It Has Been A Long Time!!

Since my last post the bottom has fallen but it has not yet stopped. I will predict that we are going to see the bottom go down for another year. In some places it may be a little softer, but anybody who expect values to get better may find themselves in a lot of trouble. So what does this means on the hard money front.

Today for borrowers there is two options Conventional financing for borrower with good credit, healthy assets, down payment and steady income or hard money. This applies both to commercial and residential properties. In addition, a number of hard money lenders have lost significant amounts of money and can no more make loans. This means that there is less hard money available. Less means More. Less capital available to invest means higher cost of capital, higher rate. Borrower should expect to pay more.

Values are continuing to go down, since hard money lenders are going to base their loan amount on values then they will be carefull. In today's market values are calculated using REO prices. REO price are the real value, who would by a property at its full price when next door you can have aproperty at $0.45 on the dollar. Another way to look at it, if the property (assuming a single familly residence) was to be foreclosed what would it go for within 90 days? Then depending on the areas financing would be offered between 60% and 70% of the value. As an example downtown Boston, MA would be financed for 70% on the other downtown Bakersfield CA would be financed for 60%.

Keep in mind, money is available for the right financing even if it is more expensive.