How to easily get a Hard Money Loan

To start hard money lenders always lend base on what is called AFTER REPAIR VALUE.. aka ARV.  What does that mean?  It means they lend base on what the property will be worth once it is fixed up vs. conventional lenders that lend base on what it is right now.  This being so, if you are in the business of fixing properties you need to work with hard money lenders as they are some of the best private lenders out there.

To get started get on google and find a local hard money lender.  The more local the lender is to where you do business the better as they are more familiar with your buying area.

Cost of Capital
From there give them a call and ask them what is the points and cost to borrow for 12 months.  They will typically say 2 points and 12% depending where you are in the country.

What 2 points mean is, whatever amount you borrow you need to pay them 2% to take that money.

As for the 12%, that is interest for the money over a period of 1 year.  So if you only borrowed 100k for 6 months, that means you pay 6k worth of interest.

So for example say we called a lender and they said the points is 4 points and 14% interest a year.  Say your borrowing 100k, that means on the day you get the loan you need to pay them 4% of 100k which is 4k to get the money.

As for the 14% interest, you need to multiply 100k x .14 = 14k / 12 months = 1.167k a month.  That means if you take 9 months to flip the property you need to pay your hard money lender 9 x 1.167k = 10.5k.

Application Fees
Along with the above ask your potential lender what is the application fee and what is the review process like to set yourself up for financing.  Typically hard money lenders will charge you $200 to $400 to review you as a prospective borrower.  They will ask you for permission to pull your credit.  Along with that they will ask you for the following

2 Year Tax Returns
2 Year W2
2 Months of pay-stubs

Scope of Work
A scope of work is the breakdown of all the improvements you plan to do to the property.  Item per item, cost for each item written up by a contractor you plan to hire to do the job.  The hard money lender will need this to review the projected rehab.

Appraisal
On the day of the appraisal you should send the appraiser your scope of work that way they know what improvements you will be doing to the property to give the lender the highest possible ARV for the property.  SO the more clear your scope of work is… the higher your ARV can potentially be.

Closing Cost
Not only will you be paying for your attorney to represent you on the closing, you will also be paying for the lenders attorney.  So make sure to ask them what that cost is anticipated to be.

Some local lenders
ABL1.net
AlphaFunding.com
More to come…

Secret to every hard money lender…

Where to find deals, money and team members

Whatever your real estate goals are, you lack a resource to achieve it or else it would have been accomplished already. To me this resource is always at a networking event. You just have to know that it is there and what it looks like.

1. The many people I meet at networking events.
I often meet people that attend networking events to network. I always ask these people what does that mean? They tell me its to meet like minded people and I say got it. 🙂 To me that isn’t good enough. Beyond meeting like minded people the number one reason why you should attend a networking event is because you lack a resource that can be found at the event. This resource I am talking about can be an investment opportunity, capital to invest, time to do the business, or expert knowledge to get it all done.

Yes.. Thats right. That is exactly how I look at people I meet at the events. So start looking at everybody as a resource and team up with the people that has what you need. If you need money meet someone that has money. If you lack knowledge meet someone that has knowledge.. You get the idea

List resources you lack:

Along with looking for resources you lack at the event you must also provide a resource in exchange. What resource can you provide in exchange? Can you sum it up into one or two words?:

List resources you can provide in exchange:

Once you finish the above point, you have completed a huge step to networking correctly. I know it was a very simple concept but this concept alone will change the way you network forever.

2. What to write on your name tag
At the event write your name and the resource you can provide under it.  That way when people come to talk to you they know what you can provide in exchange.  If you are a newbie you still need to bring something to the table.  If you are a newbie with money write that. If you are a newbie with a lot of time on your hand write that.

3. How to Network for Maximum Return
Once your name tag is filled out you must start networking.  That means you need to talk to people.  Go up to people and introduce yourself and ask them what they do?  From there ask them what they are looking to accomplish by attending today’s event?  Listen to what they say and see if they fit your needs (the resource you lack).

Say you were looking for a money partner.  Person you are talking to says, I’m looking for deals to buy.  Ask them what is the price range?  All cash or hard money purchase?  Do you see how this person can be a potential money partner?  If you don’t get it read this blog on how to see what you aren’t seeing.

If they fit your need tell them that you be a great fit to work together. If not tell them what you can provide and are looking for by attending today. From there, tell them that you will keep an eye out for their interest with people you talk to and that you would appreciate it if they did the same for you by sending them your way.

4. How the money is made
If the person i’m talking to does connect with me on a resource I lack, I make it a rule to not break apart until we clearly know exactly how we will work together. Meaning if i’m looking for capital investors, before splitting up to talk to other people, we will roughly speak about potential investment capital size, ROI/splits and each other’s business responsibilities in the potential venture… << I call this the no follow up phone call networking rule.. What I mean by that is.. Why not get everything done now and save the phone call for something else? The follow up should really be to verify what was discussed. Or to look at potential deals not to start the conversation.

5. How to verify the people you want to work with are capable people in their field?
Once you meet everyone you need to meet, you now must verify the people you met are actually capable people. If you met a potential money partner ask them to send you a pof. If you met a wholesaler ask them to send you some deals and send it over to a hard money bank for funding. If they won’t fund it, then it’s not a good deal. If you met a contractor ask them if anyone else here has worked with them before and if so can you introduce me? If you met an expert ask the event host if they know about them?

In the end, we are all here to help you succeed and that my friend is how it is all done. It is very simple.. But let me tell you that not many people realize these things and because of that they don’t appreciate networking events. As for me.. Whenever I need money, deals, additional staff, contractors or anything related to the real estate business i know exactly where I need to go which is why we do so many of them.

To your continued success,

Nick Tang

How to easily raise money for your first deal

How long would it take you to save 100, 200, 300k? Exactly… A pretty long time. Being so, to me knowing how to raise money is like having the ability to time travel. This being said, what does it take to raise?

First of all, raising is very easy. When you go to a real estate networking event typically half of the room is full of money. Its just, no one is going around asking you to take their money. Instead, what they are there looking for deals they can buy for themselves. This being said, how do you get them to invest in you?

You don’t… What you do instead is ask them exactly what they are looking for and if you were to find such a thing would they be interested in partnering with you to take advantage of the opportunity. Its that simple!

This is one of the ways to raise. Literally everyone that is at an event that is a rehabber is potential a money partner! I mean what is raising anyway? Its getting access to money to do what you want to do right? What is the difference if its through a partnership? NO DIFFERENCE at all!

Now.. you don’t have to do this for your very first real estate deal.  I highly recommend you don’t as getting paid is way more important then making more money because at times getting paid an assignment fee is actually more valuable.  Get paid, once, twice, 3 times and then slowly transition over to doing partnerships that way you can make larger spreads.  Then slowly transition to real raising where you pay people base on cost of capital vs.. giving up 50% partnership.. Point is.. it all starts here so do it up.

Like my write-up? Want to learn more? I invite you to get my 101 raising money video.

Nick Tang