Most home buyers obtain their mortgage through a traditional bank, mortgage broker, or other institutional lender. While their rates will differ depending on the lender and terms of the loan, they will be more competitive than private lenders.
But a traditional lender is not always the most efficient or best option for real estate investors. If you're flipping a home, consider more expensive forms of borrowing. These can include hard money lenders.
So, what are hard money loans and why would someone go to a lender who charges higher interest rates than traditional lending institutions? Hard money loans, also known as bridge loans, are short-term loans that real estate investors can use to purchase their investment properties.
Hard money lenders offer a useful tool for house flippers and developers. These purchasers do not plan on holding the property for as long as a typical homeowner would, and they will not reside at the home. Their main purpose is to repair the purchased property and sell it for a net profit as quickly as possible.
The reason they would choose a hard money loan is that these loans are easier to get and are processed much more quickly. They rarely require credit score checks and can be processed in a matter of days.
Hard money lenders use the value of the purchase property as collateral and its potential resale value after renovations, along with collateral from other assets. They also do not need standardized underwriting and can evaluate each deal individually for tweaks to the payment schedule.
While these loans can be easier to obtain, they have major drawbacks, one being higher interest rates. They are usually in the double digits. But as noted above, hard money lenders can be a useful tool if you plan correctly.
The best way to do this is to speak to a professional real estate agent. Whether you're an experienced real estate investor or a novice, they can offer you advice about a variety of lenders and options to obtain funding for your investment property.
Clever Partner Agents work on real estate deals every day and they know the reputations of local lenders. You want to ensure that you work with someone reliable and experienced with these specialized loans.
Here is our list of the best hard money lenders in Massachusetts.
This is a direct real estate lender that has been providing short-and-long-term loans in Boston for over 17 years. They work primarily with experienced investors looking for loans within a time-sensitive framework. They fund acquisition of properties, new construction, and other commercial ventures.
Endeavor Capital offers loans from $100,000 to $10,000,000 and the terms usually last between six months and two years. The interest rate is calculated by a derivative of the prime rate or libor, the basic rate of interest used in lending between banks in the London interbank market. The loan-to-value ratio or the assessment of the lending risk the company examines before approving the loan is 70% with some exceptions.
Buy Now Hard Money
This company lends in Eastern Massachusetts and parts of New Hampshire. The terms for their funding are always secured with real estate. Their loans are offered at 10% to 12% simple interest, but rates depend on the deal.
The minimum loan Buy Now Hard Money provides is for $100,000. The maximum loan amount is $1,000,000. Buy Now Hard Money's length of the contracts are usually 6 to 12 months, again varying on specific deals.
The company will only lend in first position. That means if there is a default on the loan, the company is in a first lien position in case of any liquidation of the collateral was used to secure the loan.
JEMS Financial is a state-based private lender offering loans for construction and development projects. The owners also operate the Keystone Development Corporation, a residential development company that has built hundreds of homes since 1998.
The company was founded by real estate developers and notes that this helps their clients because they understand their situations. It can give you an answer about your loan in 24 hours.
Conquest Capital Partners
Conquest Capital Partners works with real estate developers and investors primarily in Massachusetts, but it also provides loans for the California real estate market. The loans are for the construction of residential properties that will not be occupied by the builder or owner.
The investors behind this company include individuals and local institutions, and it notes its loan agents can help home buyers who do not qualify for a traditional bank loan.
This is a direct lender, but it also acts as a facilitator of larger loans with outside private lenders. MassPrivateLending.com determines if borrowers qualify for a loan based on a review of the collateral property.
Its loan programs include hard money construction loans, bridge loans, and acquisition loans. Loan amounts are between $75,000 and $3,000,000 with term lengths being between six months and a year, although longer terms can be negotiated.
Ask a Clever Partner Agent About Financing Your Investment Property
It's in the best interest of all real estate investors, even experienced home flippers, to work with a professional agent. Clever Partner Agents know local market conditions and can help you find the best opportunities in Massachusetts. They can guide you to reputable hard money lenders if you need financing quickly.
Clever partners with top real estate agents from major companies like Keller Williams, Century 21, and RE/MAX. They are all full service and have the latest housing data. That means you can be confident that you can target your investment dollars for the maximum return.