SO CALLED HARD MONEY LENDERS

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ross888

124 Posts

Posted - 12/30/2007 : 10:46:58 PM

I do not think there are hard money lenders who do land and or loans on developments. I have 3 one is only 20% LTV etc. and no one will do it. I have a number of predators who want like 80K to do a 40% LTV loan for 750K.
I think most if not all of the people who say they are Hard Money lenders that answer here are Fraud. If you are not then I apologies and I will post your response and we can all see how you fund a loan.
So I am waiting for an answer. I will share with the outpost everything you day and do in performance. This should not bother you if you are not a scam artist. Also please leave your contact numbers etc so we can all follow, it will be fun.

Anthony

mgraham224

1008 Posts

Posted - 12/30/2007 : 11:50:16 PM

Most hard money lenders are not doing developments right now unless a very specific set of variables are in place in the deal.

80k pay be a little high for a 750k loan, but given that it's probably one of the riskiest areas of hard money, and given the fact that you don't have any better offers, is it really that unreasonable?

Actually, if there is a 6 month interest reserve, then 80k is actually a GREAT deal for hard money development right now. I "apologies" to call you to the carpet a bit here, but I would guess, since you have not calculated 4-8 points origination and 14-18% interest and applied it to your loan amount that you either have not done much hard money or at the very least have not done developments.

I personally have not funded any development deals mostly because my partner and I only lend a max of 150k per deal, but I can assure you that (assuming there is an interest reserve) that 80k is not unreasonable for the nature of the deal. Even if 80k is only the origination, it is still a better deal than the most common response on development deals these days, which is "find JV money" (joint venture).

Hard money is real. There are scammers, but you won't find many that are still posting on this site. In fact, there are some very excellent hard money brokers/lenders on this site. Maybe you should look more closely at your deal and educate yourself on the market niche you are pursuing. No one wants to do development deals in this market. Don't be surprised that those with the gold make the rules.

ross888

124 Posts

Posted - 12/31/2007 : 01:00:10 AM

I think since you only do loans on a small scale you do not understand the area you are talking about. I have more people than I can count on both hands that want deals I can bring them in your area of expertise.

However you have it seems no knowledge on larger deals and therefor should not even answer my question.

You do not have the experience and or the money to fund much of anything.

I have been doing loans for the past 15 years and have now seen the predators like you come in to the market and try to destroy our business more.

I would not say this except for your saying it was ok to charge 80k on a 750k loan. If you were in my area I would have your files seized and audited to see who you are. It sounds like you are a loan shark.
Why don't you give me your address and phone numbers etc. And I will have you checked out to make sure we do not have another predator who can bring our business down.

Don't scream at this just post all your information and I will have you checked out.

You don't have anything to fear. So Post it Sir.

coopercash

2692 Posts

Posted - 12/31/2007 : 06:44:59 AM

Anthony, you are welcome to check out my posting which appears in the ANNOUNCEMENTS section under the heading "COMMERCIAL LOANS - PANNING FOR GOLD" which will provide you with some insights into hard money loans as well.

By very definition "hard money" is just that and the amount of fees, charges and points not only varies from lender to lender but are also established by the underwriter's risk assessment.

As Matthew so rightly points out in his response "He who has the gold rules".

Because the hard money currently sector lacks Federal and State oversight it is relatively easy for the "scammers" and "villains" to perpetrate outright fraud and also easy for "legit" lenders to decline loans following their receipt of "advance fees".

Given the typical need for speedy underwriting decisions associated with hard money loan applications = "rush attention" = higher costs for appraisals, physical site inspection by lender's representative, environmental and legal due diligence. Costs that have to be pre-paid by the applicant when the lender has issued a preliminary letter of interest and a subject-to Term Sheet.

Assuming that due diligence and all of the "subject tos" encourage the Lender to issue a Letter of Committment there may well be a requirement for the applicant to remit a Committment Fee which is designed to lock-in the loyalty of the applicant and discourage them from abandoning the loan offer at cost to the lender.

