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How Much Equity is Needed for a Private Money Loan?

When considering approaching a private lender to fund your deal, you might be wondering how much equity is needed. Keep in mind that a private money loan is a business loan that uses investment real estate property as collateral. It is not an equity investment in your project.

The money used to fund private money loans is from an accumulation of personal money of one or more private investors. A private money lender seeks to reduce the risk a private money investor(s) might lose should your project go south.

Therefore, when applying for a private money loan consider what you would need to know if you were the lender to be confident that the risk associated with a project is minimal.

The asset you use as collateral for a private money loan from a non-bank private money lender with Hand Over Fist Funding is typically the basis for the loan. The majority of private lenders or people demand that you have at least 35% equity in the property (a 65% loan to value LTV). There are some lenders who may allow as little as 25% equity (75% LTV) or less but they will have other stricter requirements. The precise amount of equity varies depending on the private lender and their investors, but it usually depends on the quantity and nature of the collateral in addition to your own financial status.

Many private lending organizations will take additional collateral as a guarantee on the loan if you do not own any equity in the project you are working on. You might, for instance, have other properties with sizable equity or other possessions that might please a private investor.

If you do not have much equity in your project, a private lender will consider your project a higher risk. When your project is a higher risk, they will look at your financial situation a lot closer. Higher credit scores, other assets for collateral, and your experience will all help in reducing the risk.  Some lenders will consider your relational capital when you have done several deals with them and pay the lender off then they will give better financing terms on future loans.

When you don’t have enough equity, you should generally look for an equity partner rather than a private lending group to fund your project. To find a possible partner it is recommended to participate in a regional real estate investment group.

How Do I Establish Credit For My Business?

Business credit for me, are you kidding? No, we aren’t kidding!! Building business credit is essential to your company’s capacity to obtain financing. Don’t be afraid. Whether you run your business as a corporation or a limited liability company, it has the power to create a credit file that is separate from your personal credit history.

When a company (LLC, LLP, or corporation) is registered, it is regarded as a distinct legal entity with the capacity to engage in contracts. It is regarded as existing independently of you.

It’s crucial to realize that if you run a sole proprietorship, there is neither a legal nor a financial distinction between you and your company. If that’s the case, any credit or funding applications you make will only be related to you personally and appear on your own credit reports. Start establishing credit in your company’s name as the first step in keeping your personal and professional money separate.

Here are five easy strategies to swiftly build business credit.

1 – Choose the Right Business Structure

You must choose a business structure such as LLC, LLP, or corporation in order to give your company legal entity status. Keep in mind that sole proprietorships do not establish a distinct company organization. Check out the SBA’s Business Guide for more guidance on selecting the best structure for your business and registration.

The next step after creating your corporate entity is to register your company with the state and local government establishments. This particular stage depends on your organizational setup and the location of your company.

2 – Obtain a Federal Tax ID Number (EIN)

The IRS has tools that allow you to submit a free application for a federal tax ID. You will need to provide this nine-digit number when submitting company tax returns, creating a business bank account, requesting licenses and permits, and asking for business credit, among other things.

3 – Open a Business Bank Account

Open a business bank account for your firm as soon as you receive your federal tax ID. This is a necessary step in clearly separating your personal and company costs.

Your company’s ability to raise money is significantly influenced by your banking connections. Your company’s bank account not only acts as a bank reference on loan applications, but it also enables lenders to access crucial information for financing reviews.

4 – Establish Credit with Vendors/Suppliers Who File Credit Reports

Always choose vendors and suppliers who file credit reports with a business credit reporting agency. To establish business credit quickly, ask for net terms from suppliers and vendors. These purchases and payments are reported to business credit reporting bureaus as you make credit-based purchases of supplies, inventory, or other products.

This activity establishes your company’s credit profile and business credit report. Once your business has reported on multiple trade lines, a business credit rating (score) is created.

Establishing a variety of accounts with different forms of business credit, such as a business credit card or line of credit. Every connection you make also functions as a business reference that can be cited on upcoming loan applications.

5 – Monitor Your Business Credit Reports

It’s crucial to keep track of each of your business’s credit files because there are three main commercial credit reporting organizations. Each agency gathers data from different sources, so they can have different details about your business.

