Hard Money Information

What to Know Before You Apply for Hard Money Construction Loans

Hard money used to be an easier method of getting a construction loan when you didn’t have the time (or the creditworthiness) to apply at a bank or other financial institution. But in just the last five years, even hard money lenders are carefully analyzing every speck and scrap of their prospective borrower’s credentials.

And hard money construction loans are no exception, since these types of projects typically put more pressure on home values in a given area.

Besides this closer scrutiny, consumer regulations have also put private money lenders into a tight choke-hold. New regulations on private lenders put a full-stop to speculative construction loans and construction-to-permanent loans, leaving many builders without a reliable funding source.

And what about banks? Banks have long stopped lending on construction loans. The risk and the speculation involved are simply too high for these types of loans to be a lucrative channel for them.

So what can builders do? There are still some private lenders out there who will fund hard money construction loans if the borrower meets specific lending requirements. So the real question is, what are these requirements and how can you meet them?

Help Increase the Odds of Getting Your Hard Money Construction Loan Approved by Following These Five Tips

  1. How much of your money is going into the project? On speculative loans, this can be anywhere from $0 to a 10 percent down payment with a free-and-clear or subordinated lot. With construction-to-permanent loans, you can work with the private money lender for construction purposes, and then refinance out of the hard money loan.

    Keep in mind that the private lender requires a 20% non-refundable deposit, but you can roll this amount into the takeout loan.
  2. Will some or all of the lot cost be included in the loan? This is usually left to the lender’s discretion as to whether or not they want to include some or all of the cost of the lot in the loan. Generally-speaking, lenders want the loan to be exclusive, or at least put in the first position private-money deed of trust.

    In these cases, they may fund as much as 70% of the LTV (loan-to-value ratio) of the appraised value and factor in some of the lot cost into the deal. It all depends on what your lender is most comfortable with.
  3. Understand the draw process – Some hard money construction loan lenders will pay the builder directly after the site is inspected – but this is not always the case. Larger lenders will require a title company to be involved and will only pay the builder and their subcontractors after lien waivers are received.

    Reach out to your local title company and see if they are doing any new construction loans, and if they are, take the time to familiarize yourself with local title and lien laws, as they can vary from state to state.
  4. All about the location – Finally, and this may seem trivial, but be sure that the lender approves of the actual geographic location your new construction is to be built in. You are much more likely to get your hard money construction loan approved if the lender has confidence that this location will be a profitable one.
  5. Be comfortable with rates and fees – You may be reluctant when you hear that a hard money construction loan is available at six months with a 12 percent interest rate and 4 points, but that’s because there’s much more to the picture than just rates and fees. Consider the money you could make when the deal is completed right away, rather than having to wait on the sidelines with no funding.

    This is particularly true of highly-competitive construction areas. Also consider too that a hard money construction loan can allow you to get a project underway in a much shorter time-frame than traditional financing.

    The bottom line is that you must show value from your end of the deal. Lenders see things in terms of profitability and efficiency, so spell out the terms and details needed that demonstrate everything from a front-end closing to monthly payments and final repayments.

    By learning more about how hard money construction loans and hard money commercial loans work, you’ll gain valuable insight into the process, and be able to be the first to jump on new opportunities as they become available.

Investing with a Private Lender: What You Need to Know Before You Decide

Do you want to invest in the ultra-competitive and lucrative real estate market, but don’t want the hassle and risk of buying or managing an investment property on your own?  If you do, investing in a private money loan fund may be an option for you. By investing in private loans, you can add real estate to your investment portfolio without being involved in the day-to-day matters of actually owning an investment property.

And the property types available for funding with private loans may surprise you. From single family homes to small commercial real estate and multi-family complexes, there are a variety of ways that a private money lender can make real estate a part of your portfolio.

The question then becomes, how do you decide if private loan funds are the right choice for your investment needs? Here’s what to consider before you make your decision.

Check the Lender’s Background Carefully

A good private money lender will handle many of the aspects of the loan, including sourcing the deal, underwriting, managing and servicing the loan. Ideally, you’ll want to look for a lender who not only knows the local real estate market, but who also has construction experience and has a proven track record working with both house flippers and investors.

