FREQUENTLY ASKED QUESTIONS
Do you have questions about USAM I FUND LLC or Hard Money Lending? Boy, do we have answers – tons of answers! If you can’t find the answer to your question below, you can always contact us via phone or email.
ABOUT HARD MONEY LENDING
WHAT IS A HARD MONEY LOAN?
Hard Money is the term used for loans funded by private parties that cannot be funded by conventional lending institutions. There are many types of hard money loans. Other common industry terms used in lieu of “hard money” are: private, asset-based, bridge, rehab, interim, etc. Generally, USAM I FUND LLC focuses on providing profitable lending solutions to real estate investors that purchase residential investment properties at substantial discounts and/or properties with large “value-add” or “upside” opportunity.
DO LEGITIMATE BUSINESSES USE HARD MONEY LOANS?
Only the smart ones. Many types of investors utilize hard money from smaller investors who only want to do the occasional fix-and-flip to enterprise-level home builders and developers who require quicker funding than is possible through traditional lenders like banks.
WHY DO HARD MONEY LENDERS EXIST?
Many real estate investors need quick funding to secure a deal. Banks and other institutional lenders that typically offer the lowest interest rates do not provide the same speed and transparency in their decision making or funding process. Investors normally use hard-money lenders in cases when they are either unable, unwilling or do not have the time to obtain financing from more conventional sources.
WHEN DOES IT MAKE SENSE FOR SOMEONE TO USE A HARD MONEY LOAN?
Having funded private loan opportunities since 2002, we have seen several different cases in which hard money loans make more sense than traditional loans. In our experience, even investors with strong financial statements and access to traditional financing choose to use hard money because:
a) They require a quick closing and their bank can’t make the deadline.
b) They have an excellent investment opportunity but don’t have sufficient financial strength to get a bank loan.
c) They need more leverage than a bank is willing to give.
WHAT ARE SOME OF THE ADVANTAGES OF HARD MONEY LOANS?
a) A much less complex application process is required for the lender to make a final loan decision.
b) There is less scrutiny of the Investor’s personal financial situation including income, tax returns, assets and liquid reserves, as compared to bank loans.
c) USAM I FUND LLC does not expect perfect credit and/or substantial amounts of disposable income from its clients. Instead we focus on the merits of the specific deal under consideration.
WHAT ARE SOME DISADVANTAGES OF BORROWING HARD MONEY?
a) Hard Money loans typically have higher interest rates and origination fees than conventional bank loans.
b) The quality of active lenders varies substantially, and in certain cases, some lenders may be seeking to write loans where the risk of default is considerably higher in order to foreclose on the underlying real estate as their business model. At USAM I FUND LLC we constantly seek the repeat business of our clients and only approve those deals that we believe are financially feasible.
ABOUT OUR LENDING PROCESS
WHERE DO YOU LEND?
USAM I FUND LLC lends throughout the five major metropolitan areas in the state of Texas, specifically Austin, San Antonio, Houston, Dallas and Fort Worth. Other secondary markets in the state are also considered on a case-by-case basis.
CAN I LIVE IN THE HOUSE DURING THE COURSE OF THE LOAN?
Sorry, no. USAM I FUND LLC does not lend on any owner-occupied investment properties. USAM I FUND LLC's hard money lending program was created exclusively to finance non-owner-occupied properties.
WHAT ARE YOUR TERMS?
USAM I FUND LLC currently has six different loan programs to help Investors with a multitude of projects ranging from fix-and-flips to longer term deals. Please see our Loans Page for more details.
HOW DOES USAM I FUND LLC DECIDE HOW MUCH TO LEND?
USAM I FUND LLC makes its lending decisions based heavily on the project’s Loan to Value (LTV) ratio. In addition to the LTV, the Loan to Cost (LTC) ratio is considered. These ratios measure the risk of the loan by comparing the loan amount to the cost of the project and the value of the asset, respectively. USAM I FUND LLC has incorporated an After Repair Value (ARV) approach to valuing its real estate projects, as well. In many cases, USAM I FUND LLC can fund as much as 70% of the ARV of a property assuming all of the other criteria is met to allow for such a loan approval.
DO YOU PROVIDE A LETTER OF CREDIT?
Of course! Once you have qualified for a loan with USAM I FUND LLC, a Letter of Credit or “Letter of Intent” will be prepared for you. This letter is not a commitment to lend nor is it a “Proof of Funds” letter. Instead it is a letter that can be presented to a seller during the contract negotiation period that shows our intent to lend you an amount typically equal to or greater than the purchase price.
HOW LONG DOES IT TAKE TO CLOSE A LOAN?
Loans are typically closed in 7-10 days. This assumes we have the investor’s complete cooperation in submitting a clean and transparent loan package. The speed of the transaction is very dependent on the accuracy of information and investor’s response times.