What are Hard Money Loans


What are Hard Money Loans?

Making sense of your financing options is the best way to make the right choice for your lending needs. Anchor Loans experts know the local lending marketplace, and within this latest post we discuss hard money loans and their unique benefits.


What is a Hard Money Loan?

Hard money loans are “asset-based” loans secured by real property. The loan amount is based on the value of the collateral, so credit scores and income levels are not a leading consideration for approval. Hard money loans are typically short-term—usually around 1 to 5 years—and are designed to help real estate investors repair and upgrade their properties to optimize profit.


What are the Benefits of Hard Money Loans?

Hard money loans are typically approved and funded quickly, do not exclude distressed properties or credit-challenged borrowers, and are much more flexible than conventional bank financing. Repayment schedules, construction cost disbursements and other elements of the loan can be optimized for each client.


What are the Main Drawbacks of Hard Money Loans?

If not managed correctly, hard money loans can be costly. Typically, borrowers will make monthly interest-only payments with a balloon repayment of the principal at the term’s end. It is critical to carefully consider the optimum loan period for your project. Borrowers must accurately assess their property’s after-repair-value and thoroughly research local market conditions to be confident they can pay the loan back on time, avoiding costs or possible default.


The interest rates on a hard money loan are higher than a conventional bank loan. Most borrowers will pay between 8% and 14% for a hard money loan, although it could be higher or lower depending on the borrower’s experience, the value of the property and other considerations. The loan-to-value ratio for hard money loans also tends to be more conservative than for traditional loans. Lenders want to be sure they’ll recoup their investment, so the loan-to-value ratio may only be as high as 70% of the value of the property.


If you think a hard money loan could be a good fit for you, it’s important to work with a qualified lender with available capital and an excellent track record. To discover more about the options available, call Anchor today.

2018 Real Estate Trends



2018 is just a few months old, but already several major trends have emerged that will affect the world of real estate for the rest of the year and beyond.


Here are three major areas to keep an eye on throughout the rest of 2018.

1: Housing supply is (finally) catching up with demand

For too long, prospective home buyers faced a simple problem: there weren’t enough houses to buy. That was certainly an issue toward the end of 2017. Available housing inventory was down 12% over the twelve-month period ending in November of last year, according to Zillow.


Decreased inventory leads to booming prices and competitive bidding on available homes, but that’s only sustainable to a certain point. Eventually, the market has to produce more home inventory. That could be in the cards for 2018.


New home construction is expected to increase this year, and that’s why some realtors are predicting a better market for buyers by the end of 2018.


“The majority of the year should be challenging for most buyers, but we do expect growth in inventory starting in the fall,” says Danielle Hale, chief economist for realtor.com.


2: Tax reform will cause changes — but what will they be?

Even a few months after President Trump’s tax reform plan passed through Congress, it’s still not entirely clear how the real estate market will be affected. We can, however, identify a couple of areas to watch.


Trump’s plan changes both the mortgage interest deduction and the property tax deduction, on top of changes that could increase spending capabilities for buyers. It could take some time before people looking to buy a new home fully realize how the new law affects their bottom line, but when they do, the market is expected to respond. With a decrease in the mortgage-interest deduction from $1 million to $750k, higher-end property sales may slow.


On the flip side, there could also be some negative consequences for low-income buyers and renters. Research by Price Waterhouse Cooper points out that Trump’s tax plan reduces the value of low-income housing tax credits, which could make companies that manufacture low-cost housing less likely to build.


3: Millennials are Living Small and Looking for Affordability

As more people move to urban areas, demand for smaller, more affordable apartments is increasing, particularly among millennials. Analyst Nathaniel Kunes told Forbes this could become “more of a norm in big cities” and could affect construction trends over the next decade.


Millennials have famously been less likely to own a home than previous generations, and data consistently points to affordability as the main reason why many haven’t taken the plunge into home ownership. Business Insider identifies an inability to put together a down payment as the main hurdle for many millennials, leaving them looking for affordable apartments and other rental housing in the biggest urban centers.


