In the arena of real estate investment, some of the protagonists in this real-life game of monopoly are hard money lenders. Let's start by defining exactly what it is "hard money" and why would one use it to buy wholesale houses.

Hard money is also called "private money" because it comes from individuals who have a lot of working capital from side to give to a company's profit, unlike most lending institutions, which are publicly traded.

Hard money loans are usually easier to get more conventional loans. However, they tend to be more restrictive and carry higher interest rates, usually from 10% to 20% or more on an annual basis. The terms are stringent to protect the individual loan financing.

So, why would one want to use hard money to finance its investment wholesale houses when dealing with higher rates, attached to the loan?

There are many advantages to using hard money when buying investment houses, especially here in Columbus, OH where most investment grade property have rehabbed. Let's look at a few.

One doesn't need to have a good FICO score. Hard money loans are secured by a piece of real estate or home that was bought as an investment. (Credit still can be a factor, but not as much as with a conventional bank loan.)

This differs from conventional loan because private lenders will only lend approximately 60-70% of repair after (ARV) of a property value. This number includes the price of the House, as well as the money needed for repairs. This leaves room to prevent them and still turn a profit if the loan is not repaid or go into default.

This can be very attractive for an individual looking for homes "flip". In which case this person wants to buy it, complete the rehab and sell for a profit quickly. In this way are able to borrow money for investment houses who have bought at wholesale prices and get the money for the rehabs all at once, using potentially none of his own money at the end.

This type of loan is also useful to the landlord who wants to buy an investment property at a below market price, wholesale and home rehabilitation and rent it out. After the House was rehabbed qualifies for a conventional loan lead to long term and that the person can then refinance and pay off the loan.

Also get the funds can be much faster than conventional loan drawn out process, which can average 30-45 days or more. Fast access to funds is a must when the voucher below market bids for a couple reasons, offers go fast and most in need of a quick cash sale.

Distressed investment houses typically have a window in which to sell for any reason, that's why I'm upset. If you are going to buy wholesale properties, a quick sale is a must, wholesalers require a quick closing and normally do not work with individuals who use conventional financing.

I know this is true here in Columbus and in many parts of the country, to my knowledge.

These types of loans are also needed for people doing short sales or purchase of houses by the Bank. Both of which require a proof of funds. So if you don't have the cash you need creative financing for these types of agreements, but that is a whole other article.

When you use the money "private" or "hard" take care of all the terms carefully and avoid early payoff penalties as can really kill your bottom line.

How far is this hard money to finance your investment wholesale accommodation here in Columbus or elsewhere for that matter?

The truth is that there is more money chasing deals that money chasing deals. There are many private lenders in your area, be it Columbus or elsewhere, just waiting for the opportunity to lend money for your next holiday home investment.

Mortgage brokers can be an excellent resource for locating these individuals here in Columbus, or in your area.

Title companies are also a great place to ask for referrals as they deal with them quite often. Would probably be better to seek companies of descriptive title of the investor, as have more experience with this type of loan.

Another great site to your local REIA (real estate investment Association) there is normally a number in a city, I know there are many here in Columbus.

You can also find us on the internet or in the phone book. However, in my opinion the best for your next property finance wholesale are those that are, however, the resources cited limelight or similar references. These people are active and private donors are active in your area. It is easier for them to drive by and the value of a property if they are local, and easier for you to get money, if it's really a big deal.

So when looking for options to finance your next investment rehab or wholesale rental home here in Columbus or wherever you are located or buying, consider hard money as an option. But as always, weigh all the options and do the due diligence, not to the point of analysis, but without a smart informed decision emotion.








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Eric j. Pifer is President and founder of columbuswholesalehouses.com. Eric is a real estate investor active in Columbus, Ohio. Formally, he studied at Miami University in Oxford, Ohio.

I hope you enjoyed this information and was able to provide some information on this topic.

Copyright 2008
Eric j. Pifer-ColumbusWholesaleHouses.com