INVESTING 101

EquityMax understands that our investment community is comprised of a diverse group of professionals with varying levels of experience.  Yet, whether seasoned or new, we feel each of us is learning every day.  If you are new to real estate investing, we feel it is our obligation as a long-standing business in the real estate industry to breakdown the differences in financing options, profit strategies, and general rules-of-thumb when considering hard-money financing.
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HARD MONEY VS. BANK FINANCING

For those who have never leveraged hard money before, a double-digit interest rate may scare you.  However, in today’s market, Sellers are constantly looking at the quickest way to close their transaction.  Qualifying with a bank and ultimately closing can take weeks, if not months.  Closing with EquityMax for a hard-money loan can take mere days.  We often tell investors that hard money is purposeful even if to simply close on a property, instead of a Seller bypassing you for a cash offer.  Then, when you have title to the property, you can refinance into the traditional loan you were initially seeking.

cash-vs-hard-money

CASH VS. HARD MONEY FINANCING

Some investors, on the other hand, don’t want to be burdened with financing period, whether through a traditional bank or hard-money lender.  However, we often tell our investors and fellow industry professionals that hard money is often crucial if a new or less seasoned investor has aspirations that go beyond purchasing a property or two.  Hard Money, if used in a short-term capacity, can enable investors to leverage the cash they do have and purchase multiple properties simultaneously.  The alternative would be using all your cash on one property, and not having sufficient cash handy should another great investment deal become available.  Certainly, investors can always count on EquityMax to lend on multiple properties for single investors simultaneously, so there’s never a moment of second-guessing or not bidding on as many properties as you’d like.

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FLIPPING VS. RENTING

Many investors like the quick flip strategy, that is, buy the home, renovate it, and sell it within a year.  Get in, get out, and move onto the next property.  Hard money works harmoniously with this exit strategy because of the short-term nature of the project.  Hard-Money for a few months will not kill your profit margins, like say, staying in the loan for 2 years would.  We also tell our “buy and hold” investors that an EquityMax hard money loan can be useful even if they intend on renting the project long-term, as our loans do not carry a prepayment penalty.  We encourage them to utilize hard money to enable a borrower to purchase a property with a quick closing, renovate the property to rent-ready condition, and then immediately solicit more conventional, long-term financing options.

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UNSPOKEN LOAN TERMS

EquityMax often educates our investors to make sure that they consider ALL loan costs when deciding which financing option is the best.  While some lenders may charge the lowest rate, or charge the lowest loan origination fee (i.e. “points”), beware of other costs they may not initially mention when quoting you.  Questions you should be asking your financing source are:

  • Is there a prepayment penalty?
  • What is your processing/underwriting fee, if applicable?
  • What is the mortgage doc prep fee charged by your attorney?
  • What insurance coverage requirements and term length do you require?
  • Do you require an appraisal?  If so, how much?

Over the years, we have found that even if a competing lender quotes a lower rate than us, they often times hide fees that may make their loans more expensive than an EquityMax loan.  For instance, they may require Windstorm insurance, charge a prepayment penalty, or their attorney charges an exorbitant fee to prepare the mortgage docs.  At EquityMax, we have the least onerous insurance requirements among our competitors, do not charge a prepayment penalty, and only require modest and reasonable fees to process your loan and have our attorney prepare your mortgage docs.

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