Transformation Underway This is Not Your Grandfather’s Hard Money Lender!
by Craig Fuhr
R eal estate investors have been relying on non-traditional funding for decades. Almost as soon as there were distressed sellers, there were investors ready to sweep up good deals. And, almost since there were investors, there have been opportunistic lenders looking for better-than-average rates of return on their capital. It’s a beautifully symbiotic relationship. Mom-and-pop lenders all over the country were—and still are—ready to meet your demand. Traditionally speak- ing, these lenders are doctors, lawyers or professionals who have done well. They have a hyper-local knowledge of very few markets, and they lend based largely on the deal, providing that you have a suffi- cient amount of skin to put in the game. The hard money industry is chang- ing rapidly, and in this case, “change is good” for you, the investor. After the mortgage industry meltdown of 2007, Wall Street traders got into the resi- dential real estate investment game, figuring
Next, regional lenders have a lower cost of capital, which means lower rates for you, the investor. Lenders make money when they lend, right? They are incentivized to make loans. More competition amongst lenders, especially those with deep pockets, should mean more competitive rates for the borrower. Finally, there is a new level of sophisti- cation in the industry. Let’s face it: the term “hardmoney” still has a negative connota- tion to many investors. Regional lenders are working hard to break the oldmold. Most regional lenders are $100 million per year originators or larger. They’ve developed relationships with their borrowers based on service and speed and by providing money at very competitive terms. Regional companies like Dominion Financial have thrown out tired practices such as charging unnecessary and exorbitant junk fees and are pressing the envelope in terms of the loan to value ratio. If you haven’t yet reached out to a region- al hard money lender to see just howmuch the industry has changed, and how you can benefit, nowmight be the time to take a look. Investors at every level are experienc- ing real choice when evaluating lenders. Download Dominion Financial’s “Top-10 Rules for Using Hard Money” at the follow- ing link: http://DominionPrivateLending. com/Top10 •
The influx of Wall Street money into residential real estate investing lending has been nothing short of transformation- al for the hard money lending industry. By partnering with hedge funds, established lenders like Dominion Financial Services have been able to explode their lending platforms from a hyper-local level to a much larger multi-state, regional level. But what does all of this mean for the average real estate investor? How does someone who flips a few—or even 15 or 20—houses per year benefit from this seismic shift in the industry? The truth is, there’s never been a better time to be a borrower. Traditionally, mom-and-pop hard money lenders were mostly opportunistic. They worked when they wanted, they had fairly limited capital, and they charged whatever the investor would pay. Many of these lenders still exist, but regional players are slowly shutting them out. How? First and foremost, regional lenders like Dominion Financial understand that speed is the true value-add in this market. They’ve set up platforms to underwrite loans in a few hours rather than a few days. With Dominion Financial, borrowers are pre-ap- proved for an Investor Line of Credit. This takes 90 percent of the fear out of making an offer—because as an approved borrower, you are 100 percent certain the company will fund your deals so long as the numbers makes sense. That’s a huge benefit.
“ THE HARD MONEY INDUSTRY IS CHANGING RAPIDLY, AND IN THIS CASE, ‘CHANGE IS GOOD’ FOR YOU, THE INVESTOR.
out how to buy and hold houses. Just like the average investor, hedge-fund reps were showing up to the courthouse steps buying distressed houses—but unlike the average investor, they were showing up with pockets lined with millions of dollars! They had an almost unquenchable thirst for houses. As the flow of foreclosures subsided and margins got pinched, hedge fund managers, still flush with cash, started looking elsewhere in the residential investment world to place their millions. Their first stop: hard money lenders.
Craig Fuhr, Marketing Director of The Dominion Group, purchased his first real estate property in 2004. He rehabbed and flipped the house in
just 90 days and netted a staggering $98,000. In April 2007, Fuhr was laid-off from his full-time IT job – and he never looked back! Having done over 150 deals, he has been a full-time real estate junkie ever since. He’s known throughout the country for his meticulous taste in design and his over-the-top gorgeous homes.
8 | INVESTOR REVIEW
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