In my last piece, Why Use Hard Money, I define Hard Money Lenders and outline some of the benefits of using them.
I recently had a call from an irritated investor who was in the midst of a rehab and was using hard money to support it. She had been accepted and thought she was borrowing from one source, only to discover that they were obtaining their money from another. That final fund provider had difficulty coming up with the cash when the borrower wanted to pull repayments. As if that wasn’t awful enough, she had to pay more for the monies than they had agreed upon. But did you know that there are many sorts of hard money lenders?
She asked whether I knew why this was occurring, and I certainly did! Unfortunately, this is not a rare scenario, and most borrowers are unaware of how or why borrowing difficulties emerge. Allow me to explain.
To begin, the term “hard money lender” can refer to various lenders, and you should know which one you’re dealing with before you borrow. Where will your money come from, and what difference will it make?
Hard money lenders come in a variety of forms, including:
To fund loans, a direct lender uses significant quantities of pooled resources. They acquire their money from Wall Street, hedge funds, and other sources. Direct lenders are often larger lenders with rapid access to unlimited cash.
A broker refers their transactions to a direct lender for underwriting and funding. The issue here is that brokers are subject to the direct lender’s timeframe and are often more expensive because their costs are added to what the direct lender charges.
For example, I charge 10% plus 3 points. Brokers in my neighborhood charge up to 14 percent and 5 points since they receive funds from people like me and then add their profit to our expenses.
When presented with a transaction, they raise funds required to support it, frequently from many sources. Syndicators can cause significant delays by raising essential funds after the deal has already been underwritten. And, like in the preceding case, their financial source may fail at the last minute. Borrowers have been advised the day before or even the closing day that their cash will not be available.
Syndicators frequently borrow from personal friends or family members, which is one of the reasons they get into difficulties. These family members or friends may have loaned someone else or just changed their minds about lending at your closure. Do not proceed to closure until you are confident that your money is accessible.
If you’ve ever heard of someone being left hanging by a hard money lender, or if you’ve ever been puzzled why the cost of hard money varies so much, the definitions above should help.
Direct lenders are unquestionably the most dependable and trustworthy source of hard money cash. However, if you do not inquire ahead of time, you will not know where your money will be. You know what to ask now.
DFW Investor Lending, LLC is a hard money lender in Dallas, TX that provides loans for residential and commercial properties at competitive rates. DFW offers a variety of loan types to meet the needs of their clients: bridge loans, construction loans, rehab construction loans, and more.
Read More Here: