Did an investment opportunity fall into your lap, but you are too cash poor to take advantage of the deal? Consider a hard money loan.
Hard money loans differ from traditional real estate loans. Real estate investors use hard loans to purchase commercial or residential properties they plan to resell rather quickly for a profit. These properties are either new construction or renovation projects that can result in a high return on investment.
Hard money loans usually come from investing companies instead of a conventional mortgage company, lending institution, or bank.
Second, knowing the borrower's credit history is not as relevant to a hard money loan lender as it is to a bank's loan officer. These lenders are mostly concerned about the value of the property the borrower plans to purchase and flip. Hard money investors want to know that if the borrower defaults on the loan, the value of the collateral will more than pay the loan back.
Since the lender is not as concerned about the borrower's credit score, the time to obtain a hard money loan is a lot shorter than a traditional mortgage. A speedy process is necessary when investors are working within the fast-moving real estate world.
Another benefit in working with a hard money lender is that the borrower works with individual investors rather than a corporation. These individual investors may be more willing to negotiate with the borrower for a more flexible repayment schedule.
This all sounds great to you, the potential real estate investor. Why wouldn't everyone use hard money loans for their commercial real estate investments or house flipping projects?
One reason that hard money loans are less than perfect is that they are expensive. Double-digit interest rates are common with these loans and the origination fees can also be costly. Because of this, investors save hard money loans for deals that promise a high rate of return in the short run.
Second, you need to have some cash or other assets to purchase your investment properties. Hard money lenders will not let you borrow 100% of the value of the property. Most hard money lenders keep their loan-to-value ratios at 50% to 70%.
If you are based in Indiana and face a sure-fire real estate investment opportunity, here are some companies to reach out to for a hard money loan.
Although based in California, CoreVest provides loans for real estate investors across the nation. Their rates start at 5%, and they may lend up to 80% of the loan-to-value ratio.
CoreVest helps investors with single-family homes, condos, townhouses, and 1-4 unit residences. They may limit their loans to individuals who have at least two previous fix and flip experiences. Plan on CoreVest's loan process taking from between two to four weeks.
RCN Capital also works across the nation. They have been in operation since 2010 and will work with investors of all experience levels.
Based out of Connecticut, RCN Capital specializes in loans for non-owner occupied residential buildings with 1-4 units. Most of their loan amounts range from $50,000 to $2.5 million. They may offer a loan of up to 75% LTV.
Patch of Land
Do you need cash quickly? Patch of Land can fund loans in as fast as 10 business days. They have been in business since 2013, and their LTV rates start at 85%.
Patch of Land is based in California but works nationally to fund a wide range of projects including single-family residences, condos, townhomes, apartment buildings, office buildings, warehouses, and retail spaces. Their typical loan amount ranges from $50,000 to $3 million.
Visio Lending loves working with landlords who want to refinance or grow their rental portfolio. Their traditional loan is capped at $2 million, and they usually allow an 80% LTV ratio.
Based in Pennsylvania, Capital Finance has been in business for over 20 years. They will work with investors on a wide variety of projects, from bed and breakfasts to gentlemen's clubs. They offer hard money loans, bridge loans, and construction loans.
Before working with any financial institution, it is essential to do your research. Check out the background of your lender and consult Better Business Bureau reports. Have your attorney review all the loan documents you sign. Make sure you are working with a credible institution.
Connect with a Clever Partner Agent in the Indiana area to help you find a great investment opportunity. This professional will help you evaluate different financing options and may uncover additional cost-saving opportunities.
Partner Agents work with the most trusted real estate firms in the country. They will help you navigate the complicated world of investment real estate, so you can earn the most bang for your buck.