5 Tips in Dealing With Private Money and Hard Money Investors in Real …

5 Tips in Dealing With Private Money and Hard Money Investors in Real …




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Five Tips In Working With Private Money and Hard Money Investors on Real Estate Deals both Commercial and Residential

It is no mistake that today’s lending ecosystem is a tough one to navigate by. There have been over 386 bank failures since May 2006, and many say, that the worst is far from over. Originators have been squeezed out of the business at the same speed, with only a small number of originators left to make sense out of this whole complete mess, and try to continue onward, and make the best of their chosen career.

With all the Doom and Gloom in this market, there are many charlatans who present as investors, saying that they can get you’re hard to place real estate loan funded. They each have their own methods to use, mainly to defraud you, however they use many masks, and will take your money, if you are not careful enough.

The only reason for you to deal with hard money or private money in the first place, is because your loan is extremely rare and “out of the box” from the guidelines of traditional financing and institutional lenders. Some reasons why it might be rare it the legal description, whether it’s a stated income deal, or also if it is a high loan amount.

I have compiled a thorough “Top 10” list in how to clarify with these companies, and if you might be dealing with a charlatan or swindler. Please read these carefully, as most of these tips, are from my own hard luck experiences with these individuals.

TIP#1
GET REFERENCES
They are soliciting you over the phone for your business, and expect you to give them a million dollar deal in a phone call. If they gave you enough confidence to where you truly think they can fund this deal, stop…BREATHE, and ask for references. If they are funding deals, they can definitely get you in contact with some past clients who have done business with them. I would suggest at the minimum 2 that closed in the last 3 months.

Copies of settlement statements might be hard to get from the investor, however ask the client who the title company was that closed the loan, or closing attorney, and then call them to verify the loan truly closed.

TIP#2
GOOGLE THEM
In an age where you can put someone’s name into your search box, click “go into”, and find out everything you need to know about someone. DO IT! Cross reference names, company names, telephone numbers, addresses etc. I am trying to close a loan right now with a guy who has a $65 million dollar line of credit, however the address of his Letter Of Intent, is for a $180,000 townhouse. Seem too good to be true???? You bet. Do your research and legwork upfront, and you will save yourself time and stress later. Are they licensed to do business as an investor? Registered with BBB? Blackballed by other defrauded borrowers? Etc. You will find out a ton about someone on GOOGLE, or you might find NOTHING. And finding nothing is equally as frustrating. BEWARE!

TIP#3
DO NOT SEND MONEY UPFRONT
Depending on the kind of transaction, you will be expected to send money upfront to an investor if they are a charlatan or swindler. THIS IS HOW THEY MAKE THEIRMONEY! Whether it is for a due diligence fee, appraisal fee, a fee after they issue a letter of intent, etc. BE CAREFUL! These letters of intent are not worth the paper they are printed on. 9 times out 10, these swindlers will say they are the investor, look at your loan, say they like, and issue a letter of intent, then expect you to send them $5000 -$25,000 upfront with no guarantee of closing. They will have a nice website, nice Letter of Intent, make it sound good, and once you send them the money, they ARE GONE! Most of them will take your upfront money, and have good intentions in trying to find an investor to fund your real estate deal, however when they realize that no money is obtainable for this impossible, STATED SUPER JUMBO RESIDENTIAL CASH OUT DEAL THAT you quoted at 6.5%, they will give up, shut down there LLC, change there name and phone number, and start up again as someone else with a new company. It’s pathetic, but this has happened to me. BE CAREFUL!

TIP#4
ASK A LOT OF QUESTIONS!
Question Everything. You will be proud about yourself if you just man up, and question everything. Who is the money source? Who pulls the cause and writes the check? Is money from private investor? What kind of line of credit does investor have? Can you show me proof of funds letter? Is money coming from a hedge fund? What hedge fund, and what are the terms of the hedge fund? Can you put me in contact with 2 of your borrowers? How are you lending at such good terms? Who are selling the observe to? Do you realize the consertiveness of warehouse lines of credit? How are you lending money under stated terms? Where is your business located? How come you live in a one-bedroom townhome, however have a $65 million dollar line of credit? How come I cannot order appraisals? How come you are getting so mad at me ASKING THESE QUESTIONS??? How dumb do you think I AM??

TIP#5
Don’t BE AFRAID to BLOW them UP!
You put your loan scenario out there, everywhere. Broker websites, people you know in the industry, etc. It’s out there for everyone to see, so expect people to contact you from all walks. You have a super tough deal you needed funded. A 7 million dollar loan, self employed builder, character is on the marker, its stated, he wants 1 million dollars cash out, and does not want to pay about 6.5%. You get the call, the investor states he can do this deal. Every objection that you have, he has an answer for, and sounds very polised in his pitch. He is a confidence MAN. He is a Charlatan. This is what he does for a living. Get the answers upfront. Follow the money! Don’t deal with brokers! Avoid the broker chains! Get TIPS#1 -#4 addressed above, and then proceed. If you do not get a good feeling about this person or company, DO NOT MOVE FORWARD. If they cannot show you the things in TIPS#1-TIPS#4. DO NOT DO BUSINESS WITH THEM. Create an excel spreadsheet, and start building your BLACKLIST. If this is a career you want to get into, there is a small pool of people truly lending money, and a huge pool of crooks, charlatans, and swindlers, that are coming out of the woodworks in droves, due to a lackluster economy, with one goal in mind. TAKE YOUR MONEY AND RUN!!!

BUYER BEWARE

For any residential or commercial hard money or private money loans, Brian Quigley is a mortgage broker with The Mortgage Network, and Real Estate Consultant with BPQ Real Estate Consulting. You can reach Brian Quigley at 720 524 3215. He currently resides in Denver, COLORADO for the last 8 year




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