Pretty funny this thread came up. We stopped purchasing at auction back in the slate spring because of the slowdown. In the interim we have decided to become hard money lenders as well. So 2009 Buyer yes this is an opportunity but you are making it sound alot easier then it is in reality. How thorough you want to be in underwriting the loan to someone is a risk assessment you need to make. How you plan to follow through in the case of a deadbeat is another not so fun subject. How much the govt takes of your return along with the overhead of legal and other services is another item. My intention is not to scare you off, just to educate you.
As posted in this thread JTR was trying to come up with a business model to provide a service for buyers to purchase homes at auction. It seems a bit dicey for me and frought with liability but it could work. Basically he will fit hard money lenders with buyers, and help the buyers to find a home through auction. I know first hand the problems of buying at auction and the legwork involved so I am not sure how successful that model works unless the buyer is going to go do alot of work. If the buyer is gonna do all that work then why wouldn’t the buyer just do the whole thing themselves.
Bruce Norris from SDCIA has alot of connections with regards to hard money lenders. There is another pig I know who is working on being a hard money lender. I am kind of watching him before I get into it.
The strategy for the hard money lender is to not undertake risk. The return is nice but that doesnt matter to me, the risk mitigation is important. Thus it is my understanding that for purchasing at auction, most hard money lenders will not talk to you unless you are coming in with a substantial nut of your own. So if you want to buy a home at auction for 500k then you better be coming in with 250k before asking for another 250k. Thus if you cannot pay it back the hard money lender will not get caught short when he has to take your home away because you couldn’t make payments.
Anyways hard money lending to me seems less risky (right now) then purchasing a home at auction for a flip. Now if you are thinking to purchase at auction for a keeper then that is a different story. Watch out though because if your plans are to purchase as a keeper and then cash out refi in 6 months you better darn well hope you don’t get caught in a rate runup or a strong depreciation cycle. Granted it is unlikely even if those happen it would be a knockout punch but it could make your loan payment higher then you anticipated.
I investigated hard money lending somewhat seriously for myself in early 2010. The quote you need to remember is hard money lenders “loan to own”.
That is, hard money lenders expect either to get paid back quickly (thus the high points charged) or they expect to make money by foreclosing and taking your down payment (thus the high down payment). As stated above the risk is mitigated almost entirely by the % down payment required which will be the equity the hard money owner is comfortable having in the property if you can’t make the payments.
After my escrow fell through 6 months ago I’ve been content to wait another 1-2 years to see if the low end prices come back from the tax credit bounce. It is starting to look OK this fall but the spring bounce is right around the corner 🙁
I investigated hard money lending somewhat seriously for myself in early 2010. The quote you need to remember is hard money lenders “loan to own”.
That is, hard money lenders expect either to get paid back quickly (thus the high points charged) or they expect to make money by foreclosing and taking your down payment (thus the high down payment). As stated above the risk is mitigated almost entirely by the % down payment required which will be the equity the hard money owner is comfortable having in the property if you can’t make the payments.
After my escrow fell through 6 months ago I’ve been content to wait another 1-2 years to see if the low end prices come back from the tax credit bounce. It is starting to look OK this fall but the spring bounce is right around the corner 🙁
I investigated hard money lending somewhat seriously for myself in early 2010. The quote you need to remember is hard money lenders “loan to own”.
That is, hard money lenders expect either to get paid back quickly (thus the high points charged) or they expect to make money by foreclosing and taking your down payment (thus the high down payment). As stated above the risk is mitigated almost entirely by the % down payment required which will be the equity the hard money owner is comfortable having in the property if you can’t make the payments.
After my escrow fell through 6 months ago I’ve been content to wait another 1-2 years to see if the low end prices come back from the tax credit bounce. It is starting to look OK this fall but the spring bounce is right around the corner 🙁
I investigated hard money lending somewhat seriously for myself in early 2010. The quote you need to remember is hard money lenders “loan to own”.
That is, hard money lenders expect either to get paid back quickly (thus the high points charged) or they expect to make money by foreclosing and taking your down payment (thus the high down payment). As stated above the risk is mitigated almost entirely by the % down payment required which will be the equity the hard money owner is comfortable having in the property if you can’t make the payments.
After my escrow fell through 6 months ago I’ve been content to wait another 1-2 years to see if the low end prices come back from the tax credit bounce. It is starting to look OK this fall but the spring bounce is right around the corner 🙁