And although defaults do happen, an experienced lender will be able to protect your investment through multiple channels such as active forbearance or foreclosure. These are qualities you’ll want to have on your side when checking out potential lenders.

Be Part of the Flip (Without Actually Doing It)

HGTV is full of shows that make house flipping look both fun and profitable. Of course, much of the process that actually goes on behind the scenes gets cut out so that the end result is “made for TV”. Flipping a home, in reality, takes a lot more time and experience than what you see on screen.

And flipping a home or property is not without risk. People who flip properties, much like other types of investors, look to make their investment as profitable as possible by looking for things such as:

  • Whether or not they’re getting a good deal for the property
  • That the renovations they want to make are cost-effective
  • That they’re getting fair prices for solid home improvement materials
  • That they are hiring skilled workers for labor and equipment
  • And that they understand the underlying costs, zoning and permit issues.

Rather than investing your own income in flipping a property and working out all of these issues yourself, it may be a better course of action to invest with a lender who funds flips. You’ll still be part of the flipping experience but without the huge investment of time as well as lower risk.

Invest In and Help Build Communities While Creating Jobs

Investing your funds with a private lender does more than generate a potential return on your investment. It also helps invest in the neighborhood and the community as a whole. Private lenders tend to fund renovation projects that have a ripple effect on the area, including boosting local business incomes, creating jobs and improving property values.

Ideally you can make this kind of impact right where you live now by investing with a local lender. And unlike traditional stock investing, you can see the improvements right in your local area. There is perhaps no better way to see the fruits of your investment paying off than right where you call home.

But Don’t Put All your Savings in ReaI Estate

It’s never a sound investment strategy to invest solely in one kind of stock. So too should you not empty all your savings into real estate. If you have some disposable income, and want to diversify your portfolio, you can put a percentage of your funds into real estate investment and potentially get better returns than you’d get in an interest-bearing savings account.

The same goes for self-directed 401(k) or IRAs. By directing this money into real estate lending, you can use the profits from real estate investing to grow your retirement savings.

And it’s easy to get started if you want to start even smaller. There are crowdfunding real estate sites that let people start small for as little as a couple thousand dollars.

Private Lending Real Estate Loans Have Hard Assets Behind Them

Unlike traditional investments, private real estate loans have hard assets behind them — in this case the property that’s tied to the loan and the renovation. Normally there’s also a 25% cushion since most lenders require investors put anywhere from 20-25% of their own equity into the project.

If nothing else, even in a down market, the lender can turn that asset into cash.

Know What to Expect Before You Jump In

Investing is all about attractive returns with lower risk, but just like with other types of investing, the riskier the project (or the more complicated the renovation), the higher the potential return can be. Whether you invest directly into the private lending fund itself or into the project for a more hands-on option, you will get monthly statements and can then decide whether you’d like to have the dividends reinvested or paid out each month.

As you can see, investing in private money loans can make real estate a lucrative part of your portfolio while diversifying your investment strategy without requiring the actual investment in real estate itself. No matter what you decide, take a careful look at the investor and their expertise, background and track record to determine how real estate investing can fit into your overall strategy.

How Do Hard Money Loans Work for Commercial Investing?

If you’re interested in a commercial investment, but you don’t have funds on hand, or banks won’t give you the time of day, a hard money loan, also known as a bridge loan, may be able to help.

What is a Bridge Loan?

The goal of a hard money “bridge loan” is to act as the bridge from a temporary situation to a more permanent and conventional one.  Hard money loans typically have higher interest rates and up-front costs, but they give you the infusion of cash you need to purchase a commercial property.

While banks and traditional lenders shy away from fix-and-flip-style properties, or hefty commercial real estate investments, you can provide demonstrable proof that you’ve got the financial backing you need – and that will make any bank’s eyes light up faster than you can say “Sold!”

So What’s the Difference Between Commercial Hard Money Lenders and Conventional Lenders?

There are several key differences you should be aware of when it comes to getting a commercial hard money loan over a traditional loan, namely:

Conventional Loan Interest Rates Versus Hard Money Loans

Conventional loans have lower interest rates than a hard money loan. There’s no hiding that fact.  Because hard money loans are private loans made from investors, the interest rates associated with them can be up to three times higher than a conventional loan.

