real estate finance - full book (500 pgs)

Pension funds with less than 15 million in assets are

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Unformatted text preview: is a loan where credit is extended but cash does not change hands, such as a purchase money loan where the seller finances the buyer. The buyer would give the seller a trust deed secured by the property purchased for the seller's equity rather than pay cash by using savings or a loan from a third party lender. HARD MONEY LOANS Hard money refers to cash. In a hard money loan cash actually changes hands, although generally in the form of checks. The term “hard money loan” has come to mean more than just a cash loan. It is a loan made by an individual rather than institutional lender. Dynasty School (www.dynastySchool.com) 6-1 REAL ESTATE FINANCE HARD MONEY MAKER A hard money maker would be a lender who uses lender funds to make the loan. While the funds used may be borrowed, the lender is at risk (we do not generally regard institutional lenders as hard money makers. We consider private lenders to be hard money makers). HARD MONEY ARRANGER A hard money arranger is neither the borrower nor the lender. The arranger is the person who brings the parties together such, as a real estate loan broker. The arranger finds a person willing to put up cash secured by a lien on real property and a person willing to place a lien on real property in exchange for cash. When we speak of hard money arrangers, we are normally speaking of arrangers between private investors, rather than institutional investors and borrowers. SOURCES OF FUNDS PRIVATE INDIVIDUALS Most loan funds are from personal or business savings. Some loan arrangers have sought investors owning homes who had very low debt–to–equity ratios as well as those having debt free residences. By refinancing, they are often able to borrow at a much lower interest rate than they can loan their money at. They are thus able to make money on this interest differential by trading on their equity. Even if their loans are well secured, the investor in such a situation is placed at risk. Should the lien that they hold go into default, they may not have the funds to make their own mortgage payments, which would place thei...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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