Affordability isn’t an issue reserved for booming big cities alone. Price Waterhouse Cooper’s study of 2018 trends also points out unmet needs for affordable housing stock in traditionally affordable markets like Charleston, Atlanta, and San Antonio. It’s clear that across the board, the price tag on houses and rental properties alike will be a key issue in 2018.

What 2018 Trends Mean for Fix-and-Flip Investors


Navigating these trends comes down to awareness. With inventory still low for the time being, fix-and-flip sellers have an opportunity to stand out with high quality renovations, but be mindful that a wave of new housing could be on the horizon. Differentiating your updated properties from newly built homes could become more difficult in the near future.


With that in mind, buyers may become more flexible, depending on how the new tax plan affects their bottom line. While the long-term consequences may still be a mystery, if potential buyers get an unexpected tax boost, they could be more willing to jump into the market. That could mean the recent seller-friendly trend may continue.


Finally, as millennials transition toward their home-buying years, awareness of their tendency towards smaller homes and renting will be a big boost to fix-and-flip and buy-and-hold investors. Focusing on smaller properties in areas where demographics align with millennial preferences could be a path to success in 2018 and beyond.

They Played Their Cards Right

In 1998 in a spare bedroom in Santa Monica, California, three real estate investment buddies with two computers and one dial-up modem came together to create Anchor Loans. Twenty years later, Anchor is the number one fix-and-flip lender in the nation, operating in 45 states plus the District of Columbia with over 5.3 billion in loans provided to our customers.


Prior to becoming successful real estate entrepreneurs, we were three professional poker players who became friends.


I first met Anchor co-founder Jeff Lipton at a poker game in California, and he later introduced me to his friend Dan Harrington, who would become Anchor’s first CEO. Dan was a successful poker player as well — in fact, he went on to win the 1995 World Series of Poker Championship and authored six books on poker strategy.


We learned that poker was an excellent training ground for real estate investing because consistently winning at either of them requires a strict reliance on numbers (never luck) and a keen ability to analyze all available data. In poker, the data are subtle cues from your opponents, their playing styles and body language, which you must accurately read before making an educated guess — often in less than a second.  In real estate investing, although you have a bit more time for decision making, critical data must also be analyzed, including market conditions, housing costs, cost of living, rehab expenses and borrower demographics.  With either endeavor, whether it’s cards or properties, you must know when to bet or fold, so the better the data analysis, the better the decisions and outcome.


Along with our success in poker, Jeff, Dan and I had all discovered a passion for real estate investing. My interest was in rental properties, and I used that experience to hone my data analysis and rehabbing skills.  As time went on, my poker winnings allowed me to invest in more properties, and it turns out Jeff and Dan were doing the same thing with their winnings.


Eventually, with several years of real estate experience under our belts, we agreed to go into business together providing quick bridge funding to real estate rehabbers.  The fancy name for it was trust deed investing, but back then most people just called it rehab lending.


Anchor Loans grew quickly, and within a few months we moved our young company into a commercial office space in Santa Monica, and even hired a few employees.  Our original clients in those formative years served non-profit organizations active in HUD-sponsored real estate rehabilitation.  By 2002 we had expanded to serve the for-profit fix-and-flip market.


Fortunately, the real estate market remained strong for a few years, but in late 2005, Jeff, Dan and I believed the data began pointing to a market correction.  We knew that to keep the business healthy we would need to do two things right away: 1) be more strategic about our loan originations, and 2) diversify our business model.  As we began scaling back our lending, we also added our own in-house construction capability to help borrowers that were struggling to complete property rehab and to manage some of our own in-house fix-and-flip projects. As a result of these decisions, Anchor Loans remained profitable during the downturn when many mortgage lenders suffered devastating losses.