But keep in mind that even though the interest rate and associated costs are higher, they can get you the financial backing you need to purchase commercial real estate when banks won’t – owing to your credit, the type of property you want to buy, or other factors often outside of your control.

This is what it means to think of a hard money loan as a bridge loan – it’s giving you the financial backing you need in order to demonstrate to the banks that you have cash-in-hand and are ready to purchase commercial property.

Upfront Costs Associated with Hard Money Loans

Conventional loans usually have an up-front cost that’s as low as 1% of the total loan amount. With hardmoney loans, the up-front costs tend to be higher – around 2-5%.  Remember, private lenders aren’t in the business of being banks, and they can’t afford to lose money.  This higher up-front cost gets you the commercial funding you need, but also helps to separate the wheat from the chaff when it comes to loaning to just anyone.

Loan Terms for Hard Money Loans are Shorter than Conventional Loans

Hard money loans are typically held for much shorter timeframes than their conventional counterparts. A traditional loan can last for as little as five years, all the way up to 30 years.  Hard money loans, on the other hand, usually have terms that average around 6-12 months.

The reason for this is because they are designed to provide a short-term solution that helps to guide you toward a longer-term, and thereby more affordable option.

Credit Matters – But Not As Much as You Might Think

To banks, credit is an indispensable way of determining your “loan-ability”.  Poor credit or a low credit score can instantly crush any opportunity you may have to invest in commercial real estate.  But with hard money loans, your credit doesn’t have quite the impact on your approval as you may think.

With hard money loans, your credit may have flaws, but since the loan is based on the equity of the property rather than your personal credit score, you can still qualify for a hard money loan even if you have a few bumps in your credit score.

Hard Money Loans Close Much Faster than Conventional Loans

Conventional loans require more time to close deals because of all the paperwork involved:  the deal needs to be underwritten, inspections need to be conducted, legal departments need to be sure that everything is on the up and up, and the loan committee has to approve everything before the process is complete.

This can take as much as 30-60 days from start to finish. In a competitive commercial real estate market, that’s’ time you can’t afford to waste.

Hard money loans close much, much faster – often as little as 7 days or less, because individuals look at the specifications of the deal itself, rather than slogging through tons of paperwork.  The individuals that lend money from hard money loans are typically wealthy investors themselves, looking to grow their own money, so they tend to shy away from reams of paperwork in favor of offering a short-term solution to other promising, aspiring lenders.

Now, it’s understandable that you may have many questions about hard money loans. Let’s take a look at the most common ones:

Does My Credit Matter for a Hard Money Loan?

It does – but it’s not as much of a “deal-breaker” as in conventional lending.  A hard money lender will go through the process of qualifying the deal, but in doing so, they don’t look at credit as a “make or break” option.  Instead, they look at three things, in this order:

  1. The property
  2. The area
  3. You

Now, although you’re third on the list, you may have some explaining to do if there are major blemishes on your credit report like foreclosures or bankruptcies, so be prepared for that.

Is There 100% Financing for Hard Money Loans? How Much Money Do I Need to Put Down?

Hard money loans do not have 100% financing options. You’ll need to put down between 20-40% depending on the deal itself. This includes the down payment plus the closing cost, which can be 5-6% of the loan.

The good news is that hard money lenders are often more open to creative financing situations than their conventional counterparts. For example, if a hard money lenders requires a 30% down payment, it may seem difficult to come up with the cash needed to meet that requirement.

But there again, you’re thinking in terms of conventional loans. Things that banks shy away from are often wholeheartedly accepted by hard money lenders. Someone could pay 10% down and carry the other 20% for three years as a second mortgage.  This kind of deal wouldn’t be approved by a bank, but a hard money lender may be open to the possibility because their 30% down payment requirement is satisfied.

How Can I Help Assure that My Loan Gets Approved? Any Secrets or Advice?

You, your lender, the person you’re borrowing money from, and your property manager all need to be in agreement on the deal and on your investing exit strategy. Having everyone in agreement ensures that you are in the best possible position to get your loan approved and get the deal closed.

