From: "Canzie" 
Newsgroups: misc.invest.real-estate
Subject: Re: Hard money lender fees?
Date: Tue, 23 Sep 2003 12:56:43 GMT

 wrote in message
news:a81a80fabf2cebd50986c229450d5388@news.teranews.com...
> Dear Michael,
>
> You wrote:
>
> >What geographic area?  Commercial or residential?
>
> Tennessee. Residential.
>
> >What LTVs/CLTVs are you
> >interested in?  1sts or 2nds?  Recourse or non-recourse?  What licensing
do
> >you have?  What lending experience do you have?  Personal, LLC, Corporate
or
> >all?  Securitization?  What type of warehouse line do you have in place?
> >Will you securitize & market?  Portfolio hold?  Individual sell?  Have
you
> >had your disclosures & security documents verified by an attorney?
>
> I have no clue about any of the above. I'm just a regular guy with
> cash who recently joined the local reale state investor's group in my
> city. Some of the members get funds for their purchases and rehabs
> from private or hard money lenders, and it seems like more lenders are
> always welcome.
>
> I've gotten the impression that some pay 10% to 12% annual interest
> rate plus points, while others seem to borrow at 10% of the amount
> borrowed for 90 days.
>
> I don't know what the lender uses for security (I assume he gets a
> mortgage or lien on the property). I thing they tend to lend at about
> 65% to 80% of LTV.
>
> Bob

Bob, Hard money lending is tough.  The borrowers need to get hard money
because they do not qualify for conventional financing, and they don't
qualify for a reason.  Lending is all statistics, like life insurance.  You
can bet $$$ on the fact that someone with many lates on thier credit & low
fico score are going to be trouble in the future.  In fact, lending to them
is exactly that - a bet.

On paper, the numbers always look great - a 12% return, plus points, fees,
etc. Its getting the people to pay on time that is the hard part, and the
only insurance for that is to have STRONG security.  Low LTV.  Mortgage and
note on the property.  Note on thier car. Personal guarantees, co-signers up
the ying-yang (spouse, mother, father, uncle, dog) so that when the borrower
goes bad, you can go after the mom's house.  You are never the nice guy.

Most importantly, only use money that you KNOW you can afford to lose, or
can afford to have tied up in an illiquid asset for years.  If the borrower
goes BK, you will get your money eventually, but only after alot of time and
legal fees.