By 2010 the market data pointed towards recovery, so we invested in developing our proprietary fintech (financial technology) platform.  Our new intuitive technology platform took our ability to access, analyze, and act on market data to a whole new level.  As it turns out, Anchor’s fintech was one of the engines that propelled Anchor to the top of our industry.  Today, Anchor Loans is the nation’s number one private direct lender to fix-and-flip investors and the first to fund more than $1 billion in loans in a single year — with over $1 billion funded in 2016, over $1 billion in 2017, and over $5.3 billion life-to-date fundings since 1998.


Most of the credit for Anchor Loans’ phenomenal success goes to our dedicated team of 125+ passionate, hard-working employees.  Their single-minded, everyday focus on delivering the products and services our customers demand is what makes us the company we are today. Over 85% of our current borrowers are repeat customers, and 70% of our new borrowers were referred to us by their business partners, friends, family and associates. That says everything about the quality of customer service our dedicated staff provides


After 20 successful years helping our borrowers transform properties, neighborhoods and communities, we sincerely thank you for sharing this anniversary with us and for being a customer of Anchor Loans.  We look forward to our next 20 years together.

Anchor Loans’ Fintech Accelerates Fix-and-Flip Funding

Anchor Loans Intuitive Fintech

Anchor’s proprietary fintech, enhanced with artificial intelligence, has distinguished us from our competitors by providing intuitive, streamlined loan evaluation and fast funding—closing loans for our borrowers in as few as 3-10 business days. Developed in-house by our team of financial, real estate and technology experts, our fintech is unique in its systematic aggregation and quick analysis of data that inform borrower approval, project evaluation, loan processing and funding, construction support, payment automation, default prevention and intervention, and many more of our vital business operations.


What is fintech exactly? The term fintech, or financial technology, describes any advanced technology used in the operations of financial institutions—and also includes a broad variety of commercial and personal finance technologies (such as desktop software and cell phone apps) used by businesses and consumers.


Anchor’s unique fintech allows us to quickly and efficiently fund fix-and-flip and rental properties that would not qualify for bank financing, or would take a traditional lender 30-45 days to fund. By quickly aggregating and evaluating a wide range of data sets, both public and private, we are able to minimize risk while providing qualified real estate entrepreneurs with fast access to the capital needed to execute purchase contracts, compete at foreclosure auctions, close cash-only deals and fund construction.


Our fintech supports an easy-to-use portal where you can sign up for an account in under a minute and apply for fix-and-flip and rental property financing via a secure and user-friendly guided process. The fintech streamlines the workflow, and with a few button clicks from an Anchor processor the submitted loan request goes into the approval queue where rules trigger requirement checks, exceptions and automated flags. If flags are raised, the system alerts managers to review for exceptions. When all requirements are met, funds are wired to the borrower within 24 hours.


Anchor’s speed and efficiency have made us the first fix-and-flip lender to fund more than $1 billion in loans in a single year — with over $1 billion funded in 2016, over $1 billion in 2017, and over $5.3 billion life-to-date fundings since 1998. And, with a foreclosure rate of 0.3% since 2010 and negligible losses, our fintech’s speed has not compromised underwriting accuracy.


“Companies that automate more processes will continue to thrive as fintech grows,” said Sabrina Zuckerman, COO at Anchor Loans. “In addition, delivering value added benefits to customers will enhance loyalty to your company.”


The sky is the proverbial limit when it comes to the future of fintech, and we are committed to staying on the cutting edge as we provide real estate entrepreneurs with the financial leverage and technological advantage to succeed. Our vision for the future is to continue providing unmatched customer service and fast funding while we develop additional resources to help our borrowers conduct business more efficiently and maximize their profitability.

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Reading the Market for Commercial Real Estate Investing



Commercial real estate (CRE) investing involves a diverse collection of properties including retail, hotels and resorts, land development, residential apartments, industrial parks and more. CRE is lucrative for investors, and if you’re just starting out in this line of real estate, you should take into consideration economic cycles and property analysis prior to entering into your next deal.


