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How to Buy a Residential Property Through A Hard Money Lender

Posted by Jim Emerson

Sep 29, 2016 2:36:05 PM


residential_hard_money_lenders_new_law.jpgHow to Buy a Residential Property:

When in the market for a new home or in the market for an investment property, one should do their own research. (An example of an investment property is buying homes to either “fix and flip” or “fix and rent”).

We’re a mortgage investment corporation and we’ve been financing homes and investment properties for over 25 years.

Because we’ve been a residential hard money lender for so many years, we pretty much know the proper due-diligence in selecting the right property at the right price.

Knowing the correct value of a home (or the value of an investment property) is paramount to making an intelligent decision. Chances are (if you’re buying a new home), you’ll occupy the home for at least 8 to 10 years. And, if it’s an investment property, you may have it even longer. Diligent research will prevent making a costly mistake.  

There are numerous groups that offer classes on how to buy and sell real estate. I would never discourage one from availing themselves of these services but I do believe a buyer should also do their own research.  

Many residential hard money lenders and commercial hard money lenders offer similar services. 

One does not have to take a class or spend money with a “professional” to know how to make an informed decision when buying a new homestead or buying an investment property.

Following are a few simple rules:  

  1. The first step is to determine an area where you want to live or invest. Make certain that you know the school district and determine its reputation. Drive the area and pay close attention to how well kept the home are and the location of the nearest fire station, super market and shopping centers. Homes that are rundown and yards with overgrown weeds are generally evidence that the Home Owners Association is not enforcing the deed restrictions. This is a red-flag waving danger;
  2. Take a picture of homes for sale. Call the listing agent and ask the size, the number of bedrooms, school district, etc.;
  3. The next step is to decide how much you want to spend and how many bedrooms you need;
  4. Go to the HAR.com website and select the area, price, number of bedrooms, etc. that you need and you should find several homes that meet your requirements;
  5. You’ll be able to determine if “the price is right” by comparing the price per square feet for similar homes in that immediate area;
  6. With the property’s address, you can go to that county’s appraisal district’s website where you’ll find all the pertinent information about the subject property. And, under the tab “nearby addresses” you’ll find the value of homes nearby. You’ll be amazed what you can learn from this website. For example, if the home is in Harris County, go to the Harris County Appraisal District (HCAD);
  7. Once you’ve selected the home you want, contact a lender (bank or a residential hard money lender) and ask for a preapproval letter. This is important because the seller (and the seller’s broker) will know you’re capable of buying the home;
  8. It’s always a good idea to hire a realtor. The seller pays the realtor’s fee and so there is no cost to the buyer. Moreover, the realtor represents the buyer and they can be invaluable in helping negotiate the best price possible;
  9. Make an appointment to inspect the property with your realtor;
  • Make a “reasonable offer” but do not offer the asking price. There is usually room to negotiate;
  • You must require the following ; (i) a residential inspection (electrical, mechanical and foundation inspections), (ii) a survey, (iii) an appraisal, and (iv) proof the property is not in a flood prone area
  • If you’re buying a home to “fix & flip”, you need to have a contractor give you a bid for the improvements/repairs that are needed. As a mortgage investors’ corporation, my goal is to have no more invested than 70% / 75% of the “as repaired value”. E.g., if the “as repaired value is $100K, I want to have no more than $70K to $75K invested in the property; and
  • If you’re buying the home to “fix and rent” a/k/a “fix and hold” follow #11 above but add to that list to make certain that the monthly rental income will repay your hard money loan including principal, interest, taxes and insurance


CONCLUSION:

If you need help with any of the above, our company (AMI Lenders Inc.) will assist you with this process for a nominal services charge.  For over 25 years, AMI Lenders has helped people obtain the loan they need when traditional lending services like banks offered them no hope of getting the mortgage loan they need.

If you are ready to apply for a loan, you can do so by clicking here:

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Topics: Residential Loans, hard money lenders

   

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