Hard Money Lender for The Norris Group
This week Bruce is joined again by Craig Hill. Craig has been with The Norris Group since its inception in 1995. He has helped The Norris Group invest in approximately $40 million worth of trust deeds.
The biggest misconception about hard money loans is that you don’t need any of your own money to complete the deal. Many people also assume that hard money loans do not involve qualifications and guidelines. This is not true for The Norris Group. However, there are some lenders who have less strict guidelines.
In 2005 and 2006, many people were lending on equity only, and they were lending on odd properties and land. This lending strategy worked all the way until the market dropped.
When Bruce and Craig started working together, the concept of loaning to investors had not been established. Craig had to fight to get his first few deals finished. Now, hard money is synonymous with real estate investment. This is one dramatic change that has occurred over the last 15 years.
If you asked an inexperience person whether they would rather loan to an investor or an occupant, they would probably say an occupant 95% of the time. There is a misconception about lending to investors.
When an owner occupant is borrowing money at 12%, there must be a problem. In the case of an owner occupant, the borrowed money will probably not be spent in a way that improves your position as a lender. On the other hand, an investor will be using borrowed money for a business purpose.
A true REO property is typically not lendable. It will probably need new paint, carpet, appliances, bathrooms, kitchens, and possibly a new roof. If an REO is sold through a short sale, there are often people still living in the property, and the property’s condition will probably not be as bad.
The Norris Group turns down many borrowers. The biggest reason for rejection is lack of liquid funds. The majority of our problems have come from people who do not have enough cash to support their goal. We need someone who can handle a $10,000 problem that was overlooked. Craig is willing to explain to people why they are being rejected, and many of them appreciate Craig’s willingness to talk to them, because Craig often helps them avoid bad deals.
Rick Solis is one of The Norris Group’s appraisers. He has helped many people because he is willing to explain why he values properties the way he does. There may be occasions where his appraisal comes in lower than someone else’s, and in that case, he is willing to explain to an investor why he believes his opinion to be correct. Bruce knows of experienced investors who refused to believe Rick’s appraisal, and regretted their choice 6 months later.
Many people get scared when they hear statistical claims such as, “the market is 90 days behind”. Many times when people claim the market is slowing, Craig can look at the same information they have, and conclude that the bad times have just passed. Craig bases his opinion on whether or not The Norris Group is making pay-offs on their loans. When TNG is getting multiple pay-offs within a day, Craig knows the market is good.
50% of Riverside’s real estate market is REO, and 20% of its inventory is in short sales. That ratio would typically drive prices down, except there is not enough of this kind of inventory. Riverside’s properties are in high demand right now.
Occasionally, Craig has to reject someone from a hard money loan who seems qualified. They might have an 800 credit score, but only $5,000 in liquid funds. If they have never dealt with a hard money lender, and if they are in a good position as a borrower, they may be astonished by the rates TNG will offer them. These people may feel entitled to a low rate, but that just isn’t how TNG’s hard money program works. Most lenders will not work with lenders, and that is why TNG’s hard money program has more value.
Standard loans cannot compete with the transaction speed of a hard money loan. This can be very beneficial to investors who want to resell quickly.
The Norris Group started an 8 year loan program for buy and hold investors. It is unusual for a California loan with 9.9% interest to cashflow, but this program has become surprisingly popular. In March, The Norris Group received 30 applications for the 8 year loan, and only 20 for the short term loan. Craig says this program is so popular because no one else is offering a program like it.
The Norris Group’s website is www.thenorrisgroup.com
On the website, you can access a California trust deed investing book and video. The material will answer many of your questions about being a borrower and a lender.
For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.