WHAT "COST" TO LENDER? Many smaller hard money lenders call on funds from their investor pool. Those investor's deposits are in interest bearing accounts and the investors do not want to lose money on their funds when placed in a deal-specific Escrow Account. If the applicant were to back-out at that stage then the lender has to make their investor "whole". Same is true of lenders who have their own funds available in interest bearing accounts. They want to make certain that they don't lose out while "earmarked" funds are in Escrow.

Also please note that there may be a discovery of a major issue that affects the initial underwriting decision AFTER the Letter of Commitment has been issued and AFTER the applicant has paid the Commitment Fee.

In some cases the discoveries may be cause for the lender to vary terms or even to decline the loan and borrowers need to CAREFULLY READ AND UNDERSTAND the terms and conditions associated with the L o C.

Maybe there is a provision for a full or partial refund of the L o C fee if the adverse discovery was something that the applicant could not have reasonably been aware of at the time of their application. However if the adverse discovery was or should have been known to the applicant then the L o C will be forefeited.

This whole issue can be very subjective which leads us into the "gray area" and certain high-profile hard money lenders have been severely taken to task on this Forum for having mistreated borrowers and seizing those fees which can certainly be very substantial five and six figure amounts.

Legitimate hard money lenders will have varying policies regarding the need for and the amount of L o C fees which are disclosed, often in legal language, in the Letter of Commitment.

In the hard money "game" it truly does come down to BORROWER BEWARE!

I will be pleased to work with you in reviewing your commercial hard money deals and determine the possibility of interest from one of my "true, tried and tested" investors. All I initially require is an emailed and clearly presented Executive Summary.

r8drzrule

53 Posts

Posted - 12/31/2007 : 12:06:22 PM

quote:
Originally posted by ross888

I do not think there are hard money lenders who do land and or loans on developments. I have 3 one is only 20% LTV etc. and no one will do it. I have a number of predators who want like 80K to do a 40% LTV loan for 750K.

10 points on a land deal in this market, tell the borrower to take it before the lender changes his mind. Is he getting cash out on that deal?

Dude, wake up. Seriously. With conventional lending as it is, construction and construction lending almost non-existant, LAND IS ABOUT AS LIQUID AS CEMENT.

If you get anyone to offer to fund a land deal right now, especially cash out on land, take it and tell the borrower not to b!tch about paying a lender 10 points. Especially considering hard money is no income or asset verification.

Ask yourself this, is the land REALLY worth $750,000 when no bank will lend money on it? How is the lender going to get rid of it if the guy defaults?

mgraham224

1008 Posts

Posted - 12/31/2007 : 1:25:27 PM

quote:
Originally posted by ross888

I think since you only do loans on a small scale you do not understand the area you are talking about. I have more people than I can count on both hands that want deals I can bring them in your area of expertise.

However you have it seems no knowledge on larger deals and therefor should not even answer my question.

You do not have the experience and or the money to fund much of anything.

I have been doing loans for the past 15 years and have now seen the predators like you come in to the market and try to destroy our business more.

I would not say this except for your saying it was ok to charge 80k on a 750k loan. If you were in my area I would have your files seized and audited to see who you are. It sounds like you are a loan shark.
Why don't you give me your address and phone numbers etc. And I will have you checked out to make sure we do not have another predator who can bring our business down.

Don't scream at this just post all your information and I will have you checked out.

You don't have anything to fear. So Post it Sir.

Is he serious?

Ross, are you serious?

You kind of sound like Nigerian Royalty.

Actually I know you're not serious. If you had "more people than you can count on both hands (that's 12 in your gene pool right?), then you would be well acquainted with the going rate for hard money deals. Maybe you're having a hard time finding help because of your negative preconceived notions about hard money? Richard will always be eloquent and diplomatic in his responses and I praise him for that. If you have the IQ to read between his lines, or if he responds with a slightly more blunt comment on rates and fees, you will come to understand the veracity of my first post and hopefully your ******gery will then wane.

coopercash

2692 Posts

Posted - 12/31/2007 : 1:29:59 PM

Jim...you raised an intersting point regarding value of the collateral. In the hard money investor game, regardless of wehter the collateral is land or improved real estate here's what plays out. An MAI appraisal is ordered by the lender at cost to applicant.

