Smart Real Estate Investors Choose Hard Money Loans
Oct 05, 2016
Having a hard money lender in your rolodex is an important part of being a successful real estate investor. For properties that don’t fit a traditional banker’s requirements or that need fast financing, having access to hard moneymight be the difference between doing a deal and having to wait for the next one to come along. Here are some of the advantages that hard money lenders offer:
They’re Investors… Like You
Hard money lenders are investors like you. The only difference is that you choose to make your money by owning real estate while they choose to make it by lending on real estate properties. Hard money lenders know that their money won’t work for them if they don’t structure loans that let you make a healthy profit. In other words, everyone wins.
More Favorable Valuations
Sometimes, the LTV is the least important part of what goes into valuing a property for a loan. Banks might lend at a 75 to 80 LTV, but that LTV comes with conditions attached. Traditional lenders usually look at a property’s income, so properties that have no income might not qualify for lending at all. Hard money lenders will frequently look at the value of a property after renovations. In other words, if you plan to purchase a $2 million property and put $1 million into it, a lender will give you 75 percent of $2 million and leave you to figure out the construction financing. Some hard money lenders will give you 60 to 65 percent of the $3 million as-renovated value, giving you more loan dollars, even though the quoted LTV is lower.
Fast And Easier Loan Underwriting
With a hard money lender, the underwriting process is simplified. Instead of having to answer to a committee, the hard money lender answers to themselves. This lets them make decisions in days or weeks instead of months.
Furthermore, the loan is usually tied to the value of the asset. Given a valuable asset and a down payment, the lender can assume that you will pay back the loan to protect your investment. With this in mind, factors like credit scores or the amount of debt you have on other properties become less important.
Riverdale Funding commercial hard money lenders make a loan solely on the value of property, and accept all credit scores and financial histories. If you think your property qualifies for a hard money loan, contact us today for an evaluation!