If you’re interested in exploring the options that a hard money loan can provide, or you’re looking at getting a hard money loan for your commercial real estate venture, give us a call at (818) 584-2424 and one of our hard money lending specialists will work with you to help answer any questions you may have and help you take the next step toward commercial property investing with hard money loans.

Before Taking Out a Hard Money Loan – Have Your Exit Strategy Ready

If you’re interested in taking out a hard money loan or a private money loan, it’s crucial that you know precisely what you’re getting into.  One of the most important steps is in determining your exit strategy long before you ever start the private loan application process.

Unlike traditional bank financing, hard money loans tend to be shorter term (from 9 months to three years on average) and more expensive (interest rates range from 7.99%-12%), but by the same token, they offer numerous benefits that bank financing does not.

Determining Your Borrower Profile

Many of the people who opt to apply for hard money loans do so because banks either take too long to approve their loan request, or the type of housing doesn’t necessarily fit the bank’s lending criteria (such as with homes in need of repair).

That being said, read over the list below to determine which of these profiles most closely matches your own borrowing intentions for seeking out a hard money loan.

The Experienced House Flipper

If you’ve flipped several homes for profit, you likely already know how long you’ll be in the property for. You’ve taken into consideration things like renovating the home, how long it has been on the market and so on.  Experienced house flippers typically carry hard money loans anywhere from 2 months to a year and then pay it all off when the escrow closes.

The Owner-Occupied Borrower Who Had a Short Sale or Foreclosure

If you’re a home buyer who had a short sale or foreclosure sometime within the last three years, chances are that as soon as the three-year anniversary of that short sale arrives, you know that you can refinance and go from private money loan to conventional mortgasge loan.

Oftentimes, this process is started well in advance (often a month ahead of time) before the anniversary date, so that the A-Paper mortgage broker can get the paperwork underway to transition to a conventional loan.

The Self-Employed Borrower

For entrepreneurs, hard money loans are often used as a stopgap measure until either their next two years of tax returns show much higher income or they have a portfolio lender who will take into account their unique situation, and look at things like revenues, net income, liquid and real estate assets and so on.

If this sounds like you, and you need a lender who looks carefully at these points relative to your business, reach out to us – we can help!

The “Money from a Friend” Borrower

When you receive gift funds from a family member to be used toward a down payment, they’re noted as such from conventional lenders.  But what about money from friends?  Under the rules and regulations of traditional financing, this is considered a personal loan and may disqualify you from getting the financing you need.

The Resources and the Knowledge to Help You Take the Next Step

We don’t share these exit strategies with you as if they were some kind of hidden, little-known knowledge.  These are just the facts of hard money lending.  If you can get the money you need through traditional or conventional means at a lower interest rate, why wouldn’t you?

You absolutely would. However there are cases, such as those we just noted, where banks won’t give you the time of day, either because you don’t meet the proper income requirements, they’re not interested in financing fixer upper homes, or any of the other scenarios mentioned here.

In these cases, hard money loans can give you the short-term infusion of cash you need to get repairs done, get money to refinance with, and so on – the very things that banks tend to shy away from, simply because financial institutions are not in the business of real estate.

If you’re ready to take the next step, reach out to us and we’ll take a closer look at your unique situation and determine if we can help you. Even if we can’t, we’ll take the time to point you in the right direction and help you see what issues may factor into your decision either way. Call our main office 7 days a week from 8 am to 5 pm PST, or fill out contact form to receive guidance by email.

House Flipping 101: A Guide for New Investors

Real estate is one of the most potentially profitable markets out there, because there’s a finite amount of it available. The good news is that new investors can start today and work toward seeing increasing returns from their efforts.

But it’s not all sunshine and roses. When considering fixer upper properties, there are certain pitfalls to avoid and steps to take to protect your investment. We’ve created this guide to help you get started flipping houses for fun and profit. Let’s get started!

Learn from Those Who’ve Been Where You Are

One of the best ways to learn any skill, be it flipping houses or anything else, is to walk in the footsteps of those who have done it before. Fortunately, there’s no shortage of books, videos and guides that show you how to fix and flip real estate. You may even find it worthwhile to work with a mentor and develop your own strategy that matches your investing goals.

