Hard Money Loan Investments
Hard money loan investments are secured by real estate. Typical returns are between 8% and 12%. Little City Investments makes and services private, first lien mortgage loans to proven, Austin and Houston real estate investors and developers. Loans are secured by real estate at a maximum loan-to-value ratio of 75%.
Smaller investors are entering a market that big banks used to dominate.
Tighter lending standards are driving borrowers to hard money loans. Historically, super-secure, first lien mortgage investments were only available to institutional lenders, but that’s starting to change. In the world following the financial crisis, banks have deserted investor borrowers with less than pristine credit. Hard money lenders are making up the difference.
Hard money loans are becoming more mainstream.
Boutique mortgage lenders are reshaping the market for real estate investors. Banks have retreated from many commercial and real estate investment loan products, and these hard money loan investments are now available to private investors.
First lien mortgages are exceptionally safe.
If the borrower doesn’t pay, the lender forecloses. Hard money lenders also require significant equity. On a $500,000 home, we would only extend $375,000 credit (75%). The property would sell quickly for significantly more than the loan, so a borrower who can’t pay the interest could easily liquidate the property. This is why hard money lenders care more about the real estate asset and less about the credit, wealth, or income of the borrower.
Texas foreclosures are fast and strict.
The foreclosure process in Texas only takes about 45 days and there is no redemption period. At the foreclosure auction, either (1) someone will bid the loan amount or more or (2) the ownership will go back to the lender and the lender can sell the property on the open market.
Hard money loan investments earn 8 to 12%, without getting their hands dirty.
No watching stocks, managing contractors, or dealing with tenants. You’re just collecting interest payments – boring, stable, and secure. To earn 12%, you’ll need at least 500k to invest, but 8% to 10% is accessible for many investors.
Ways we secure your investment
- Low loan to value. Hard money loans typically have 25% or more equity. So if the real estate is worth $300,000, we would only lend $225,000.
- First lien position. The mortgage is secured by physical property in desirable and marketable areas.
- Physical asset. Investor money is attached to specific, short term loans made to flippers and builders in attractive areas of Austin and Houston.
- Construction supervision. Many of our loans have a repair or construction escrow. We do all of the physical site inspections, plus review paid receipts, permitting and lien releases throughout the process.
- Investment properties only. We lend to professional investors not homeowners.
- Foreclosure in Texas is very efficient for investment properties. It’s about a 45-day process from start to finish. At the foreclosure we either receive full payoff or ownership of the property.
Why invest with Little City instead of directly funding loans
- High stakes homework. We provide expert valuations and risk analysis based on our 10+ year history of funding these kinds of loans.
- Plan review. We review and provide feedback on all (remodel or construction) plans and specs before construction to be sure they are competitive in quality and features to the comparable recent sales.
- Passive investments. We handle all construction supervision, draw approvals and receipt review.
- Loan servicing. You will never meet or hear excuses from a borrower regarding late payments. We handle everything, and at 30 days late we begin foreclosure.
- Foreclosure servicing and negotiation. If the loan defaults, we have the proper team and tools to recoup your investment including interest. We have never lost money on a hard money loan.
- Diversification. Investing with us means participating in more loans and reducing your risk.
- Consistency. Because hard money loans are relatively expensive for the borrower, most are paid off between 4 and 8 months from origination. If you invest with us, we find the new loans so you don’t have to.
Why lend in Austin? Why Houston or San Antonio? Why Texas?
- Real estate prices are very resilient in Austin, Houston, San Antonio – Texas in general.
- The foreclosure process in Texas is faster than almost anywhere else in the country, about 45 days. The national average is a whopping 629 days according to RealtyTrac.
- Our lending areas are restricted to metropolitan areas that are highly marketable. We don’t lend on anything we wouldn’t mind owning.
Double dipping: Leverage your hard money investments
- Self-directed IRA funds are eligible for hard money loan investments. We’re not tax or IRA experts, but we can point you in that direction if you’re interested in putting your IRA funds work in private mortgages at 8% to 12%.
- Many banks will lend a percentage of your stock portfolio at very favorable rates. You can keep your stock investments in the market, but borrow against them (at rates as low as LIBOR – 1.3% as of this writing) to invest in hard money loans.