What is hard money and is it different from other traditional financing sources?
According to Brandon Moulton, hard money is private money.
Its purpose is the acquisition of real estate. It is more focused on the asset.
The short term for hard money lending is usually nine to eighteen months. After this period they could either refine or sell the property.
If you want to know the full details of what hard money is, continue watching this video.
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
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Fernando Angelucci (00:00):
What is hard money and how is it different from other, say traditional financing sources?
Brandon Moulton (00:15):
Sure. So, hard money is really just private money for the purposes of the acquisition of real estate. It’s tends to be more focused on the asset. And there’s more of an understanding we’ll say, that comes along with each borrower and each project that maybe doesn’t fit into the box that the traditional outlets like conventional lenders would like to see. So, and then typically, it’s short-term. Usually, 9 to 18 months is the the term that you’re looking to turn the money in, and either refight or sell the property.
Fernando Angelucci (01:02):
Okay. And during that 9 to 18 months, is it amortize? Is it interest only?
Brandon Moulton (01:08):
Typically, interest only. But that can depend on each deal, and what you cut with that group. Some guys like to see pay downs after, you know, some period of time, but typically interest only.
Fernando Angelucci (01:25):
Okay. You said that hard money is usually utilize more when conventional financing sources aren’t viable. What are some of those? Give me one or two situations where using hard money would be preferred over, say using a bank.
Brandon Moulton (01:42):
Sure. So you know, from a hard money perspective, it’s typically an asset that is and some state of disrepair. Meaning, it needs to be turned around, value add whether it’s rezoning or just construction. And when I got out the building banks are, you know, and conventional outlets are lukewarm on it. Especially depending on the size of the dollars, they all love the, million plus that’s what gets them out of bed. But for those dollar amounts, less than a million, it’s a lot of work. It’s not something they really gravitate towards. They want the deal with the bow on it at the end where it’s stabilized, but the the heavy lifting within the construction period is something that can be a little bit challenging within the conventional world.
Fernando Angelucci (02:36):
Yeah. Now with hard money, you said that it’s a more of an asset based loan. When you say it’s an asset based loan, what does that mean? As opposed to what?
Brandon Moulton (02:48):
So, asset based meaning looking at the collateral. Focus is initially on the project plan. And then, there’s, I would say, there’s some understanding around the personal background and maybe there’s some bumps in credit in the past, but really the focus is on the actual hard asset.
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