Tighter lending standards in both residential and especially commercial lending, have fueled the growth of private, or "hard money" lending. The source of hard money loans are typically investors who have $1 million or more to play with. These loans are typically short-term and average 6-months to 2 years in maturity. The interest rates now are in the 9%-20% range and often require the borrower to pay points as well.
These are ideal loans for investors who want to buy and rehab Dallas' bread and butter investment homes. These homes that we target for investors and ourselves are worth around $100K to $115K ARV, or after-repaired-value. Hard money lenders nowadays will often offer 70% of the ARV. As an example, let's say the home has an after repaired value of $100K. The hard money lender loans you $70K (70% of the ARV of $100K). You buy if for $60K, and rehab it for $10K. Thus, you would just have to pay the closing costs on the loan. Next, you rent out the home, and then refinance into a more favorable conventional loan at $75K - $80K so you can pay off the hard money loan. In essence, you may have $5K - $10K out of pocket on an investment that's going to make you $200 to $300 a month in positive cash flow, give you about $10K annually in tax refunds, and is worth $20,000 to $25,000 more than you owe on the loan. Ask your financial planner or stock broker if he can beat that.
Gordon Albrecht of FCI Lender Services, says his Irvine, California-based company services roughly $2 billion worth of private money loans, in all 50 states, making it the largest in the US. He says hard money sources include movie stars, entertainers, well-heeled private businessmen, and what he calls "private mortgage funds". But he's not naming names, as he fears those private money individuals would be overwhelmed with requests.
For specifics on Dallas hard money lending, or help buying Dallas investment real estate, contact Troy Corman at t2realestate.com.
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