the condos have no HOA or it's no longer active - There are 3 total units in the building. Another one he saw has 6. - They are listed for $50-70K. - They are assessed as of 2008 at 4 times the listing price. - The other units are vacant or rented. Not owner occupied. Because of these conditions he can not get conventional lending. On top of that: - His credit is good but he has a lot of revolving credit. - Because of that he has a 30% debt to income ratio. - He currently pays $1000 in rent alone so he wants to buy one of those units so he can stop wasting money on rent. What he needs is a hard money lender that will look at the property and lend him maybe $40-50K. That will allow him to pay for a place to live and pay down his debt. But we can't find anywhere that will do that even at a high rate. All the so-called "hard money lenders" we found go the same route as a conventional bank, pulling his credit and all and generating all this inquiry on his credit report. Time is of the essence because these properties are really good ones that are being liquidated and the good ones are selling like pancakes with every passing day. I'd appreciate any lead you may have. Thanks.
If you know the answer to your problem, then you don't need our help. Problem is: You don't know the answer. A hard money lender is precisely the wrong answer. They're great in the right situation, but your friend's situation is totally wrong for a hard money lender. For instance: It appears that your friend wants to occupy the unit he's buying. Hard money lenders don't do that. They lend on investment properties, not primary residences. Hard money lenders lend for short periods of time--generally 6 months to a year. When that loan is due, a borrower is expected to either refinance or sell the property. Well, as you describe it your friend would be able to do neither. No conventional lender would lend to him with his poor credit, and buying into essentially defunct, bankrupt condos. You talk about paying high interest. Yup. Hard money lenders I work with typically charge 5 points and anywhere from 12%-17% interest. How's your friend feel about paying 5 points and 17% interest? You say your friend is paying $1,000 a month in rent. By my calculations, if he were able to buy one of those units at $70,000, the interest alone with a hard money lender would run about $700 a month. Then throw in taxes. Utilities. Insurance. Other maintenance. You're up around $1,000. No savings there. You say your friend wants to "stop wasting his money on rent." For $1,000 a month, he's got a place to live. That's not wasting money. And have your friend compare the equity buildup in the first few years of a mortgage. There's practically none. Meanwhile, your friend wants to buy into a declining asset. Vacant rental units. Buildings that don't have enough money to fund a condo association or HOA. That can be a very tricky investment. A hard money lender would be crazy to lend to your friend under such circumstances. Plus, you say they're listed at $50,000-$70,000. From what you're describing, I assume they're shortsales or foreclosures. What makes you think they're going to sell for those prices? Or that the lenders will actually sell them at those prices? Have your friend stop jumping to conclusions about what type of financing he needs, and start figuring out a long-term plan. There are a number of ways to make good money on that sort of situation. For instance, would the properties cash-flow at a purchase price of $50,000 per unit? That is, would they rent for maybe $800-$1,000 a month? If so, one strategy would be to assemble a group of investors to buy all the units in the building, then rent the units out. But, because of the present situation, the purchase would have to be in cash, not financed. Still, that shouldn't be too hard. Using your figures, it would take between $200,000 and $450,000. Then you'd have a nice, positive cash flow. Better yet, offer the units as lease-options. But always, always, look at the situation and ask: "OK. Where's the profit potential here? And how do I get from here to there?" Not: "I'm sure I need a hard money lender."
Hard money loan lenders or such companies are money lenders providing you special kind of real-estate backed loan. They will give you short-term capital which gives you funding keeping real estate value as security. Hard money loan lenders targets on the real value of security property rather than the borrower's ability to repay it back on the basis of their income or assets. Comparatively the interest rates here are much higher than banks because they finance your fund which does not follow bank standards such as verification of borrower's income, assets, or credit score oh , sure , there are a lot of hard money lender , i can suggest u this link
The term "Hard Money Loan" is a type of non-bankable loan. Usually this means a loan where the hard money lender can approve the loan request based upon the value of the assets and the equity in the assets, without the need for much of the usual time consuming documentation and verification that a more traditional lender might require to lend the same amount of money.
Traditional lenders will generally be less flexible. For instance, you might be able to write a loan in which the repayment does not begin for six months to a year down the road. This gives you time to get your new venture off the ground without worrying about servicing the debt right away. While your brother in law or grandmother is likely to agree to this arrangement, a traditional bank might be less understanding. No matter what terms you work out, it is important to put them in writing.
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