Hard money/private lenders that work with less than $50k loans?

[Sarah Giffin]

Looking for hard money or private money lenders to provide a bridge loan for the purchase of a $45k rental property in SC while we get our funding in place. I will be taking a 401k loan to pay off the lender, but need time to rollover a 401k balance from an old employer in order to get the money. All of the hard money lenders linked on BP require a minimum of $75k.

[Jay Hinrichs]

Yup the under 75k loan is a niche I carved out about 7 years ago and over 2000 of those fundings..
some of the companies will do it though.. but usually not just one off they will do it for borrowers doing volume.
But it is a very narrow niche..
the reason is they cant make any money.. I mean you cant put money out at 2 and 10  or 2 and 12 on those small balance loans they would go broke.. I mean they cannot stay in business making 2 pionts on 45k. .thats only 900.00  LOL.. and HML have to borrow the money they give you and that is usually 6 to 9% for their cost of capital  so they make a delta on the interest spread  but again say a 5 % interest spread delta on a 45k loan is a mere 2,250. per year or 187.00 per month
say the loan is out short term less than 6 months  that brings them a total return of 1125.00 in interest and 900 in points for 2,025.oo  having been in and around this industry since the early 80s..  in todays world it does not matter the loan size a company that is lending money as a business needs to make at least 4k per file At least and thats just fee's does not include interest other wise no way to pay your over head and make a profit.

And since borrowers are hyper sensitive to points  and they see the 2 and 12  they just assume it stays static for all loans.
now many lenders will charge the 2 points but your going to have 3k in junk fee's  on top of it.

So bottom line is you should figure on 4 to 5k for the loan out of pocket at least unless you can find an individual who will do it for less and has no over head etc..

hope that helps with explaining how the business works from a income standpoint of the lender.. and so on and so forth.
Now you will get the fake lenders hounding you saying no problem just need to send me a 500.00 good faith fee or deposit etc etc and it will be credited back at closing.. those monies will be gone and lost forever.. Its a virus not unlike Covid right now in our industry with advance scheme fake lenders taking advantage of those that dont understand how HML works.

If your an American Greed fan  find the episode on Remington Financial and INgrid Robinson.. its an eye opener.
or just google Ingrid and advance fee schemes she has a website dedicated to it.. 

[Arsen Atanasovski]

So Jay are going to lend on the deal? A lot of explaining but the young lady Sarah needs a loan. 

@Sarah Giffin if I were you I would look for local banks or credit unions that would be your best bet.

[Sarah Giffin]

Thanks @Arsen Atanasovski I want to put in a cash offer to look better to the seller, so are you suggesting a quick straightforward loan from a local bank/credit union (rather than a mortgage) to get the funds for the sale while we get the other money in place?

[Jay Hinrichs]

Originally posted by @Arsen Atanasovski:

So Jay are going to lend on the deal? A lot of explaining but the young lady Sarah needs a loan. 

@Sarah Giffin if I were you I would look for local banks or credit unions that would be your best bet.

U cant self promote on BP open forum etc.. I am sure there are folks now PM ing her to help her.. hopefully not to many fake lenders 

looking for their 500.00 committment fee LOL

the purpose of the open forum is education and that was all I was trying to do explain to her why under 75k loans are hard to get. 

[Arsen Atanasovski]

@Sarah Giffin if you have the cash I would offer cash and see what the seller does. If you do not have the cash but have part of it I would look in to personal loans like from LightStream, SoFi, etc..... lock in tour deal fix it up if it needs any rehab then down the road 6 months from now you may refinance it at a local bank or credit union. You will need to refi it with your personal name that would make it possibility to do it with a bank. If you were to go down the business name route then your typical RE brokers will like more of a (bigger deal) so let's say you have 3 or 4 of those houses then you can do it as a package deal! Right now times are good and brokers are lazy picking the low fruit big deals! But not saying all brokers are the same there is hustlers out there that would loan a $55k refi on a SFH under a business name. To me it never made sense and till this day it never makes sense. Little Caesars make their billions off same deals ($5 hot and ready) but a broker wouldn't even pick up a phone for $900!!!! Makes not sense! If I were a broker I would deal 20 $900 deals then wait and hope for a large one to come by. There are millions of people buying homes in the $100k Mark but there are a few that buy million dollar homes, I am a RE agent and not even for one second do I deal with the big deal stuff, I would be working months and months and in the end they buy from someone else I just wasted a lot of time chasing a pot of gold. Sorry for the run on explanation but hopefully it makes sense to you.....

