Private Hard Money Lender Loans

Why do they do this? This is a key point and worth remembering.

These lenders have relationships with all types of
investors. For example, suppose they provide funding to an
investor on a single family residence and the investor doesn't do
what they promised the lender? For example, suppose they take the
funding and then don't do a very good job of marketing the property
for sale and the property goes back to the lender. Do you think
the lender wants these properties? No, the private hard money
lender is a "money investor", not a "real estate investor". The
private hard money lender depends on "turning the money" over and
over again to make profit on interest and points.

So what happens when a private hard money lender gets a property
back? Well, most of the private hard money lenders have
relationships with real estate investors who are "waiting in the
wings", so to speak, to take those properties off the private hard
money lenders hands. They purchase those properties and then rent
them out. So that is why the LTV (loan to value) ratio must work
for the private hard money lender to be able to help you fund your
property. If a private hard money lender loans on properties with
LTV's that are too high, these properties will not "cash flow"
adequately to provide an adequate interest return to the lender who
purchased the property. In other words, if the private hard money
lender loaned out $50,000 on a property that was likely worth
$100.,000, it would be reasonably easy to sell that property in
case the borrower defaults. The investor who buys that property
from the private hard money lender would then either pay cash for
the property or finance it through a conventional loan. Most of
these types of investors pay cash for the property first, get a
renter in the property, and then finance the property long term or
sell retail to a homebuyer or sell it "wholesale" to another
investor using a "note" or "trust deed" that is secured by the
property. Either way, this type of investor provides a safety net
for the private hard money lender by helping the lender to recover
cash and profits. Everybody wins.