The good news is that you can easily update the essential details about your company with each of the business credit agencies. You should get in touch with the organization to request any updates if you see any information that is out-of-date or inaccurate.

You can qualify for more loans and credit lines with better interest rates and payback terms if your business has a strong credit history.

In-Depth Video Course to Improve Your Credit

If you want to improve your credit you can take a video course like Business Credit Blitz. This course was founded by Eric Miller and David Cohen both highly successful business credit consultants, investors, and seasoned entrepreneurs.

They created the Business Credit Blitz video course to help the beginner to intermediate business owners, entrepreneurs, and investors to successfully secure money to fund their businesses or to start investing in real estate and equities, just like they do.

When you sign-up for their course, you’ll be given access to the in-depth video lessons that cover pretty much everything related to building credit and funds to launch your business along with investing and business strategies they use to multiply their income. They will teach you how to not only secure capital, but also how to become successful entrepreneurs and investors.

Topics include:

* How to build business credit

* How to improve your personal credit

* How to leverage credit into real estate and stocks

* How to use credit to invest in profitable businesses

* How to scale your credit limits and your business growth

Sign up now!

Who Let the Dogs Out?

Make it you; let your dogs out! Having bird dogs on your team allows you to leverage your time, energy, and money. It’s a low-cost way to acquire properties for sale by motivated sellers, and it keeps a steady flow of deals coming in.

The top real estate investors wear several different hats, including finding deals, negotiating deals, funding acquisitions, managing construction teams, and more. Finding properties at a discount is without a doubt one of the most crucial activities. This can be both time-consuming and expensive. It is important to leverage BOTH your time and your money.

This is when hiring a “Bird Dog” comes into play.

If you want to succeed in the real estate game, you must assign tasks to individuals on your team who can free up your time. This will allow you to concentrate on the lucrative parts of closing real estate deals. Why drive around looking for properties when you can have a pack of bird dogs to act as your eyes and ears in the neighborhood? The final effect is a constant flow of leads you wouldn’t otherwise have.

Additionally, adding bird dogs to your squad is a fairly cheap approach to increase leads. There is very little initial investment required, and you won’t lose money if your bird dogs don’t produce quality leads you can follow. Very few marketing techniques provide this benefit.

What is a Bird Dog and what do Bird Dogs do?

A Bird Dog is a person that finds investment properties for buyers of real estate. Other names for bird dogs include deal hounds, property locators, and property scouts. Some individuals even refer to wholesalers as bird dogs. A bird dog explores properties for other investors in exchange for a finder’s fee.

Many Bird Dogs perform this role while they are studying the fundamentals of real estate investing in their spare time. The Bird Dog only identifies potential deals and provides the investor with information about the properties. The investor compensates the Bird Dog with a finder’s fee if and when the investor completes the transaction. It’s that simple.

HOW TO BE A SUCCESS:

• Recruit- while it may take some time, it is well worth the effort to select the best bird dogs.

• Coach- To get your bird dogs started and to help them as they bring you bargains; you’ll need to coach them.

• Manage- Just like in any business, you’ll need to manage your people and transactions, including how leads are sent to you, how you respond to leads, and how quickly you pay when a lead turns into a deal.

Recruit

If you are really trying to leverage your time, you can recruit bird dogs to do the property scouting for you. A good bird dog can be invaluable to your business. Understanding the role of a Bird Dog will help you discover and train your bird dogs to bring you bargains.

When hiring bird dogs, you’re NOT seeking people who are unemployed all the time. You want someone that is motivated and eager for extra money on their terms and timetable.

The best bird dogs are active, have reliable transportation, and are well-connected. They must have access to a computer and a cell phone. Use your own network to find bird dogs; Ask your mailman, the landscaper, your hairdresser, or anybody else who is frequently seen around your neighborhood.

Don’t forget about your regional REIA and hungry college students. You can even enlist the help of real estate brokers to look for off-market properties for you. Realtors spend a lot of time traveling through neighborhoods, so having a group of them on hand to bring you unlisted deals gives you a huge advantage. Making it simple for them to bring you deals will ensure that you get compensated.