Research Your Local Markets

Knowing the ebb and flow of your local market is crucial to your success. Take the time to drive around neighborhoods to scout out potential fix and flip homes. Keep an eye on local real estate news and listings (both online and offline) to see which areas are up-and-coming and which are experiencing demographics shifts. Staying up-to-date on what’s happening in your local real estate market means you can be the first to make an offer.

Accurately Estimate the Cost of Repairs

This is perhaps the most important lesson for beginning house flippers to learn. Being able to accurately estimate the cost of repairs is vital to determining how much the home will flip for. Do a thorough inspection and be realistic when creating your fixer-upper budget. Will you be making the repairs yourself or hiring a contractor?  What will you do if unexpected repair costs should arise?

You want to be sure you have enough time and money to get the job done, so pad your rehab budget by around 20% or so. There’s some math involved, but the most important equation to remember when it comes to flipping houses is:

Your Purchase Price + Repairs – Selling Price After Repairs = Your Profit!

As you can see, the cost of repairs is going to be the most important part of the equation.

Make an Offer (They Can’t Refuse)

Once you’ve found the right house and have figured out your repair costs, it’s time to make an offer. Think about the highest amount you’re able to pay and how you’ll secure financing. Banks in your area may be apprehensive about lending money to purchase homes in need of major repair, so you can always apply for a hard money loan before you start negotiating with the seller.

Don’t be surprised if there are other investors interested in the property, particularly if the house is in a high-demand neighborhood.

Invest Some Elbow Grease!

If your offer stands head and shoulders above the rest, congratulations! Now it’s time to start working on the repairs. Whether you’re investing your own time and elbow grease on making the fixes or you’re hiring a contractor, you want to be sure you have the correct permits in place, as well as an accurate timeline and budget so that everything is on the right track.

Fixed It? Now Flip It!

Once everything is fixed, it’s time to do what you came for and flip it. Use the MLS listing service and a knowledgeable real estate agent – both of these can help you find an eager, ready-to-act buyer quickly. Real estate agents have considerable knowledge about local markets and trends, and they can work to show the house and close the deal on your behalf.

Rinse and Repeat

That’s it! Now that you’ve fixed and flipped your first home, chances are you’re already out scouting for your next big win. Many investors fix and flip multiple homes to build up wealth and increase their returns over time.

Of course, investing in homes in need of repair takes time and has its own risks and rewards. Know what you’re getting into before you jump, and knowing the challenges that lay ahead can make the difference in how much money ultimately goes into your pocket.

And if you’ve done plenty of reading and are ready to start buying, it’s worth having a local Los Angeles hard money lender on your side to help. The fixer-upper market is becoming more and more lucrative every day. Don’t be left behind! Call us right now at (818) 584-2424 for more information.

Infographic: Why Borrowers Choose Hard Money Loans

Hard money loans can be an essential part of the business strategy for Real Estate investors these days. Not all banks lend money fast, and require lots of paperwork before pre-approval. Sometimes it can take up to 3 months to fund the conventional loan and investors can loose many fix and flip deals because of that. This is why investors prefer hard money loans more than conventional for business purposes.

Hard money loans are much easier to get approved for and can take less than 5 days to fund the whole amount. This is why investors can fund multiple deals with hard money lenders in only 30 days. To be more specific, we prepared a detailed infographic with main points of advantage of Hard Money Loans VS. conventional loans.

Conventional Loans vs. Hard Money Loans – Which is Right for You?

You may believe that when it comes to buying a home or property, that a conventional loan from a bank is the only way to go.  But a hard money loan may be a better option for you depending on your specific circumstances.

Many people have never even heard of a hard money loan (also known as a private loan) and are naturally interested in learning more.  What are the advantages of a hard money loan? What’s the difference between a conventional loan and a hard money loan? How do I apply for a hard money loan?

This article will answer those questions and much more.

Who Qualifies for a Hard Money Loan?

A hard money loan has several notable advantages over a traditional, conventional loan. In fact, you may be surprised to learn just who qualifies for a hard money loan:

  • People with a high amount of debt
  • People with poor or no credit
  • People who have been denied a conventional home loan
  • People who have difficulty proving they meet specific income requirements

The reason for this is because hard money loans typically focus on the “loan to value” ratio of a particular property.  The more equity a borrower has in a given property, the higher the likelihood that they’ll be approved for a hard money loan. Click here to go to main page for more information on hard money approval guidelines.