Economic Cycles

Understanding economic cycles is key for a successful investor. The four typical economic stages—expansion, contraction, recession and recovery—all offer different opportunities to the savvy investor.


The bottom phase includes the recession and recovery stages. The recession stage is the best time to buy, but can also be the scariest, since typically, inflation and unemployment are high and demand for rentals decreases. With all of those risk factors considered, this is also when the property will probably be the cheapest. When the economy enters into the recovery phase, vacancies decrease and rental rates start to increase. When these signs begin to appear, you know you have weathered the storm.


The peak phase includes the expansion and contraction stages. Key indicators of the contraction stage include an increase in new projects, rising inflation, and increasing interest rates. Some markets will see increased vacancy rates and a leveling off of prices. Understanding these indicators will help you know how to take advantage of market timing to make the wisest investments. Everyone wants to experience the expansion stage when population increases, incomes rise and employment is high. The peak phase may be an ideal time to sell your property and cash in on your investment.


With these two phases, bottom and peak, come uncertainty. Having a plan and watching trends in any type of real estate is critical to getting the best bang for your investment buck. Continued analysis of the area and type of commercial real estate investments you have and are interested in will be key to your success.



Property analysis is another key to achieving your real estate goals. There are several types of analysis to consider, including operating expenses, taxes and break-even.


Operating expenses: It is important to identify all expenses that relate to operating the property. These expenses will sometimes be presented to you by a broker, however our recommendation is to review them with your property manager. Brokers are trying to close a deal, but property managers actually deal with property maintenance, be it routine or unpredictable. Property managers will have a better idea if the proposed operating expenses are truly in line with the experiences they have on similar properties.


Taxes: When brokering a new deal, check the taxes with the tax assessor’s office. Taxes listed on the realtor’s or broker’s sheet may be current, however when a property is sold it is common for it to be reassessed. Upon the sale, there may be an increase in property taxes.


Break-even: Understanding your break-even analysis on a CRE property is important to ensure there are enough tenants to cover at least your expenses. No investor wants a negative cash flow position, and while being cash-neutral is a better position than negative, being neutral can still negatively impact profitability.


Our recommendation is to discuss each form of property analysis with your lender. Having open and transparent communication will help your deal move more quickly and smoothly, and your lender will be in a better position to help if there are bumps along the way.


If you have questions regarding potential real estate deals, register for the Anchor Loans Borrower’s Portal to open up a discussion. Anchor has partnered with thousands of investors to provide financing for single family, multi-unit, condo, land and commercial units.


How to Create a Rental Property Strategy



A previous Anchor Blog post provided advice on developing a total investment strategy, including the recommendation to include rental property in your portfolio to keep your business diversified. Within your overall strategy, it’s critical to have a clear plan on how to run the rental side of your business. Similar to finding the right fix-and-flip property, it’s also imperative to find the right rental property.
To achieve the best return on your rental property investment, several key factors regarding geography and property type must inform your investment decisions. Believe it or not, the old adage “location, location, location” is still applicable today and can have so many implications (both good and bad) when looking for a rental property. Location will greatly affect how much you can charge for the rental rate, and may also affect your bottom line in other ways, such as crime and vandalism, local vacancy rates and quality of local schools. Lastly, the type of rental property investment you choose must be realistic and sustainable for your business—Are single-family homes the best fit for you? Are you set up to successfully invest in multi-unit properties? Or, is your strategy to include both property types? These are important considerations.

Location, Location, Location

Consider the city and state for your rental property investment. Housing Wire stated in a recent article that in some areas of the U.S., it is cheaper to rent than to buy a home. Specifically, the data shows that 64% of the U.S. population lives in markets that are more affordable for renting than buying. In addition to the property’s city and state, look for demographically growing areas. Is there a new up-and-coming neighborhood in the city where properties may be cheaper, but have the potential to grow your equity over time?