Additionally, you can hire bird dogs by posting classified advertisements online at craigslist.org, on social media, or in your neighborhood’s print media. Your advertisement might appear as follows: Property Scouts are needed. I’m a real estate investor looking for someone to assist me in finding homes to buy, and I’ll provide you free coaching. Earn $500 or more by assisting me in finding properties. I’m not browsing for homes that realtors have listed. I’m searching for foreclosed homes and sellers, unoccupied homes, and houses that require work. Get in touch with me right away to learn more if you have a camera phone, access to the internet, and a large social network. Put your own spin on it, but don’t forget to include the benefits.

Mention that you’re seeking bird dogs when you meet new folks. You could even write something about looking for properties and paying referral fees on the back of your business card. Everyone you know has a different network, is familiar with other areas of your community, and conducts their daily activities elsewhere than where you are. Increase your number of on-the-ground eyes and ears, and you’ll see an improvement in your lead generation.

Coaching and Managing

You’ll need to train your bird dogs on the types of properties you’re looking for and how to recognize residences that could be prospective bargains if you’re working with potential bird dogs that are new to real estate. If you skip this step, people will contact you about properties that you can’t buy — a waste of your time and effort! You’re not looking for properties that a realtor has already advertised, to be clear. You’re looking for off-market homes that you can buy straight from the owner. Realtors can still be a very useful resource.

Your best chance is to sit down and draft a straightforward set of instructions that contains your criteria, how to locate properties, how to submit properties for your consideration and information on how you will pay them on your deals before you ever hire your first bird dog.

When dealing with bird dogs, effective management and communication is also crucial. Inform your bird dog as soon as you obtain a new lead that the information has been received. Tell them roughly when you’ll review the lead and get in touch with the owner of the home. Let your bird dog know if and when you make an offer. This helps your bird dogs learn what kinds of properties are ideal candidates for your consideration and keeps them engaged.

The inverse is also accurate. Inform your bird dog if they send you a property that doesn’t meet your requirements for the purchase. Tell them WHY you don’t have an interest, and make use of the chance to assist.

To-Do List

• Prepare your instructions for your Bird Dog. Specify the types, regions, and price points of your ideal properties.

• Prepare instructions on how to submit properties for review and payment details.

• Be Prepared. When a wonderful deal arises, have some funds set aside if you’re buying.

Let Handoverfistfunding.com know about what deals you have found and we will help get your deal funded.

Keep this in mind

Don’t think that the only thing your bird dog can do for you is driving around neighborhoods. Make them your assistant. With little grooming, some bird dogs may even develop into collaborators. Enlist them in your courtroom foreclosure hunt, your Craigslist ad job, your bandit sign placement, and other activities.

If you don’t want to take the time to work with people then you can always get a Bird Dog Robot. It does all the heavy lifting for you and you don’t even have to leave your home.

Want to Be a Bird Dog?

If you’re thinking about becoming a bird dog, being an active investor who is constantly hunting for deals is the key to keeping the checks coming. Connect with an investor. Once you are aware of their requirements, start searching neighborhoods, utilizing classified advertising, and informing everyone you know that you are looking for a home.

Understanding Real Estate Private Money Loans

A private money loan enables a borrower to get a loan for business purposes in exchange for pledging their property as security. An investor or a group of investors may provide this loan. An investor like this could be a business lender, a finance firm, an online lender, or a broker like Hand Over Fist Funding.

A private money loan is used by people in the business of real estate investing for business purposes to buy a conventional residential non-owner-occupied home for rental, fix and flip, Air BnB, new construction for rental property, office buildings, apartments, multi-family homes or undeveloped land. Whatever the project is it must be used for true business purposes and not be owner-occupied.

The processing time for private money loans is one of the main benefits. Loans can sometimes be approved in as little as 7 days. Another benefit is that you can still get a private money loan even if an average run-of-the-mill lending source won’t fund it.

It might be challenging and tough to find private money lenders on your own. The typical real estate borrower frequently lacks a thorough understanding of private money lending, which makes it challenging to understand the procedure, loan specifications, and where to locate those private money lenders.

The good news is that you have located the ideal starting point for this quest. Hand Over Fist Funding has a network of over 6000 private money lenders ready to fund your deals. They have more money than they have deals. So go ahead and tell us about your deal.

Where does the money come from for a non-owner-occupied private money loan?