[Jay Hinrichs]

Originally posted by @Arsen Atanasovski:

@Sarah Giffin if you have the cash I would offer cash and see what the seller does. If you do not have the cash but have part of it I would look in to personal loans like from LightStream, SoFi, etc..... lock in tour deal fix it up if it needs any rehab then down the road 6 months from now you may refinance it at a local bank or credit union. You will need to refi it with your personal name that would make it possibility to do it with a bank. If you were to go down the business name route then your typical RE brokers will like more of a (bigger deal) so let's say you have 3 or 4 of those houses then you can do it as a package deal! Right now times are good and brokers are lazy picking the low fruit big deals! But not saying all brokers are the same there is hustlers out there that would loan a $55k refi on a SFH under a business name. To me it never made sense and till this day it never makes sense. Little Caesars make their billions off same deals ($5 hot and ready) but a broker wouldn't even pick up a phone for $900!!!! Makes not sense! If I were a broker I would deal 20 $900 deals then wait and hope for a large one to come by. There are millions of people buying homes in the $100k Mark but there are a few that buy million dollar homes, I am a RE agent and not even for one second do I deal with the big deal stuff, I would be working months and months and in the end they buy from someone else I just wasted a lot of time chasing a pot of gold. Sorry for the run on explanation but hopefully it makes sense to you.....

this is a good conversation and segway into explaining to the beginner BP crowd the differences in being a real estate broker ( of which I have been one for 45 plus years and owned multiple brokerages) and a mortgage broker/banker  ( of which I have been on since 2003 ) and before that in the 80s we lent hard money in CA through our real estate brokers license and its still done that way today .

I get the small commissions but what folks need to realize RE brokers sell the home its done they make their fee and they are done.. and if your like my wife in a 100% shop you have no overhead other than minuscule MLS and board dues..

The lending companies have Employees they have to pay out of that 900.00 fee..  ( private lenders of course are just them no overhead) 

However when we are talking about licensed companies.. they need their reps that get a commission.. they have to pay their underwriter to underwrite the file.. and if they are collecting payments monthly they need a robust software system and full time accountants etc.. 

When I had my HML company up and running we had a CFO we had me the owner we had a sales rep or two then depending on how busy we were we had 2 to 3 underwriters.. we had a post closing specialist ( make sure all the docs get to us and recorded correctly) and between one and two in the AP AR .. and one to answer the phone..

So you can see a huge difference from being a real estate broker and being a lender.. now the mortgage broker just gets a piece of that 900.00 so you can see how unattractive those loans are and you would simply go out of business.

Points to lenders are just one fee.. And you see people do this all the time. they are in shock when the final hud comes in.. In HML you don't have to give a good faith.. you can if you want but its not mandatory.. so next thing they see is their 2 points but then there is the underwriting fee and the inspection fee appraisal review fee tax monitoring fee and about 20 other ones they can think of .. this will all add up to at least 2 to 3k on top of points and sometimes higher.. I did a JV for a guy in Temecula and we got a loan from Civic I read the HUD 800.00 for tax monitoring for a 9 month loan I mean really LOL.

Other than a bank or credit union that is HOLDING their own paper.. any mortgage broker lender you are going to see the cost of these loans at a minimum of 3 to 4k per file.. I see it everyday when my clients get their loans to take us out I read the huds.. Then you add on 3rd party the appraisal fee the title insurance lenders title insurance escrow fee's and all the junk fee's the escrow and title charges and that can easily be another 1500 to 2k.. depending on who is paying for what.. but someone is paying it.. Now in Attorney closing states you can see private attorneys do this for less might have a flat fee and don't junk fee you to death.. but that's rare in my markets I work.

For RE brokers I get it though I mean I started selling land at 18 for 2,500.00 to 10,000 per parcel we made 10% commish..  

So for lending pricing is kind of universal  but for real estate is totally market dependent if your in a market were the median price might only be 150k your going to have a lot of small transactions its just what it is.

My project we are building now in Oregon our average sales price is 610k and we sold 20 of those in the last 4 months ( building them new) and my wife is the broker on all of them.. Of course to be fair we are also the owner  LOL.. so we create our own listings.. 

And median new home price in our market is 500k or so.. U cant find any property under 200k  unless its basically a tear down and lot value. 

And of course Seattle is much higher and the Bay Area is stratospheric in price points. 

AS for this deal the OP did PM me and I recommended she go to a bank or credit union like you suggested.. once she flushed it out the house is rent ready and there is NO reason to use HML She is just worried someone will get it before her.. But its MLS listed and my point to her was that's basically market value for that kind of property in that location and there will be another.. just get your financing all lined up then pull the trigger don't get antsy

[Scott Wolf]

@Sarah Giffin, have you asked your bank about a personal loan? Or a HELOC on properties you own, or if you have a stock investment account, many of the offer Lines Of Credit against your holdings as well.