IS A HARD MONEY LOAN RIGHT FOR YOU? In the world of real estate investing, each property and every borrower is unique. Here are typical scenarios where hard money is an ideal financing option: SPEED: Opportunities in real estate today require decisiveness and speed. Aside from a cash offer, hard money is the next best thing. Since hard money lenders are not restricted by the same regulations as conventional mortgage banks, you can expect quick closings – around 5-15 days. FIX AND FLIP: Hard money lenders understand the business of flipping and are vested in your plan to rehab a property – So much so that they can add rehab financing to the loan to help manage cashflow during renovation. RENTAL: Conventional financing caps the number of rental loans as debt-to-income ratios become too high, or the max limit of loans has been reached. Leveraging hard money on long-term rental financing can help you acquire more properties and scale your business. CREDIT OR INCOME ISSUES: If your credit situation is holding you back, a hard money loan could help. If you’re not a W-2 worker or have a gap in employment — don’t worry. If you have the stated income or assets to qualify, and a sound plan for the property, a hard money loan may work for you.
HOW TO CHOOSE A REPUTABLE LENDER? When you are ready to find a trustworthy, reliable hard money lender, conduct your due diligence. It’s easy to get lured in by cheap rates; but do all of the math. The most important things to consider are a proven track record, good communication and access to capital. TRACK RECORD – How long have they been lending? Do they have an uninterrupted record of funding loans through good times and bad? EXPERIENCE – How many loans have they funded? Credible lenders have funded thousands of loans for investors. ADAPTABILITY – Do they have the experience to address challenging scenarios, unique market or property nuances, and fluctuations in the market? ACCESS TO CAPITAL – What is their capital source? Are they lending their own money, using bank lines, or brokering? Protect yourself and make sure you identify this up front. Focus on finding a reliable financing partner who will educate you, grow with you, and support you as the real estate and capital markets shift, and you will be well on your way to a new world of real estate investing opportunities.
WHAT ARE THE TYPICAL TERMS OF A HARD MONEY LOAN?
The details to which the lender and the borrower agree upon constitute the “terms”. For a hard money loan, this includes interest rates, points, fees, loan duration, and LTV (Loan-to-Value). LTV is the outstanding debt on real property divided by the fair market property value. (For a property valued at $500,000 with a down payment of $100,000, the loan amount is $400,000, thus the LTV is 80%). When securing a hard money loan, you can expect to borrow 65-80% LTV. You must have some skin in the game. Rates, fees and points vary widely. Since hard money lenders take on more risk than a bank, interest rates are higher. But don’t make the rookie mistake and focus on interest rates. Keep your perspective on the entire financing package, your investment goal and exit strategy. The benefits of speed and leverage and the ability to proceed with your strategy likely outweigh a higher rate.
Civic Financial Services, LLC is a leading institutional private money lender specializing in financing non-owner-occupied investment properties. CIVIC helps investors leverage opportunities to grow their real estate portfolios and build wealth through real estate. For more information, please visit www.civicfs.com.
© 2021 Civic Financial Services, LLC. All Rights Reserved. This is not a commitment to lend. All offers of credit are subject to approval. Restrictions may apply. Civic Financial Services, LLC reserves the right to amend rates and guidelines. NMLS ID 1099109. Loans made or arranged pursuant to a California Finance Lenders Law License 603L321. AZ Mortgage Broker License 0928633. OR Mortgage Lending License ML-5282. See www.civicfs.com/Licensing.
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