The money is raised from individual investors. A single investor or a group of investors could be the source.

How do I know if I qualify for a non-owner-occupied private money loan?

The loans are based on the asset and your real estate experience. The more experience you have the lower the risk. If you have less experience then your credit score may be used to evaluate the risk. There are many variables they use to determine if a deal is acceptable. The best way to find out is to have your property under contract then Tell us about your deal and we will see if your deal is a good fit for private money lending.

Do I need equity to borrow private money?

Yes and no. Private money loans are mainly determined by the asset you offer as security as well as the risk. Generally speaking, private money lenders prefer that you have at least 40% equity in the property. The precise amount of equity varies depending on the lender and investor, but it is always determined by the quality, kind of collateral, and the risk. Private money lenders may typically take additional collateral, like equity in another property, as a guarantee on the loan.

How do I apply for a private money loan?

Initially, the first step for any private money loan application is to have a signed contract, then find out if your deal is one the investors would be interested in by telling us about your deal.

At HandOverFistFunding.com we have a network of lenders that have all types of loans to meet your needs for your project. Such as bridge loans, rehab loans, multi-family loans, commercial loans, residential loans, apartment loans, construction loans, and a variety of other types of loans.

Tell us about your deal to determine what type of loan you are needing.

We at Hand Over Fist Funding are looking forward to hearing about what you have going on.

Should it be mine?

Finding out how much a piece of property is worth doesn’t require you to be an appraisal expert. You do need to be aware of the right instruments to utilize and the most effective ways to determine worth.

The following are recommendations for real estate investors to perform due diligence on the worth of the property. Different types of collateral will necessitate different assessment methodologies.

Multiple Value Viewpoints

Do not rely just on one value assessment; gather numerous points of value. Here are some examples of various value types:

Appraisals – a certified appraiser’s value opinion report. Can be 5-70 pages long, depending on the property and form type requested, and includes details on sold, pending, and active comparable properties, images of the subject and similar properties, and analysis of property data to support the judgment of value.

Collateral DNA (C-DNA) – a professional third-party market analysis that offers thorough information on property value utilizing a variety of parameters. You can learn the after-repair value before shelling out cash for a full appraisal by ordering one of these reports, which is less expensive than getting an appraisal. Hand Over Fist Funding, LLC recommends investors get a C-DNA on all their deals.

Broker Price Opinion (BPO) – Value estimation made by a real estate broker. In comparison to an evaluation, this report is substantially shorter, typically only being one or two pages long. Be cautious while using BPOs because the value you get depends on the broker who performs the evaluation. Make certain that you personally choose the broker to examine the property and that the broker is the one who takes photos of the property. Brokers frequently send an assistant to view properties because they are too busy, which negates the point of getting an opinion.

Appraisal Review – When you get an appraisal, you can ask for another appraiser to review it and pay for that service.

Personal Drive By – This is often referred to as “driving the comps.” The time to do this is when you have a few valuable points. Drive a few of the sold comparable properties, some of the pending comparable properties, and some of the active comparable properties to determine the value of the property for yourself. Take a break along the way to chat with other brokers, owners, managers, tenants, and other neighbors or property owners. Sometimes talking to others who are familiar with your property or its type will yield the most useful information.

Negatives that affect private money loan valuations

Beware of defects that have a negative impact on value. Depending on the collateral kind, the drawbacks will change. Too frequently, appraisers will subtract their best estimate of the financial worth to make up for the drawback, but in actuality, the drawback may render your property unmarketable or substantially less valuable than expected.

To give you a sense of the potential harm, consider just a few of the following:

Location – It’s true when they say that real estate is all about location, location, location. Comparing the value of a home in a great urban neighborhood near a store and the identical home next to an oil change shop is instructive. The home next to the oil change store will probably draw considerably fewer purchasers even though the houses are on the same street (other than perhaps the manager of the oil change shop). Less extreme instances of location influence include a home backing up to a noisy sporting field or being on the corner of a busy street.

Access – Think about a business property that is surrounded by houses. If a business requires frequent large (semi) truck deliveries, inquire with the local agency that issues business licenses about whether a license would be granted. This may reduce the number of potential lessees you have.

