I receive calls everyday from Real Estate investors wanting to borrow private money (hard money) through my company and more often than not, I have to tell them no. Inexperienced borrowers often make the same mistakes so let’s review.
1) No down payment or too small of a down payment.
Private lenders require a minimum of 35% down most of the time. If you are looking for a no money down loan or very little money down, the only place to go is to either friends/family/business associates willing to co-invest with you or to the banks. Regular banks have a product from the Federal Housing Authority called FHA where you can buy a house for as little as 3% down. However, these loans are difficult to qualify for and can only be used for personal residents and not for investments.
2) The purchase price and loan for a home is just too small.
3) Borrower is trying to buy at auction or at the courthouse.
4) Borrower is buying an REO or short sale and has made an “all cash” offer.
5) Borrower thinks their property is worth more than it is.
6) Borrower is buying in an area with an extremely high amount of foreclosure sales.
To your Wealth!