Rental Rates

Rental rates vary drastically across the nation and have an obvious impact on a renter’s cost of living considerations. Determining what you will charge for your rental properties may also vary depending on type of dwelling, taxes, maintenance and local amenities. Do your research and review similar properties for rent. Check municipal codes and laws to ensure you follow them as a landlord, and interview property management companies for input. Bridgepoint Property Management has posted some helpful tips for determining rental rates on their website.

Types of Properties

Understanding the types of properties that are in demand could be the key to your rental success. According to National Real Estate Investor, multi-family units will continue to be a competitive rental market in 2018. Additionally, their prediction is new construction started in 2017 will carry over and be available during this year for renters. For rental success, be sure to understand the available rental inventory, and structure your offer to take advantage of gaps in your region.

Regardless of location, rate and property type, the rental market is still in demand. Take time in 2018 to review your investment strategy and diversify with rental properties. Anchor Loans provides financing for residential and commercial fix-and-flip and rental property acquisition and rehab, and can be a long-term partner to help you meet your goals.


Flipping Homes with Millennial Homebuyers in Mind

millenials-houseThe housing market is significantly impacted each time a new generation reaches adulthood and begins to explore housing options. Think back to the Baby Boomers, who were so vast in number they sparked an entirely new construction boom.  Next came Generation X, which stimulated its own boom in a housing sector that reached near-bubble proportions due to easy and aggressive financing.


Fast-forward to today, where the newest generation – Millennials – are a part of the buying mix.  These individuals range from 37-year-olds who are already on their second home, all the way down to 20-something first time homebuyers. In addition to facing an inventory strapped market, Millennials enter the housing market with additional challenges that include heavy student debt and having graduated college during a recession.


How are Millennials dealing with these challenges? As a generation that saves, Millennials will put down the 20 percent needed to secure a mortgage to avoid falling victim to the housing finance bubble their Generation X predecessors faced. And, with the advent of the Internet, Millennials are a tech-savvy generation that thoroughly researches home-buying in ways not possible before. Finally, they are a generation that will network with friends and peers to find the best possible home, with all the desired upgrades, at the best possible price.


Why should house flippers target this generation? Millennials have already dramatically impacted the rental market, and with their increased disposable income many are ready to move from renting to buying. In fact, they already account for more than 34 percent of buyers in the market. If your investment strategy includes both rental and fix-and-flip properties, you may already have your ideal buyers at your fingertips. Please note that this group is highly social, which means they write about every experience – and their friends will take those comments as “recommendations”. The result of all of the above is that the Millennial generation has enormous buying potential, making up 66 percent of first-time home buyers (see this article).


What house flipping strategies should you employ to appeal to Millennials? Make sure you’re repairing and upgrading kitchens and bathrooms, as these areas of the home are of particular interest to this generation. Also, Millennials are “green” minded, so consider energy efficient appliances, windows and HVAC systems that are environmentally friendly.  Also, consider installing high-tech, programmable features that can run from a smartphone. That will add an element of surprise and delight for what is already a “plugged-in” generation.


And finally, before you get too far down the road with Millennials, don’t overlook Generation Z.  These young adults are already starting to rent, and it won’t be too long until they are ready to purchase their first home or property.

Tips for Creating Your Real Estate Investment Strategy

As you develop your real estate investment strategy, be sure to consider the key fundamentals for success which include, acquiring attractive properties in strong market locations, determining optimal cash flow, and identifying a financial lender that understands the investment property business and can be a valuable partner along the way.


Another important consideration in developing your strategy is determining the types of properties you will acquire, and your investment approach for each property. For example, will you include residential and/or commercial real estate? Will your strategy include fix-and-flip and/or buy-and-hold for rental? Our belief is that the healthiest real estate investment business will include a mixture of property types, contributing to diversification and a strong foundation.


To learn more about important decisions involved in real estate investing, download How to Invest in Real Estate: A Step-by-Step Guide for the First-Time Investor.