Private streets – may have access problems because there is no county or city road maintenance. Areas with heavy snowfall should have contracts with third parties to supply the service or private maintenance agreements between property owners on the street.

Parking – Parking can significantly lower the value of a property for commercial financing. Compare a building with 4 spots per 1,000 to one with the same number of spaces, but 50% of them are tandem spaces, in which one party is confined to the place until the vehicle in front of it is moved.

Permits – Watch out for building projects that aren’t quite finished because they might need new or revised permits. Because materials have deteriorated over time or because of changes in codes, inspectors have occasionally been known to order the demolition of entire structures.

Environmental – Be cautious of properties that have not undergone a Phase I or, if necessary, a Phase II environmental investigation to ascertain the property’s previous uses. Mold, radon, and meth should all be evaluated in residential buildings.

Land – Be mindful of land that is “locked” or lacking in property easements. Verify whether the property has access to sewage, water, and utility hookups or whether a septic system can be installed if a municipal hookup is not available.

Floor Plan/Functionality – The layout should be functional for the intended or best purpose, regardless of the type of property. In a commercial building with lots of small offices, for instance, the “chopped up” floor space could be a big issue if all the nearby businesses are shops and the location would likely draw a retail business tenant if it weren’t for the incompatible floor design.

Trends

Keep an eye out for patterns in the type of property you are lending against. Are values increasing, decreasing, or staying the same? Are there many for sale or for lease signs on properties like mine in neighborhoods like mine?  If so, why, then?

Income
It is crucial to ensure that the income estimates are reasonable because the value of rental properties is typically calculated as a multiple of net operating income. Find out what they are paying and what the terms of their leases are by speaking with other tenants.

Send an estoppel certificate to the tenant(s) as proof that the rent is currently being paid.

Vacancy Factor
Verify the accuracy of the vacancy factor used in the financial analysis by examining properties that are similar to this one. What is the area’s comparable properties’ vacancy rate? What is the distribution of vacant positions?

Expenses

Verify that the property’s costs are appropriate and that fair growth is anticipated for those expenditures in the future.

Capital Expenditures

Make sure the proper capital reserves are set aside for financial assumptions. Capital costs will vary depending on the type of property. Appliances, carpet, and roofs may be included in rental homes, whereas tenant improvements including heating and air conditioning would be included in industrial office buildings.

Future Zoning Changes / Area Developments

To learn about potential future modifications that have been approved or are presently being proposed, contact the local zoning and planning office. Possible zoning changes or nearby future construction could have a positive or negative impact on value, but they would almost certainly never be taken into account in a standard evaluation because they are outside the purview of what an appraiser does. Three years from now, the value of this property might be significantly impacted by a sizable shopping and residential area that is currently applying for approval with the local planning authority.

A smart option is to inquire about any significant road alterations with the state Department of Transportation. If the interstate on/off ramps will be relocated in 5 years, which will be crucial to know if you anticipate investing in this property for a long time and consider interstate access to be one of its key features.

The ideal way to assess value is through numerous points since this gives you more information from other sources, including yourself, to help you decide if the asset for which you are taking out a loan is worth what you think it is worth. High-impact information might never reach you through the conventional channels for a value report. There is no alternative for independent research that uncovers current or potential future events that could materially damage your investment.

The finest discounts are occasionally the ones you pass up because you weren’t happy with the price.

A Lender to Fund Your Deal

You’ve found a fabulous deal, and now comes the daunting task of finding a way to fund that deal. Banks have turned you down because the property doesn’t fit their criteria, or they have turned it down because you have used your credit one too many times in your real estate investments, leaving your credit score below the ideal expectation. Or they have turned you down because you make money with your business or investments, but on paper, on your tax returns, it looks like you are below the poverty level. These roadblocks can stop you from growing your business as quickly and as much as you would like to.

Now is the time to look to private money lenders. We have the money and we have the investors who want to invest in real estate deals like yours. Hand Over Fist Funding, LLC came into existence because we wanted to connect investors like you with the hundreds of private money lenders that are funding deals of all sizes throughout the country. They have the money, they just need more deals.

We at Hand Over Fist Funding, LLC, want to help you find the funds to get your deals closed. Go ahead and tell us about your deal. Fill out the pre-application form or call us at 1-800-437-1982.