Faster Loan Approval Process

One of the best reasons to consider a hard money loan is that it can be approved faster than a traditional, conventional home loan. In highly-competitive real estate markets where sellers receive numerous offers, it’s often the buyer who gets approved quickest that ultimately nabs the home or property.  

Because hard money loans do not have strict income verification requirements and don’t need to check credit scores or other typical loan application hurdles, they can shortcut the approval process, helping buyers to secure the funding they need faster than a conventional loan.

Bad Credit? No Problem!

One of the biggest challenges for borrowers looking to get their loan approved is the dark cloud of bad credit hanging over them.  But a low credit score is simply not a factor that hard money lenders concentrate on.

The financial crisis of 2008 caused many banks to become more strict about their lending requirements.  Unfortunately, this, coupled with the drastic roller coaster of credit card changes and updates lead many people to suddenly find their credit in shambles. That

Private lenders understand that not everyone has perfect credit, which is why they look primarily at the equity and loan-to-value (LTV) ratio of a given property and the borrower’s investment in it, rather than at finances that can be skewed by outside factors like credit scores and income details.

For people who invest often in real estate, bad credit can keep them from getting the financing they need even though they may have plenty of equity.  Hard money lending lets them put that equity to use to secure financing in a way that’s open and transparent.

Denied By the Bank? You Have Options!

Let’s face it — banks are in the business of making money.  They are the farthest thing from being real estate investors.  And if an investor comes to them wanting to quickly secure financing on a hot property or just-listed home, the bank only sees things in black and white.  So even if you’ve been denied by the bank because of bad credit (or no credit), you still have options on the table.

A hard money loan may be precisely the solution you need to get financing quickly and affordably.  By requiring far less paperwork, income requirements and other verification steps, private loans enable real estate investors to act on hot properties the moment they become available, giving them a competitive edge in a bustling real estate market.

To learn more about how a hard money loan may help your specific situation, contact us today! We’ll work with you to help better understand your unique needs and goals while giving you the opportunity to secure affordable financing for your real estate investments.  Whether you had bad credit, high debt, or were denied by the bank or other traditional lender, you still have options available. Reach out to us and let’s discuss them in more detail at your convenience!

For more detailed information on hard money loans and approval guidelines, please call our financial office or email our sales department today.

 

Getting a Private Loan to Grow Your Hospitality Business

For hotel owners and developers, getting a loan from conventional lender like a bank or credit union can be an uphill battle.  Due to the very seasonal nature of the hospitality industry, traditional lenders are loathe to loan out money, owing to things like tourism dips and inclement weather.

Of course, as a hotel owner or developer, the last thing you need is high vacancy rates and roller-coaster cash flows.  All of these things present as a glaring red flag to traditional lenders – but not private hard money lenders.

What Makes a Private Lender Different?

Private hard money lenders are ready and willing to step in when banks and other financial institutions will not – helping owners and developers get much-needed capital for their building, renovation or real estate purchase.

In fact, the very nature of the hospitality industry means it needs to create a quality experience for guests at all times of the year – not just during the typical seasonal tourist surge. This makes it more important than ever to get the cash flow needed to help bridge the gaps.

Even if you’ve tried to get a hotel loan, such as an SBA 7a, SBA 504 or USDA B&I loan and have been turned down, or simply don’t want to deal with the financial red tape and the headaches, a private hard money lender can help give you the one-on-one service you need with amenable and flexible terms.

Private hard money lenders are also more open to working with various types of hotels and motels – including:

  • Full and limited service
  • Extended stay
  • Resorts
  • Flagged and non-flagged

Whether you want to build a new hotel from the ground up, refinance an existing hotel loan or acquire a hotel,  private lending can open up new opportunities that help you close on your ideal property and get to work building your vision the way you want.

Traditional Lenders Have Become More Selective

If you’re opening a hotel for the first time, it can be difficult to get banks and other traditional lenders to even give you the time of day.  Hotels and motels fall under specific criteria as to whether or not they’ll have their loan request approved and funded.

