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NW Private Lending | Conventional Loans VS Hard Money - YouTube
Channel: Northwest Private Lending
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so conventional finance Hank I kind of
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alluded into this so I'm not a
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conventional lender I'm a private lender
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a conventional lender is a bank who has
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the ability to use our money we are
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we're depositors we deposit in the bank
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and the bank can use fractional reserve
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lending to lend out even more money and
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so that's why the rates are cheap get
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trust me if you go anywhere else in the
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world
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no one's getting 5% money and I'll tell
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you why there's a there's some reasons
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why we have such cheap money but we are
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unique here in the u.s. our average our
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average interest rate over the last
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hundred years is nine and a half percent
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that's what that would be a normal
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really healthy interest rate it's good
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for borrowers because they can afford it
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and it's good for lenders because they
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can make money when they lend it out
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problem is is right now if I can make
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one percent of the bank I have a hard
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time retiring because I'm not getting a
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very good rate where rate of return on
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my money but because the Fed is willing
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to lend the money for free or almost you
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know 25 basis points or 50 basis points
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the banks can borrow them fed and they
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don't have to pay us very much money
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that's why the more secure assets are
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much lower value because the banks won't
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the feds want to print the money and
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they don't have to get it from us and
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pay us a better rate of return well it's
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great for us as borrowers but it's very
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bad for us if you're trying to retire it
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right so you can't do something what you
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can do with your savings but at the end
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of the day a conventional lender is
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gonna take your money multiply and then
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lend it out at the cheapest rate
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possible and then most lenders will then
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sell that and loan to Fannie Mae or
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Freddie Mac or whatever is called the
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secondary market and someone else is
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gonna buy it and ultimately the Fed will
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end up buying it so a conventional
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lender can print money basically for
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free and then they'll sell that note to
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the Fed who buys the knows because the
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Fed bought Fannie Mae and Freddie Mac
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back in 2008 and so that's why our loans
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are so cheap so if you can get a loan
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from a conventional bank as a borrower
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you always should I'm never going to
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compete with the conventional lender I
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don't want to that's not wearing
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different spaces conventional lenders
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really want to lend on people's primary
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residences and where most people buy
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houses you buy their one house that they
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live in for the small sect of people who
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are saying yes I I know I can all in my
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own home I want to buy investment
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properties and best
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real estate still you should use a bank
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whenever you can because the money's
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cheap but there's times what happens
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with the bank is that that because the
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Fed is the one that's gonna buy these
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notes at the end of it they create with
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this little this box all these rules and
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regulations you know 43% debt to income
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ratio and two years of two years of
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employment and your tax but you can't
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get a loan from controlled convential
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bank if you have done your taxes you
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know why the Fed gets their money from
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taxes so they're not gonna give you a
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loan if you're not paying your taxes
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that you're their income stream so they
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want it they can they can force
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everybody to be a part of the system
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that they that they ultimately do very
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well with so people have another taxes
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or they all except there's there's if
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you can't fit in the box and you can't
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get alone
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if you can't fin the Box you always
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should and then get a loan from the
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cheapest place hard money lenders
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private lenders private lenders are like
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me or like Gary we're lending our own
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money out so I don't have to ask anybody
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it's I have the money right don't and if
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you want to borrow it I could say yes so
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I can say no and the nice thing is is
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that banks they have to ask people they
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have to fit you in a box I get to define
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what my box is and so the nice thing is
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I don't call my loans hard my loans I
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call them make sense loans because I do
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loans that make sense you in a buy a
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house for 300 grand you're gonna put a
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hundred thousand dollars down you want
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to borrow - can I borrow two hundred
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thousand dollars
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sure that makes sense and I worried
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about you defaulting on that loan Oh
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if you want to buy a house for $300,000
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and Bop and borrowed 297 am I worried
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about you to fall through that loan yeah
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a little bit I need to make sure that
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you have a really good job making a
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really good income that you're for sure
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gonna be able pay me back over time
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because I'm really at risk here by
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making this long a private lender wants
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to make a loan that's not so risky up
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front I'm gonna lend you some but we
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kind of do loans our banks used to do it
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back in the 50s you couldn't go to the
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bank and say hey listen can I get an 80
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percent loan to value loan they didn't
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make them if you had if you had half the
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price you had half the money hey will
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you loan me half to buy the house well
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Who Kicked maybe right it's only in this
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last 70 years what we've been able to
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print all this money and money is
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basically free that we can do these you
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know really in some ways risky loans and
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banks can do them so a hard money lender
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or private money lender is lending on
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the hard
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the hard and hard money is I'm making an
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asset-based low does the acid speak for
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itself
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I don't even pull credit most the time
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when I'm doing my lungs I'm just saying
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if this didn't work out
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let's talk amongst ourselves let's do
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this investment deal if it doesn't work
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out what are we gonna do to pay back the
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loan we'll sell the house the app
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there's plenty of equity in the house to
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sell that I'm not worried about getting
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paid back and so on deals like that I
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can be very creative I can be really
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fast because I'm lending my own money I
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can lend it to you in a few days I don't
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have trade I don't have any of the
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regulations that banks have so literally
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someone come to come to me on Monday
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bring me a deal that makes sense and I
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can give them four or five hundred
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thousand dollars on Friday to go do it
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if they want to do with that property
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sometimes I'm refinancing someone's
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investment properties sometimes they're
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acquiring an investment property and the
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reason people would use my money over
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banks is because I can be so quick so if
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you want to buy a house on foreclosure
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or give a bank sale or if you have a
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distrust seller and and your offer would
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be it would be improved by the fact that
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you could close in ten days guaranteed
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cash ten days or five days if you can
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get that house for twenty or thirty
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thousand dollars less than you otherwise
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would have is it bad for the borrower to
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pay five or ten grand to me to borrow it
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no it makes sense
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and you should only do a deal that makes
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sense I don't want someone to pay more
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to me and interest than they would
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otherwise get in the reduction in the
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price of the house so people come to us
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when people are there they're investors
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they're buying houses that are not a
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good shape it's a hoarders house it's a
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foreclosure it's the roof leaks them
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there's no electrical panel all these
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things that would make the house
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unconventionally lendable perfect I love
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those houses right because the person
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can take some sweat equity put in the
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electrical panel fix up the house and
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now the house goes from making being
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worth 250 maybe it's worth 350 now by
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adding some some sweat equity into it
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that's how I'm my people who borrow from
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me make money so for the most part let's
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say sixty percent of the people who
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borrow money from me are buying a
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flipping houses other people who are
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just people who have their cash tied up
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in investment real estate and they need
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to make money for payroll or they have a
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1031 exchange well they have some unique
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situation where they're not getting the
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money for a long time but just having as
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needed to do this deal I hid the money
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for three or four months sure I can do
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that you can pay me back in time maybe
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buy the house and and you go get it and
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once it's once it's blendable go get it
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people keep money with me for short
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periods of time so we might charge 12%
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interest but over six months it's not
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that much if you compare it over 30
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years is crappy but over six months it's
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not such a big deal and if you made
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money on the purchase then it's a good
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deal so that's what we do for a living
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that's that's my only feeling are my
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lending but is you know
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