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People shy away from raw land because in most areas in the United States, it is assumed that an undeveloped parcel has something going against it. And depending on what area of the country you're in, that could be true; proper due diligence can reveal most issues.
But in some parts of the western United States and Alaska, there is a lot of raw land still available that is good property. Assuming you structure the contract correctly and keep location in mind, raw land can present an excellent opportunity.
You also should consider the borrowers. Maybe they have good credit but seasonal income. Alaskan lenders, for example, are familiar with this scenario; many potential borrowers who work in commercial fishing earn 80 percent of their annual income between May and September and are self-employed. Most of these potential borrowers also do not keep immaculate financial records, but hard-money lenders know they have money and that they will pay to preserve their equity.
Another thing to remember: Hard money is not a long-term solution. After all, because of its rates and fees, it can be expensive. So make it clear that as soon as your customers' credit, income or property qualify, you can refinance them out of the hard-money loan.
Remember that you don't want just one closing; you want to develop a relationship for life with your customers. You can become their one-stop shop for financing, whatever their situation or property.
Every time you close a hard-money loan, schedule a follow-up call with your clients 18 to 36 months later to see how they are doing. You likely can close another loan for them at that time, saving them a few points on interest and netting yourself another commission.
While mortgage professionals are here to serve with their borrowers' best interests in mind, hard money can help increase your bottom line and keep you from just surfing the Internet all day with a dry loan pipeline.
As soon as you can adjust your paradigm to see the value of nonconforming property types and other unusual collateral types and borrowers, you will hear your phones start ringing.
Charles Preston entered
the mortgage industry in 2000 with McKinley Mortgage Co., where he is finance manager. In 2005, Preston and his brother Tobias saw an opportunity for institutional private lending and started Alaska Financial Co. -- which pools investor capital and notes -- for which he is vice president. Preston and his wife, Jessica, reside in Anchorage, Alaska. For more information, visit www.mckinleymortgage.com or www.akfinancialco.com. Reach Preston at (907) 783-2277 or email@example.com.
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