If you’ve ever dreamed of building financial wealth through real estate by flipping houses, you might already know that it’s not as easy as your favorite DIYers make it seem on TV. Yet, since you always knew that achieving your goals wouldn’t be a cakewalk, you’re ready to move on. You may even have already chosen a repairman that you can renovate, but you will need financing to make it happen. Enter a hard money lender who could lend you the funds needed to complete your purchase.
To better understand how to find one and how the process works, we sat down with a private investor Ejiro AjueyitsiOwner of Brooklyn Funding Group for advice. His company helps clients obtain financing nationwide.
BET.com: What does it mean to be a moneylender?
Ejiro Ajueyitsi: It’s private equity, which means we’re not the traditional FHA (Federal Housing Administration) bank. We are people who look at something other than your taxes and income on your pay stubs. We are private investors, so we can set our guidelines however we see fit, obviously within reason, because we need to protect our capital.
A typical hard lender lends without requiring the borrower to provide full income documentation. We provide money for people to buy property, fix it or flip it or buy property and rent it out.
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BET.com: Would you also lend money to someone buying a house to live in?
Ajueyitsi:This would be for someone who may not have a first home but might want to live in the house and rent out a room to earn money and use the proceeds to buy their home. Some people might just want to stay in the apartment they’re renting and buy a two-family house and let that earn money for them until they’re ready to buy a forever house.
BET.com: Do hard money loans work the same way as a typical mortgage?
Ajueyitsi:It’s different, a fixed and flip loan is a temporary loan. If I loan $100,000 to a client and he has 12 months to complete his project, he doesn’t have to pay me back until he sells the house. So if they sell the house for $300,000, they have $200,000 after paying me back.
There are different ways to make their payments. These can be interest-only payments for the term of the loan, which in this example is 12 months. Suppose a person obtains a rental loan where he places tenants. In this case, the loan works almost the same as a conventional FHA loan without the traditional FHA guidelines. The only difference is that they invest more money. There may be a 20% deposit. But we are not asking for a debt to income ratio.
BET.com: What are the criteria for a potential borrower?
Ajueyitsi: In the case of long-term loans, I look for a credit score between 620 and 640 and the last five years without bankruptcies or foreclosures. Plus, you have to pass a background check, and that doesn’t mean just because you have a past doesn’t mean we’re not going to lend you. It’s just [lets me know if there have been] financial crimes. Finally, there is an income check.
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BET.com: Are the interest rates the same for hard money loans as for conventional mortgages?
Ajueyitsi: It’s very different, but it’s consistent. Over the past five years it hasn’t fluctuated much, a six month loan is usually 10%, and it has been that way, maybe even for 15 years. It has been fairly stationary. The only thing that fluctuates is the long-term loans we make that closely mirror conventional or FHA rates.
BET.com: How can someone choose the right money lender?
Ajueyitsi: Check reviews.
BET.com: Why did you become a moneylender?
Ajueyitsi: I started a private fundraising group because I couldn’t see people like me. I try to get people to understand that things that seem out of reach, like running or starting a hedge fund, which is the next step for us, are doable. Maybe [when I started out] if I saw people who looked like me, there would be 30 or 40 Brooklyn fundraising groups right now, [I am the only known Black hard money lender] nationwide that offers direct lending for fixed and reversible mortgages and long-term real estate investments. I’m trying to create a movement of people who can look at me and think, ‘if he could do it, I can do it.’
*Editor’s Note: This interview has been edited and condensed for clarity.