Tips for Success


 1) Choosing Attractive Properties: Be sure to consider the current demographic in the area. Are there new companies moving in with diverse employees? Will apartments or single-family homes be needed to house the influx of people? Determine the class of the investments you would like to pursue. Want to know more about how properties are classified? Watch this brief video.


 2) Strong Market Locations: Determine the city and state you want to invest in. According to Business Insider, Dallas, TX is currently the number one market for rental properties. Do the research to see where your city and state rank, to help determine if market conditions are positive for investing.


 3) Optimal Cash Flow: Determining optimal cash flow for your business should be worked on with your financial advisor. Use tools to track expenses and income and closely manage your cash flow statement along with your income statement and balance sheet. Having documentation and analysis of your ROI will empower more strategic decisions as more investments are added to your portfolio.


 4) Choosing the Right Lender: Finding a lender to help fund your property investments will be key to building your business. Hard money lenders, such as Anchor Loans, not only help you fund your property deals, but can also offer expert advice. Learn more about Anchor’s lending options.



Five Key Tips for Real Estate Investment Success



I was recently interviewed by Dennis Cisterna, a U.S. News & World Report real estate expert who hosts his own Investability podcast dedicated to teaching listeners how to invest like a real estate insider.


During the podcast interview, I shared 5 key tips every real estate investor should know to be successful. You can hear the entire episode on the Investability website (it’s #58), and here’s a summary of what I shared:


1) To succeed at fix-and-flip investing, it’s critical to know the value of your property and to know how much time and money should be spent on improvements.


2) Your success as an investor will be determined by your expertise at researching the market and analyzing in detail your property’s neighborhood and comparables. Doing your homework up front will save time and money in the long run.


3) Choose a lender that does not need to wait for cash from trust deed investors to fund your loan. Anchor Loans has immediate reserves available, and we quickly fund every loan we originate.


4) The investor/lender relationship is only successful with regular, forthright communication. If you communicate often with your lender through all stages of the lending process, they will want to work with you to achieve your goals.


5) Investors should make sure they partner with a lender with longevity and a proven record of success. Anchor Loans operates in 44 states and the District of Columbia and we have successfully weathered economic downturns because we understand the cyclical nature of real estate.


Listen to the entire podcast (Episode #58) or find it on iTunes. The episode can also be downloaded for listening at your leisure. If you’re a current real estate investor, or considering real estate investing, the critical information in this podcast will help you go in with your eyes open, and will highlight the necessity of working with a dependable, trustworthy lender.


For continued insight into today’s fix-and-flip investment market, be sure to follow us on Facebook and Twitter, as well as my personal social media accounts including stevepollackceo (Instagram) and @StevePollackCEO (Twitter).

Anchor Loans Does It Again – Over $1 Billion in Loans Funded in 2017



You may be part of the reason we’re celebrating this significant milestone.


Repeating last year’s record-breaking success, for the second consecutive year Anchor Loans funded over $1 billion in loans to real estate investors – and we couldn’t be more excited!  Whether taking advantage of new products like the rental program we launched this year, or leveraging our traditional fix-and-flip loans to transform properties, real estate investors from all over the country received hundreds of millions in Anchor financing to purchase, improve and profit from residential and commercial investment properties.


Since 1998 Anchor has funded over 16,600 loans totaling over $5.1 billion. We attribute our phenomenal success to the expertise and dedication of our energetic staff who make customer service the top priority. In addition to providing fast, dependable financing, the Anchor Loans team offers our borrowers guidance on everything from securing the right property, to determine the best loan products to optimize ROI. Supporting our elite team of professionals is our proprietary Fintech platform, which continues to set us apart from our competitors in our ability to rapidly evaluate, underwrite and fund loans – typically within 3 to 10 business days.


In the private lending industry, success can be defined any number of ways, but at Anchor, success is helping our clients realize their business goals while we maintain our position as the nation’s number one hard-money lender to the fix-and-flip market.