Private Money Financing in Florida
Hard Money Loans - Florida
If you are in need of Private Money Financing for Residential Real Estate Investment Properties in Florida, You have come to the right place.
Private Money Loans are helping Investors, Realtors and Contractors in 2014
I am happy to say that Private Money Financing is back in Florida and is being used in the Real Estate market-place once again more than ever. These types of bridge loans for Investment Properties are getting popular again. Quite often referred to as private money financing or hard money loans or fix & flip bridge financing this type of financing is being provided by large institutional investors instead of individuals. (Like in years past)
Private Equity Firms and Hedge Funds are in the marketplace providing short term financing to Investors, Realtors and Contractors, or anyone looking to Purchase, Renovate and Sell. When I say short term financing I mean financing that is in place for 3, 6 or 9 months with no prepayment penalties and reasonable fees for this type of loan.
This only applies to residential real estate for investment purposes.
(Not Primary Residences)
What is great about today's marketplace is that this money is being doled out by Mid and Large sized Institutional Investors who have deep pockets and can get you the money you need in approximately 10 days. Not so much by the entrepreneur on the corner who has a bunch of money trying to make a good return.
The whole process is much better now.
I personally will not be funding your loan nor will my employer, but I can refer you to great sources that can fund your deal. My goal is to help you with the end loan after the property is fixed up and ready to be listed. Then we can do this same routine, again and again and again!
Basically the profile of an eligible private money candidate in today's market place is an Investor/Rehab Guy who is looking to purchase residential real estate with mostly someone else's money, fix it up and then sell the home in 3-12 months.
What has changed in 2014 (for the better) is that this type of bridge financing is being made available to individuals with limited experience. The focus is on the property not so much the individual or LLC . Credit is not a limiting factor but be prepared to have your skin in the game with 20% - 25% to put down.
Private money is typically lent at around 12% (Interest Only) with 3 or 4 points origination fee. This is actually a vast improvement over years ago when the going rate was 15% interest only with 5 or 6 points origination fee. Whereas bridge financing like this used to be lent at 50-60% loan to value, now we are seeing higher loan to values as high as 80% of purchase price and fix-up costs. Although the lending is not based on credit score, a credit report is still pulled and taken into account in the underwriting decision. Sometimes even financials are required if you are looking for larger loans such as $500,000 to 1,000,000.
Private Money Financing - 2013
Investors, Contractors and Realtors are taking advantage of this scenario.
I can certainly help you find a source that is right for you.
The Evolution of Private Money in Florida
Over the last seven years there has been many changes for Private Money Lenders and Hard Money Lenders.
Just imagine being an investor back in 2005-2006 and your laying out your own money to help customers with bad credit or limited documented income. Typically at that time 60% Loan to Value was lent at a high rate of interest of about 15%. Typically these deals went through a mortgage broker so the total fees charged to the borrower could be as high as 4-8 points. (To clarify a point is 1% of the loan amount.) Generic documents were drawn up by the investors title company and the loan closed, usually quite quickly in a matter of a week or two. The appraised value assigned to the property was typically the opinion of the individual person lending the money. This figure was usually ultra-conservative or a low estimate. Kind of a take it or leave situation.
Then 2007-2009 came along and many of the homes that were lent on lost 40-50% of value in Florida. So the private money lender was stuck holding paper on collateral that was worth about as much or less as the note he was holding. Many of the recipients of these loans, who were marginable borrowers at best, decided to simply stop paying and walk away from their homes. They played the foreclosure process to the max and stayed in the property as long as they could without paying anybody. Many of these private money individuals lost their shirts!
Many private money investors were forced to foreclose on the properties they lent on which in many cases were in really bad shape to begin with. This occurred after two or three years of no payments from the customer. Because of these circumstances many private lenders who did not have large bank rolls and liquidity to stick out the crisis went out of the business of lending money.
Then in 2010 with the passing of the Dodd-Frank Law the situation of the private money lender got even more complicated. The Dodd-Frank law was all about more government regulation on the financial markets. It was a response to the excessive exuberance on Wall Street in the previous years that almost caused a melt-down in the financial markets. What this law did for the private money guys was it introduced a whole new set of guidelines and series of hoops to jump through when lending on an owner-occupied property. These hoops were put in place, designed to protect the borrowers from predatory lending practices, but actually what they did was stop most private money lenders from helping everyday Joe and Betty Homeowner with bad credit.
Nowadays the typical private money candidate is an investor or realtor or contractor who has found a good deal on a home somewhere that needs some rehabbing or TLC before it can be sold on the market. That person purchasing the real estate maybe wants to leverage his or her own money or perhaps wants to work on two or more properties at the same time. By borrowing through Private Money Institutions the Rehab guy can purchase the property in his own name, fix it up and turn it over in a relatively short period of time.
Because the property is treated as investment property many of the rules of RESPA (Real Estate Settlement and Procedures Act) and Dodd-Frank do not apply. This scenario makes the private money lender happy because their risk or exposure is limited to the fix up time frame before they get their money back. (Usually 3-12 months) And in today's market where real estate prices are appreciating it is a much safer investment on the lender side.
Another difference between the private money days of old and the private money in today's market is that the lender is usually a much larger private equity firm or hedge fund with millions or perhaps billions of dollars. It's not so much Joe on the corner who has a bunch of money saved up and wants to get a good return. Also many of these private equity firms are simply purchasing properties on their own behalf and are using a buy and hold strategy where they fix up the property and rent it out and let the home appreciate. This is one reason why many borrowers in Florida are getting trumped by cash offers.
From what I am hearing on the street, approximately 60% of all Real Estate transactions in Florida are paid in cash now vs 70% in 2013. All of this activity is helping repair our housing market.
Private Money Loans - Palm Beach County