Whatever that appraised value comes in at is going to be subject to a DISCOUNT down to a value that the lender believes would attract a buyer within 90-120-days if they had to foreclose on the loan.

How much of a discount? May be as little as 5% to as much as 60% depending on the nature of the collateral and it's location.

Based on that discounted value, the hard money lender will offer a % "LTV". In most cases that % "LTV" will be around 60%-65% of the discounted value.

mgraham224

1008 Posts

Posted - 12/31/2007 : 1:32:54 PM

Holy Crap, Antwon! I just realized you are about 4 miles from my office.

Let's meet in person! Just take 205 north, get off at johnson creek exit.

take a right, and then first right into Mt. Scott Center complex.

We are on the top floor with Ken Hoffman Realtors and Ross Insurance.

We are suite 210, I'm the fourth door on the left side bank of doored-windowed offices. You can audit all my files then, and I can get you on the phone with the top ten hard money players in the portland market.

if you actually show up, I will promise to apologize to you on this forum for my somewhat terse defense of myself, AND I will save you 4 years of contact building in the hard money market. I will even let you ride in the back seat and chauffeur you my favorite hard money lenders in the area. You can see their offices and personally impugn their ethics at that time, in person.

I'm 100% dead serious and would LOVE to meet you in person at my office.

mgraham224

1008 Posts

Posted - 12/31/2007 : 1:36:17 PM

Hey Jim,
Looks like you are in town too. Wow, a ton of portland brokers on this post.

mwgreco

1182 Posts

Posted - 01/01/2008 : 10:10:35 AM

It seems that Ross888 shouldn't be throwing his "Preditory" comments around so without understanding what Hard Money is... If Ross888 was actually in this industry for 15 years then he should already know... Most hard money lenders are tied to Hedge Funds and each Hedge fund likes to secure on different things... Some NOO properties, Some Land, Some Gems, etc.... The word HEDGE means they are leveraging it against something else... It might cost them 9% to tie up the money in order to finance your transactions so having a Hedge charge 13% + 5 points means that THEY will make a 9% return on their money... Dosn't sound like alot now does it??? Ross888 needs to educate himself on what hard money is and why it is...

mgraham224

1008 Posts

Posted - 01/01/2008 : 12:54:32 PM

I still haven't heard from him. I'm hoping he calls, so we can go tell the local hard money guys in person that they are scammers because they charge 4 and 14.

dkendall1979

9487 Posts

Posted - 01/02/2008 : 1:09:19 PM

I wouldn't put $100 bucks against a million dollar piece of land in Malibu, regardless of what I could charge the borrower.

Over 1/2 of land loans default. It's called risk assessment. If there's a 50% chance that the borrower won't pay back the loan, would you want to loan the money?

The only way I'm seeing land loans happen now is a cross between another residence and a Peronal Gaurantee from the borrower.

However, if you have an investor that is willing to do raw land with just 10pts, I'd appreciate an email with their information. I have a TON of business for them.

igonzalez

221 Posts

Posted - 01/02/2008 : 10:05:03 PM

Here is what I tell brokers everyday.

There is a huge surplus of residential properties on the market atthis time.
Why do I want to fund another one?

Residential development have to be pretty unique and in a particular High demand area to be considered and the exit strategy better be rock solid. That means no speculation based exit.

Commercial development has a much better chance of getting funded.
Particurlarly if the lots are being improved upon within 6 to 12 months.

No one wants a loan on dirt for an extended period of time.

Also land prices are expected to drop hardest given Lennars big discount sell off.

I am still offereing bridges and completion loans on development.
9 out of 10 times I will tell you no on residential development
Commercial probably 6 out of 10 times decline.

However any good lender will tell you before they ask you for any upfront fees.
Beware of the lenders who say yes to everything then ask for ludicrous fees!

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