RE: Fwd: [RealEstate] Still Looking for Hard Money Lenders(Michigan)

Tue, 06 Dec 2005 20:21:57 -0800

It depends on your definition of "up front".
 
To me, up front means that you have to come up with cash of your own out of pocket.  If cash comes out of proceeds from closing, that's not up front.
 
Out of all the lenders and borrowers I've dealt with, this is the first place I've ever heard anyone call cash paid out of closing proceeds "up front".
 
I think what a few of you need to understand is the concept of the "time value of money".  A lender charges interest to compensate him for the time his money is in use by a borrower.  The interest charged represents the money he's LOSING because you're holding it and he can't invest it in something else.  Points charged represent the fee for services rendered - processing your loan and all the work associated with it - think of it as a salary or money earned.  (Example:  If you work a 9 to 5 job as say a poolboy for which you earn a salary, you get paid for doing your pool duties.  If you then lend the money you earned to someone, you get paid interest on the loan (if you're smart).  If you lend money for a living (ie. that's your job) and you don't charge points, then you can't pay your bills because nobody is paying you a salary).
 
This concept of time value is used on a regular basis by Note buyers.  When they buy a Note, they buy it at a discount to compensate them for the time they have to wait to get their money back.  That discount represents the service fee (or salary earned) - same as points charged. The interest paid is for the use of the money.
 
To help understand the time value of money, answer this simple question.  If I offered you $1,000 today, or $5,000 in 10 years - which would you take?  Most people would take the $1,000 today.  That's time value of money.  Of course if you chose the second one, then simply change the numbers around until you choose the first option.  The value of money is different to different people depending on their personal circumstances.  Someone who is sitting on a pile of cash would think nothing of spending $1,000 on a TV set.  Someone who is struggling to earn a living would choke at spending $1,000 in one swell foop.
 
 
-----Original Message-----
From: [email protected] [mailto:[EMAIL PROTECTED]On Behalf Of mark scully
Sent: Monday, December 05, 2005 9:59 AM
To: [email protected]
Subject: Re: Fwd: [RealEstate] Still Looking for Hard Money Lenders(Michigan)

yes you are correct but even you concede that points
are charged up front when the loan closes. royal
financial is a good example of this in Michigan. they
charge apx17% rate and the up front charges or heavy.
bringing the true apr to 24. something%

--- John B Corey Jr <[EMAIL PROTECTED]> wrote:

> Maybe I am just missing something.
>
> I would say that the 4 people on the cc line have
> not done there 
> homework when it comes to what was posted as the
> original request and 
> what true hard money is. The person who gets it
> partially correct if 
> CrM. The other three appear to not know that
> traditional hard money 
> (no credit check at all, no up front fees and the
> loan determined by 
> the value of the property) is out there and savvy
> investors are 
> making good money landing deals with such funding.
>
> True hard money is not the right solution for a lot
> of situations. 
> The LTV is lower than many would like (65% of the
> as-is value for 
> some HML when there is no credit check). The costs
> are what you would 
> expect from hard money (15% and 5 points appears to
> be par these 
> days) and the funds are not available for owner
> occupied properties. 
> It definitely is out there for good deals.
>
> Be a bit more gentle to the person who posted the
> request as they 
> appear to know more about hard money than many of
> the folks who have 
> responded so negatively.
>
> BTW - There was never a statement the loan would not
> be lacking 
> collateral or that the fees would not be paid when
> the loan closes.
>
> The only point that I think will be hard to find is
> a HM loan for 24 
> months if all the other factors remain as presented
> below. The one 
> firm that I know that will go to 24 months wants to
> see the credit 
> file so they get to understand the borrower better.
> They do not use 
> the score they just want to know who they are
> dealing with. When you 
> are at 12 months or less there are multiple lenders
> out there who 
> will offer loans on the terms below. BTW - Many
> times you can find 
> such a lender in your local investment club
> meetings. I closed a loan 
> in Detroit just a few weeks ago on terms that fit
> everything below 
> except it was for 12 months max.
>
> John Corey
> Manager/Member
> Chelsea Private Equity, LLC
> +1 (503) 906 7840 x1108
> +1 (503) 210 0227 (efax)
>
>
>
> Begin forwarded message:
>
> > I'm looking for a real hard money lender.
> >
> > No credit checks
> > No up front points
> > No income verification
> > No cross collateralizations
> >
> > With:
> >
> > Quick closings (2-3 weeks)
> > Loans terms 12 to 24 months
> > Loans from 20K to 500K
> > Loan secured by the real estate
> >
> > I don't mind getting the property appraised. But,
> the loan should be
> > based on the value of the property.
> >
> > If this is something that you can provide, please
> drop me a line.
> >
> > Thanks,
> >
>
>





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