For example, if you’re opening a flagged (franchised) hotel, you’ll have a better chance of getting a loan than a non-flagged (independent) hotel. If you don’t already have a long history of successfully developing, operating and managing a hotel, banks and traditional lenders will take a hard pass on your application.

What’s more, there’s a catacomb of regulatory frameworks like Dodd-Frank which give banks even more reasons not to consider funding specific types of loans.  This type of shortsightedness ripples out to affect an area’s tourism in jobs that depend on it, such as hotels, restaurants and much more.

Making the Switch to Hard Money Loans

With this in mind, private capital has stepped up to the plate to offer flexible terms and the infusion of cash that hotel owners and developers need to make their vision a reality.  Despite the fact that hospitality projects have a higher risk, so too can they create a much more lucrative reward for everyone involved, which is why private hard money lenders are happy to help shoulder some of that risk.

Often issues which trip up hotel owners and developers, such as limited cash flow, low or poor credit scores or owner/occupier concerns, are much less of a problem for private hard money lenders, owing to their flexibility.  In an area where banks are resistant to lift a finger, hard money lenders will willingly reach out their hand.

We have worked with numerous properties in helping them to secure the hotel development, rehabilitation or expansion capital they need to grow their business. This is particularly notable in areas where commercial real estate is highly competitive and in high demand.

We provide a variety of solutions for the hospitality sector, including owner/user commercial real estate loans, acquisition, refinancing and much more.  No matter what your concerns, we’ll provide you with competitive financing structures, affordable rates and much more, so that no matter how the tourism cycle or the weather behaves, you can be ready to move forward with your hospitality business goals.

Basic Tips for Choosing a Reputable Hard Money Lender

Hard money loans can provide financing options to buyers who may not fit the stringent criteria and strict requirements of traditional lending.  This allows brokers to close on loans much quicker, since less bureaucracy and paperwork is involved.

Typically, hard money loans are made toward single-family residential homes, multi-unit dwellings and commercial properties. “Fix and flips-type” properties are also often funded with hard money loans since banks aren’t exactly thrilled with the idea of holding onto properties in need of serious repair.

This is great news for people who enjoy renovating properties, however, since interest rates can vary between 10% to the mid-teens and in some cases, interest payments can be deferred until the property is paid off – freeing up much-needed capital to make said repairs.

Hard money loans also have a much shorter timeframe than traditional loans, and can range from a few months to two or three years. Compared to 15, 20 or even 30 year fixed loans, a private loan could be the ideal option for someone in the situation of needing to buy a property quickly in a competitive real estate market.

So with these points in mind, how do you go about choosing a hard money lender to work with?  Many brokers claim to be direct hard money lenders, but if they don’t fit the criteria listed here, it’s best to move on.

The Company Should Specialize in Hard Money Lending

Beneath the surface, hard money loans can be complex and require individuals who are experienced and dedicated to properly structuring and executing these types of loans so that everyone is satisfied at each stage of the process.

Make sure to only choose a company that is knowledgeable about private loan origination, servicing and compliance and that makes hard money lending their specialty.

The Company Should Be Locally Owned and Operated

It’s understandable if a hard money lender wants to actually inspect the property they’ll be investing in, so it can pay off to work with a company that’s locally owned and operated. Of course, there are national hard money lenders, but these types of companies typically don’t have the flexibility of their local counterparts.

The Company Embraces Transparency

Watch out for so-called private money lenders who advertise “too good to be true” rates that seem to never come to fruition in actual lending situations.  When looking for a reliable hard money lender, make sure that they are willing to share all of the information pertaining to the loan, including adhering to requirements and guidelines.

When everyone is open, accessible and on the same page, loans can close more quickly, with terms that are favorable and amenable to everyone involved.

The Company is Fully Licensed

Hard money lenders may not be beholden to the same requirements and regulations as traditional lending institutions, but the best ones still follow proper licensing processes. Make sure that the company you’re looking to work with is licensed by Department of Real Estate and registered with organizations, including the Nationwide Mortgage Licensing System and Registry.

