The effects of the recent mortgage meltdown are still being felt and conventional lending has come to a screeching halt for real estate investors. This puts hard money lenders in the position to make a fortune.
While it would be easy to blame selfish corporate bankers for the lending freeze, the problem is actually a little deeper. The strict lending rules and borrower criterion that must be followed was enacted to protect investors who buy loans in the secondary markets.
Allow me to explain: to insure banks always have money to lend; several loans are bundled into a group and sold to investors as a mortgage backed securities. This sale provides the original lending bank with a quick return on capital and enables them to lend the money again.
The investors who purchase these mortgage-backed securities do not have the privilege of meeting the borrower or reviewing their credit worthiness, therefore they must rely on the lender's guidelines to ensure the integrity of the investments.
Prior to the mortgage meltdown, the lending criterion was much more relaxed, when the sun was shining and everyone was making hay. Now with the banking and mortgage industry on shaky ground, the rules were tightened to soothe nervous investors and encourage them to keep purchasing mortgage backed securities.
Unfortunately, now the banks are gun-shy. No bank wants to be stuck holding mortgages they can't unload so they've almost stopped lending altogether.
However throughout this turmoil real estate investors are still working diligently flipping and rehabbing distressed properties and for the hard money lender this presents a fantastic opportunity to build wealth.
As a private lender there are no committees and your underwriting process can be as streamlined as you desire. There is no shortage of available clients and you will have the opportunity to cherry pick the deals that make the most sense to you.
For the real estate investor seeking financing, hard money is the perfect solution. These short-term loans provide swifter funding without jumping through the regulatory hoops imposed by conventional lenders. Truly a win-win situation.
Private Rehab Lenders Can Make a Fortune in Today's Real Estate Market
The mortgage banking industry's lax lending practices during the early part of the century changed banks from lending institutions into loan flippers because they sold every loan they made back to Wall Street.
Now as they struggle to set the market straight again, thousands of solidly built properties sit vacant. Property rehabbers and flippers would love to take these properties off the bank's hands and turn a tidy profit and as a private rehab lender you can earn an even tidier profit helping these investors do just that.
One of the first economic concepts any of us learn is that of supply and demand. Unfortunately the balance is skewed; there is an abundant supply of properties but no one can obtain the money to rehab them.
The banks aren't doing it; many of them have used the "TARP" money that was supposed to go into loans to purchase other banks or build reserves after getting their toxic loans off the books.
To the savvy private rehab lender this mismanagement of the corporate banking industry can mean real dollars in your pocket for years to come.
These days conventional financing doesn't work for rehabbers and flippers. Since they are buying houses that need work it's difficult to convince tightfisted bankers to assume the higher perceived risk on an investment property and if they are selling back to Fannie/Freddie the loan will not qualify for conventional financing anyway.
But there's a lot of money to be made in private lending BECAUSE of the declining market and the perception that real estate is dead. In fact, you can capitalize on this market if you buy at the right numbers. Because so many have subscribed to the doom and gloom reports many of the rehabbers and flippers that were only looking for the quick buck have disappeared.
This means that the ones that are left are serious about finding profitable deals. If you're looking for a way to profit in the real estate market without getting your hands dirty providing private rehab loans to other real estate investors can yield double-digit returns.
Winston Rowe & Associates
31408 Harper Ave
Suite 147
Saint Clair Shores MI 48082
248-246-2243
