Hard Money Lending Questions and Answers Top 10 questions and answers from the leading expert in the field of hard money lending Gregg Reichman - Active Funding Group - A Publication of
Question No. 1 How much do you charge? Answer Typically 18% per annum, interest only with an additional $750 per loan paid up front. Payments are due monthly, in advance. The private money lending business is very competitive state to state, and the rates we charge at AFG are very typical for asset based investor loan products being offered in Arizona at this time. Question No. 2 How much will you lend? Answer - A maximum of 80% of what the Borrower is paying for the subject asset, and not more than 65% of present market value. As an example, if the Borrower is purchasing a property for $200,000 that is worth $275,000 AFG would lend the lesser of 65% of the present retail value of the property OR 80% of what the Borrower/Investor paid for the property, which in this case would equate to a maximum loan amount of $160,000.
Question No. 3 How fast can you fund? Answer - Within hours, if necessary. Typical funding time frame is the next day. One of the primary tools our borrowers use as an incentive to induce the sellers to proceed with a sale at very attractive or distressed pricing is closing and transaction speed. Sellers are frequently willing to trade a discounted price for the certainty of all -cash, non-contingent closing. To support and facilitate this, AFG has a very user-friendly online loan application format that allows a borrower to enter a loan application 24/7, or even from an iphone or Droid by utilizing AFG s mobile application. Question No. 4 What is the qualification process? Answer: We do not qualify the borrower at all; we are a true asset-based lender. This is an important distinction to emphasize because many lenders advertise themselves as
asset-based lenders, but in reality they do conduct some level of due diligence on the Buyer. At AFG, we believe that a true asset-based lending model DOES NOT require any level of due diligence on the Buyer, and that the only component that should be considered in making the decision to proceed with the loan request is the value and condition of the asset being pledged for collateral. Question 5 What types of property will you finance? Answer Almost anything except manufactured housing. Our core customer is an entrepreneurial investor who is buying assets at a distressed price and then repositioning them for sale at the retail level. We also provide capital for all other types of distressed asset acquisitions, including commercial assets, land and construction.
Question No. 6 Do you provide financing for owner-occupied loans? Answer - Not at this time; currently we are only providing Investor financing. Owner- Occupants who are unable to obtain financing through conventional sources due to various A- challenges Not at this in time, their we situation are presently will only frequently providing Investor financing. investigate Owner-Occupants asset-based who lenders are unable as a possible to obtain financing through solution. conventional We are sources not in the due consumer to various challenges finance in their situation business, will frequently as an entirely investigate different asset based set of Lenders state as and a possible solution. federal We are regulations not in the consumer governs finance activity business that as because an entirely different set of state and federal regulations govern activity in business space and dealing with consumers that business space and contains an element of risk that we are unwilling to expose ourselves to. Question No. 7 What is the maximum loan amount? Answer We don t have one. I can t address what is typical as far as competitors go, but I
can assure you that compared to other companies in our space of business, we have a much more significant capital base than 99% of them, and as a result I would expect other firms to have limitations on maximum loan amounts. A- Not Question at this time, No. we 8 are What presently is the only minimum providing loan Investor financing. amount? Owner-Occupants who are unable to obtain financing through conventional sources due to various challenges in their situation will Answer frequently - We investigate don t have asset one. based My Lenders as a possible solution. expectation We are not would in the consumer be that most finance of business our as because an entirely different set of state and federal regulations govern activity in competitors WOULD NOT have a minimum loan that business space and amount. Question No. 9 What is the loan maturity? Answer Six months. Maturities vary from company to company. A six-month maturity is very typical and there are opportunities to have this extended to 12-month, depending upon Borrower performance.
Question No. 10 -- Can the borrower be an LLC or a Canadian citizen? Answer - Yes. This is not property- or location- specific and has nothing to do with the asset; it has to do with repayment risk and it is an A- internal Not at this policy time, with we are our presently company. only LLC providing Borrowers Investor financing. create Owner-Occupants a higher risk loan who for are the unable Lender to obtain since the financing through LLC may conventional not have sources any meaningful due to various net challenges worth and in their situation to will the frequently extent that investigate there is asset a default based on Lenders the terms as a possible solution. of We the are loan, not the in the LLC consumer may well finance turn out business to be as because an entirely different set of state and federal regulations govern activity in uncollectable. that business space and
The Expert About Gregg Gregg Reichman is one of the most pragmatic individuals you will meet in the real estate investment industry. Reichman is a leader and pioneer in opportunistic financing for the entrepreneurial investor. He began as an investor and realized that reliable funding was the answer to most short-term investing and fix & flip investing. He launched a foreclosure listing site in the late 1990s, followed by one of the first online application processes on a hard money lending website. This all worked perfectly in an appreciating market. When the market turned, Reichman had to learn the asset recovery and liquidation business first-hand. Today the firm that he and Jody Angel lead is using a combination of financing, technology and aggressive marketing to remain an entrepreneurial leader in short-term investor financing in Arizona, Nevada & California. These are markets Active Funding Group is extremely familiar with from a legal, real estate and valuation perspective. Contact them at 602-252-1155. -Andrew Waite, Publisher, Personal Real Estate Investor Magazine.