Make sure that your lender has a valid real estate broker license and don’t hesitate to check and see if any complaints have been filed against them. Does the lender have a valid, professional website or profile on a recognizable site such as LinkedIn?  Is their messaging consistent? These are all questions to ask yourself to avoid being taken for potentially thousands of dollars by some fly-by-night operation.

The Company Offers Many Different Types of Loans for Hard Money Financing

There is no “one size fits all” procedure when it comes to getting hard money financing. Different hard money loan types are available, including private money loans for foreclosures, commercial properties, fixer uppers and more.

If you are looking to acquire a hard money loan, have information available on the property, including the address, any critical deadlines, the purchase price, renovation budget and the asking price after renovations have been made.

The Company Understands the Intricacies of the LTV or Loan-to-Value Ratio

Large banks and lending institutions typically won’t loan more than 80% of a home’s value. Government-backed loans may exceed 90%, but what about hard money loans? Hard money lenders usually follow a more conservative route and look at the value of the property as if it were sold today. That price becomes the collateral basis for the loan.

The most important thing to do when considering a hard money loan is to do your homework. Hard money lenders may serve many different markets or specific loan types.  That’s why it’s vital that you actively look to build relationships with these lenders, as you never know when a prized property will suddenly become available, and you’ll need to act quickly in order to take advantage of the opportunity.

When such an opportunity arises, the last thing you want is to have your application tied up by the bank’s red tape. Buyers who seek out these types of loans generally need funds quickly, and don’t have the time to wait until the bank decides to take action.

This is why it’s so important to take the time to work with an established, specialized private money lending company – one that not only knows the local area, but is flexible enough to help buyers get the funding they need, even if they don’t match up with the “perfect” criteria that the banks may present.

If you have more question or need an assistance with your property loan, please call us directly or email Lending Bee using contact form.

How to Close More Escrows with Alternative Hard Money Lending

Home ownership is a dream for many people, but for countless people, a typical Fannie Mae loan simply won’t work.

In a perfect world, every buyer would be a cash buyer and no escrow would ever be canceled because of lack of funding.

And while most buyers can obtain a standard Fannie Mae loan, those that aren’t may feel like their chances of owning a home are slim to none.

For many reasons, the loan process can stall, which has a ripple effect for buyers and sellers alike.  If people can’t sell their home, they can’t get the funding they need to buy a new home. The real estate agent doesn’t get a commission, and in short, everyone loses.

Alternative Hard Money Lending May Be The Right Answer

There are many reasons why the loan process doesn’t work for certain buyers.  It could be that they’re just outside the lending requirements of most banks or financial institutions.  They may have additional income challenges or credit issues.

Sometimes the issue has nothing to do with the buyer at all. Maybe they want to “fix and flip” a home that is in need of significant repair.  Banks won’t loan on a home that’s in considerable disrepair.

The best part is, if the buyer has 20-25% for a down payment, the other requirements, such as the income and credit requirements that banks and lending institutions put into place, are eliminated.

Alternative hard money lending doesn’t have the kinds of income and credit requirements that buyers need to meet in order to obtain the loan.  And in some cases, real estate agents who are open to alternative lending can close even more escrows.

Here are a few situations where alternative lending can help:

Lower FICO scores due to bankruptcy or foreclosure

With alternative hard money lending, buyers can get their loan approved right after a bankruptcy. If there was a foreclosure, there’s no need to wait several years in order to get the financing they need.

And with alternative hard money lending, a short sale isn’t considered a foreclosure – so everyone wins.

Income issues from tax returns

Banks typically judge a buyer’s income from their tax returns – but tax returns don’t tell the whole story.

With alternative hard money lending, all that’s needed is 12-24 months’ worth of bank statements, which are easy to get.  And in some situations even stated income can be all that’s needed.

FNMA/FHLMC Condominium Approval

One issue that’s specific to buyers who are looking to purchase condominiums is that their approval is contingent upon the condominium being Fannie Mae or Freddy Mac Approved.  Alternative hard money lending has no such stipulations.

Less documentation needed

Alternative hard money lending also requires less documentation in how the down payment is sourced. This can be ideal for buyers looking to fix and flip properties or who are looking to buy a fixer upper and repair it on their own.

If your buyer is having trouble getting their loan approved, contact us for more information about how alternative hard money lending could be the solution they need.

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