What Is A Hard Money Loan?
Here’s the short answer: A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies.
Is Hard Money The Same As Private Money?
The history of our industry includes endless esoteric debate over wether to call itself private money or hard money lending. If you do an online search of both terms you’ll discover there is no single definition for either. Take a look at any Arizona private money lender or Arizona hard money lender website and you’ll likely find both terms used interchangeably and frequently, but it’s not because they are confused. It’s all about ranking with the search engines and since the battle for business is now fought on the internet no one wants to leave to chance that all pistons aren’t firing. When the phone rings the borrower could be asking for either hard or private money and it makes no sense to argue with a good loan opportunity. “Are you guys private money or hard money?” My stock answer: “Absolutely!, now tell me what you’re trying to accomplish so that we can craft an exacting loan to fit your needs.”
However, truth be told, given the opportunity to introduce myself where there are no preconceived notions about our business, I do prefer to say we are an Arizona private money lender. After all, “private” leaves less to the imagination than “hard”, don’t you think? Kenwood Mortgage Investments is an Arizona private money lender, and yes, we are also an Arizona hard money lender. Call us anything you like, so long as you call us when you need a fast funding without unnecessary personal intrusion or bank underwriting neurosis.
Arizona Hard Money Lender or Arizona Private Money Lender?
We fund loan amounts of $50,000 to $25,000,000 usually within 24-48 hours of receiving a preliminary title report and are regarded by the industry as a lower rate/longer term alternative to typical terms offered by our competitors. Kenwood makes loans on the following property types:
• Single family
• Multi family
• Specialty properties (e.g. assisted care, restaurants, horse property)
• Construction (flexible draw schedules and fast inspection turnarounds)
What Are The Interest Rates?
Interest rates are typically higher than conventional commercial or residential property loans and generally range from 8% to 12%. There is two basic reasons for this: 1) funds for our hard money Arizona loans are sourced from private individuals or investment groups looking for higher returns than are typically offered by banks and other traditional institutions, hence the rates charged are going to be higher than those charged by those institutions. 2) Arizona Hard Money lenders work very quickly, usually closing loans inside of one week from the first phone call or application. This means their capital has to be ready and available at a moments notice. Opportunity cost for the investor are high as they have to keep a fair amount of capital on hand and unemployed, earning very little interest as they stand ready to fund your loan.
What Factors Determine My Pricing Or Loan Amount?
The “3 C’s of real estate lending” will ultimately determine the interest rate you pay and the amount of money your lender is willing to loan:
1) Credit. Your credit history is the best indicator of timely payments. Do you generally pay your bills on time or has everybody in your path had to chase you for money? A lenders expectation of how hard they have to work to collect payments will affect your loan pricing. If you have excellent credit history your lender will be open minded to a lower rate. Poor credit will likely result in higher pricing for your hard money Arizona loan or a loan declination altogether.
2) Capacity. Can you afford your Arizona hard money loan? Your loan has to make sense and any professional hard money lender wants to make sure you truly benefit from the loan. Your ability to afford the monthly payments and eventually retire the obligation will be given heavy consideration.
3) Collateral. The condition and marketability of the property is the most important factor your Arizona hard money lender will consider. Your hard money lender wants to understand the true value of the real estate before they can establish a final loan amount. Also known as the “LTV” or loan-to-value ratio. Is your property in great condition and easily marketable in its current state? Does it need work, is it in a major metropolitan region of Arizona or is it rural. And of course, the most important question to answer is “what price can the borrower command for the property if they needed to sell it in the current market?”
Once the “3 C’s” are properly addressed your hard money lender can properly price the loan and arrive at a loan amount they are comfortable with.
How Fast Can You Fund?
Kenwood Mortgage Investments typically funds its Arizona hard money loans within 24 hours of receiving a clear preliminary title report, which is usually in hand within 3-5 days from the submission of your completed loan application found here . In some cases, we have actually funded the loan on the same day the file arrives from a mortgage professional. In every case, no licensed Arizona mortgage broker or banker is faster than Kenwood. Our funds are sourced in-house which means we are not burdened by secondary markets or typical bank-type neurosis. At the moment the loan makes sense we are looking to draft loan documents and fund immediately.
Do You Offer Deeds of Trust Investing?
First position Arizona Trust Deeds (Deeds of Trust)
Kenwood Mortgage Investments chases “Safety” not “Yield”
Current yield 8%, for the conservative investor
Kenwood is not your typical hard money lender. We only fund first position loans on highly marketable investment grade real estate at low loan to value ratios earning us the reputation as a “coupon clipper” rather than a “yield chaser”. Our interest rates and fees are set to attract only what we consider to be the safest deed of trust opportunities available. Since 1992, Kenwood Mortgage Investments principals and underwriters have invested millions of their own personal funds in the very loans they underwrite. Few of our competitors can make the same claim. If you have experience with deeds of trust investing in Arizona and have a genuine appreciation for quality loan underwriting, then you should get to know us.
This page of our website is not designed to educate you about Arizona trust deed investing nor is it an offer to sell investments. Instead, we encourage you to contact Randy or Mark to discuss your interest and let us answer any questions you may have.
We are proud of our 22 year history in the business and look forward to sharing it with you.