Get a Hard Money Loan in Today's Market
Real estate deals are everywhere today. The best way to get the money to close on deals today is with hard money loans. A hard money loan is a loan that is made based upon the ARV - after repair value of the property. Generally speaking, 65% of the after repair value of the house is the maximum that hard money lenders will loan.
Well. All of that changed when the real estate market crashed. What I typically have found is 50% of the ARV is the max that a hard money lender will lend in today's unstable market. The hard money brokers are also looking at your credit report today. Too many dings and you will not get the hard money mortgage loan that you are looking for, regardless of the deal.
Money is tight, put someone else's cash on your deal. So what is a real estate investor to do when attempting to get a residential hard money loan? I was at a real estate seminar a couple months ago and one of the speakers kept going on and on about hard money loans. An associate of mine stopped the seminar and asked how he could get hard money loans still in this market.
The speaker with no hesitation, said, "If you can't get hard money you aren't trying hard enough." He then went on for another half hour without going any more in depth about getting hard money mortgage loans in this market. I needed to know how to get hard money more easily as my sources were drying up.
Develop a great relationship with the local hard money loan brokers. The easy part is finding the deal. Deals are everywhere. The difficult part is getting the hard money.
Educate yourself More Regarding the Commercial Hard Money Loan
As for the basic definition of a Commercial Hard Money Loan, it can be described as a Cash Finance Option or Business Loan for someone who has trouble getting a regular financial loan. If the borrower can't pay back the loan, the Real Property is taken as collateral to ensure the Commercial Hard Money Loan eventually gets paid back. The basic key of the various types of Commercial Loans can also be defined as Sub-Prime Lending, Near Prime, B-Paper or Second Chance lending options.
So affirmatively would someone take out a Commercial Hard Money Loan verses a standard Commercial Loan? Some companies have a minimum amount they will lend you when helping you acquire a Commercial Hard Money Loan.
There are also what they quote Mezzanine Loans which is a an accommodation that's paid back after the transfer or refinance of the Commercial Property. It's possible for a lender to secure a portion of the proceeds upon sale of the Hard Loan debt. These loans tend to have preferable structures such as good debt and equity ratios.
Maybe you have or haven't heard of a Hard Money Bridge Loan. These types of loans basically "bridge" the gap so in essence you can get a project off the ground a lot faster. There are also Hard Money Construction Loans, which is another distinctive Money Financing option that can be used for little home projects to larger Commercial Property projects such as the development of a strip mall or tract home development project. In most cases for construction projects there is a reserve account setup to make sure that money is allocated properly as the project keeps moving forward.
A Commercial Hard Money Loan is typically used in both Urban & Suburban areas. The current Prime Rates are from 11 - 16% verses the 6-7% for a standard loan. Also note these are Short Term Real Estate Loans that are usually given from 1-3 years.
I could write a small 100 page book detailing all the features regarding all the types of Commercial Hard Money Loans. If you are paying 20% upwards, that could be considered Predatory Lending.
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