How do I structure Private Money Loans or Hard Money Loans?
How much equity can I afford? Can I afford the monthly amortization?
Are there going to be fees upfront?
These are some of the questions that will pop up if you are to secure private money loans for real estate to fund your project.
Before you can get an answer to these questions, you should know first what your project is and what type of loan will be appropriate for it. Private Money Loans are not fit-for-all financial solutions. For instance, GL&L Holdings have five loan programs that fit your needs. Read on to know more about them.
Loan Programs for Your Every Need
1. Residential and Commercial Investment Properties (Non-Owner Occupied)
Private money loans for real estate residential and commercial investment properties that are non-owner occupied fall under this category. The properties must be ready for occupancy, though they may need a bit of cleaning. You do not have to rehab the properties you want to purchase. You are allowed, however, to have a maximum term of 20 years. Balloon terms for up to 3 years are also available for this type of loan. You can pay monthly interest-only or include principal payments in your monthly amortization.
2. Cash-Out Loans
If you need cash for another property purchase and you have in your portfolio some properties that are mortgage free, you can use these as collateral for our Cash-Out Loans. These properties, however, must not be owner-occupied. You can get a maximum of 70% of the appraised value of your property and even opt for a 20-year term. Rates and Origination Points are also the same as the loans for Residential and Commercial Investment Property Loans.
3. Fix and Flip Rehab Loans
When you need loans for rehabbing a dilapidated property, private money loans for real estate are the best in the market. The loanable amount is 70% of the property’s After Repair Value, and you may be able to cover your purchase cost and the repairs with one loan. To help you and the lender determine the ARV, you have to submit a detailed estimate of the materials cost and labor costs of your project. You have 6 to 36 months of lead time to find a buyer if you are into fix-and-flipping or find a tenant if you are into property rental investments. You pay only the loan interest until the loan instrument matures. You can convert the loan to long-term or apply for one with a traditional lender for your exit strategy.
4. Residential Construction Loans
You can earn more from your idle plot of land by building a rental on it. The residential construction loan provides the necessary funds in this scenario. With this loan, you can even secure up to 100% funding of your construction cost. As with the Fix and Flip rehab loans, you should submit a detailed bill of materials and labor costs to the lender.
5. Foreign Nationals’ Passport Loan
Our foreign nationals’ passport loan provides an opportunity for immigrants with a stable source of income within two years, whether they have their own business or are employed. GL&L Holdings makes this easy for you because the documents we require are uncomplicated.
Loan Type Comparison
To help you decide and understand the types of loans better, we have prepared a comparison table below.
|
Investment Properties (Non-Owner Occupied) |
Cash-Out Loans | Fix and Flip Rehab Loans | Residential Construction Loans |
Foreign Nationals’ Passport Loan (non-owner occupied) |
|
| Loan Amount Parcentage | 70% -75% Max LTV | 70% Max LTV | 70% -75% Max LTV | 70% Max LTV | 75% Max LTV Purchase
65% LTV Cash Out |
| Max Loan to Construction Cost | N/A | N/A | 100% | 100% | N/A |
| Annual Interest Rate | 9.9% to 13.5% | 9.9% to 13.5% | 9.9% to 13.5% | 9.9% to 13.5% | 9.9% to 13.5% |
| Origination Points | 2.5 to 4.0 | 2.5 to 4.0 | 2.5 to 4.0 | 2.5 to 4.0 | 2.5 to 4.0 |
| Maximum Loan Term | 20 Years | 20 Years | 6 to 24 months | 6 to 24 months | 6 to 24 months |
| Balloon Terms | 1 to 3 years | 1 to 3 years | 1 to 2 years | 1 to 2 years | 1 to 2 years |
| Closing Days | 7 to 15 days | 7 to 15 days | 7 to 15 days | 7 to 15 days | 7 to 15 days |
| Loan Amount | $50K to
$1 Million |
$50K to
$1 Million |
$50K to
$1 Million |
$50K to
$1 Million |
$50K to
$1 Million |
| Other Features | Escrow Taxes & Insurance | Escrow Taxes & Insurance | Escrow Taxes & Insurance | Escrow Taxes & Insurance | Escrow Taxes & Insurance |
Figuring it All Out
Let us put some figures and work out the details for an easier understanding of the concepts and structure of Private Money Loans or Hard Money Loans. Let us assume that the ARV for the property is $200,000.00 for simplicity.
1. 20-year term with Balloon Payment
Applicable for (A) residential and commercial property purchase and (B) cash-out loans.
| In Dollars | What It Means | |
| Appraisal Value | 200,000 | The appraisal value is an estimation of the property value at the time of appraisal. Some factors that influence the estimated appraised value of the property are the materials used in the construction, the house layout, the number of bedrooms, bathrooms, and the size of the garage. |
| Loan Amount (70% LTV) | 140,000 | This amount is 70% of the Appraised Value, that is, $200,000.00 multiplied by 70%. |
| Interest Rate | 9% | The annual interest rate for the loan. |
| Monthly Amortization | 1,259 | The monthly amortization includes payment for the principal and the loan interest every month. |
| Balloon Term Payment
(3 years) |
131,39 | The remaining principal amount after regular and on-time payments for three years. |
| Origination Points at 4% | 5,600 | Origination points are between 3% to 5%. For simplicity, let us use the maximum percentage of 4%, thus, $140,000 X 4% equals $5,600.00. |
2. Interest payments only
Applicable for (C) Fix and Flip Rehab Loans and (D) Residential Construction Loans.
| In Dollars | What It Means | |
| ARV | 200,000 | The ARV is the projected value of the real estate property after the rehab. |
| Loan Amount (70% LTV) | 140,000 | At a maximum LTV of 70%, the maximum loanable amount for this sample computation is $140,000.00. |
| Annual Interest of 9% minimum | 12,600 | The annual interest rate ranges from 9% to 13.3%. In this sample, we used the lowest interest rate for the computation. Thus, $140,000.00 X 9% equals $12,600.00. |
| Monthly Interest Payment | 1,050 | Because for these types of loans, you will only make monthly interest payments. Thus, the annual interest of $12,600 divided by 12 months, amortization will only be $1,050.00. The principal you have to repay at the end of the term, so you should be ready with your exit strategy before the loan expires. |
| Origination Points at 4% | 5,600 | The amount equals 4% of the loan amount of $140,000.00, based on the maximum points given for origination and processing fees. |
Please note that the figures in the computations above are all estimates. They also do not include other fees and expenses such as Property Tax, Home Insurance, and Home Owners Fees. You can learn more about private money loan fees in this article.
Ready For Your Next Investment Project?
If you want to invest in Real Estate now, you can structure your hard money loan according to your specific needs. You can buy a ready-for-occupancy property to save you from rehab costs and earn rental income as soon as possible. On the other hand, you can also look for rundown properties in good areas that you can rehab and flip or even set up as rentals.
Whatever real estate deal you have your eye on, let GL&L Holdings help you start investing. We have just the Hard Money Loan product perfect for your investment needs. Call us at (832) 770-9415 or contact us online at info@gllholdings.com. You can also fill up our pre-qualification form online so we can pre-qualify you for a loan. Let us help you make your real estate dreams come true.
