Is hard money a myth?

[Jackson Long]

So we hit a snag on our last round of financing and are looking to buy some time and comfort with a hard money loan.  I am making calls and having conversations and these pretty much feel like regular loans but with crappy rates.  All the stuff I see required to regular financing appears here, all the paperwork and apps, appraisals, etc...  Am I grossly confused about what hard money is?  Or am I talking to traditional lenders who are just cross marketing into the hard money space?

[Jay Hinrichs]

@John Thedford  this is one of the main stumbling blocks for borrowers who think points and rates need to move exponentially down with the size of the loan.

so when a lender advertises 2 and 12 lets say.  2 points on 400k is 8k  you can make money doing that

2 points on 30k tiny loan is 600.... I wont walk over and get a cup of coffee for 600.00 .. one would go BROKE running a company and bringing in that low of dollar amount.. could never pay for staff.

what the public does not realize is HML generally are paying someone for their capital.

Like me I had big LOC with my banks 25 million worth... I paid a point per year and 6% interest.

So if I lend out at 2 points one point is gone to my money source... and I will make money on the delta 6% per year... but with tiny loans its such small money you simply cant make it work

Now  one nice thing about the market is that conventional  banks have stepped into financing lower value rentals again.. IE doing sub 75k loans for buy and hold. I get taken out of most of my deals this way.. I see the huds.. even the conventional banks that are doing say a 40k loan when you look at all the charges on the settelement statement it comes to 4 to 5k to the bank.. IE a few points and then 4k worth of junk fee's  its the ONLY way they can make this stuff profitable..

And for a HML to lend 80% in what in TN would be basically the rough hoody type areas to an out of state investor.. that would be suicide for them.. WAY too risky.. as a HML in that scenario I personally would only go 50% LTC on hoody type low value assets if that. most of the time I would redline and tell them no way out of hand... too dangerous for them and way too dangerous for me.

the real value of the assets is only what the wholesale value is.. IE when the home gets stripped what will a wholesaler sell it for again.. one needs to remember its vicious circle in these value assets if we are talking Memphis under 50k.