8A — August 9 - 22, 2019 — Multifamily Financing — M id A tlantic
Real Estate Journal
www.marej.com
Multifamily Financing
ew J e r s e y b a s e d Mortgage Expert, Mi- chael Mikhail, CEO By Michael Mikhail, Stratton Equities Hard Money Loans versus Fix & Flip Loans and why the industry is confusing the two N lender to get their money back quickly if the borrow defaults on the mortgage. ment for the borrower, as it doesn’t have many guidelines and criteria.
Loans are among the most popular programs that inves- tors utilize for their real estate investments. Although, they are two different programs, many in and outside the indus- try believe them to be the same loan…but this is the furthest thing from the truth. Hard Money Loans A true Hard Money Loan (is an asset-based loan, which means the financing is based on the Loan to Value (LTV) of the Asset. Unlike the Fix and Flip loan, it doesn’t go through full underwriting and there’s no minimum FICO require-
within 1-2 weeks (from day of application), commonly as a first lean position - because it’s just money. It’s normally in the form of a Bridge Loan, which is short term financing in a period of 12-24 months. One of the reasons why Hard Money Loans are for invest- ment properties ONLY, is due to the high cost regulations and predatory lending – you can’t put such high interest rates and cost on an owner occupied property. In certain states, there are non-judicial foreclosure laws, which allow a Hard Money
This type of loan doesn’t have as many restrictions as one might think considering that it’s just money, so no more having to worry about bankruptcies, foreclosures, col- lections, etc. Due to the lack of guide- lines and underwriting, a true Hard Money Loan is generally capped at 65% LTV or less. For example, let’s say you have a home worth $1M, if you want $500K against it (50% LTV), you’re able to receive the money
of Stratton Equities, re- views Hard Money and Fix & Flip Loans Pro- grams. Regardless of the type of investor you
These foreclosure laws make the lender more comfortable doing high-risk loans, usually the money is not sold on the secondary market – the lender holds the note, they don’t sell the paper. Fix & Flip Loans Fix & Flip Loans are also asset-based loans, however they utilize more underwriting guidelines and criteria. While Hard Money Loans focus solely on the asset, Fix & Flip loans look at both the asset and the borrower. The reason why people con- fuse Hard Money Loans with Fix & Flip Loans, are because both the loan and the laws are very similar - they are both private money to an investment property. Virtually all fix & flip and hardmoney loans are funded by hedge funds, the money comes from the same place, but the underwriting is different. Contrary to Hard Money Loans, Fix & Flip Loans are usually sold on the secondary market and goes through a full underwriting with tighter guidelines. For instance, de- pending on the lender, Fix & Flip loans have a minimum FICO requirement. Addition- ally, the borrower can’t have late payments, foreclosure, judgments, or bankruptcy on their credit for 24-36 months. Furthermore, a Fix & Flip loan is a rehab loan, a loan that you utilize to acquire a property and then receive the funds to rehab that property in short term financing (12-18 months). Depending on whom you are working with, it’s important to bring something dynamic to the table, to help you close your loans quickly, efficiently, and professionally. However, make sure that when you move forward with a mortgage lender that you know all the details of your loan, why they are utilizing that program, and whether or not that loan program is being properly pre- sented to suit your needs. For example, at Stratton Equities, we offer bothHard Money and Fix and Flip Loan Programs, amongst an array of other programs, for Nationwide Real Estate Investors. Each loan sce- nario is carefully curated by one of our Senior Loan continued on page 10A
Michael Mikhail
are and your loan scenario, there is an array of loan pro- grams that are designed to meet all your mortgage needs. Hard Money and Fix & Flip
We are the leading Nationwide direct private money & NON-QM Lender, o ering the most diverse array of loan programs in the country. Our Loan O cers are ready to discuss your unique loan scenario and loan program that best suits your needs! HARD MONEY - FIX AND FLIP - NEW CONSTRUCTION - MULT-FAMILY - COMMERCIAL BRIDGE - CASH OUT REFINANCE - STATED INCOME
1-800-962-6613 www.strattonequities.com info@strattonequities.com
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