Hard Money Loans vs Commercial Bridge Loans

Typically the term Bridge loans and Hard Money loans are been confused by people in the past

as being the same thing because they have some points in common and some points that makes a big difference. Bridge loans are usually are generally given for 1 to 2 years period, whereas Hard Money is anywhere from 6 months to over 5 years.

Both bridge and hard money loans have higher interest rates and neither is considered as a permanent loan because these loans are utilized when conventional loans did not work. These loans help property owners achieve their goals involving non-bankable processes like:

·         Rehab or add-on a commercial property

·         Time to lease out or rent a commercial property

·         Pay discounted loans payoffs quickly

·         To lighten DTI ratio (Debit To Income Ratio) payoff the debit

·         Cash out facility to purchase investment property

The Differences

The major difference between them is FICO Score; a number representing the creditworthiness of a person, the likelihood that person will pay his or her debts. Bridge loans are in box type of loan and require a FICO score of 625 or more. The lender will take anywhere from 2 to 4 weeks to close your DSCR (Debt Service Ratio) will be considered and it could be the make or break point on whether you qualify for a Bridge loan.

The rates are normally between 7 to 9% and it is fixed for a period of time. LTV (Loan to Value) ratio is between 60 to 65%. Prepayment penalty could be anywhere from 6 months to the whole term of the loan.

Hard Money Loans

When you cannot qualify for other types of commercial loans California Hard Money Lenders are there to help you. Hard money lenders are able to give you loans quickly. It will take about 5 to 10 business days to complete the process. Interest rates are from 8 to 11% based on the equity in property, higher the equity lower will be your rates. LTVs are 55 to 65% maximum and prepayment penalties are normally 6 months on a 1 year loan to 1 year on a 2 to 3 year loan.  The good thing about Hard Money is everything is negotiable and it can fit any situation and give the property owner exactly what he needs to achieve in his future objectives.

How to Finance Rental Properties with Hard Money

Hard money is used mostly by investors as a short term solution to fund real estate deals. Hard money is an excellent option that is used to fund fix and flips or buying rental properties until long term financing put in place. 

What is Hard Money Loan?

It is a type of financing used to finance properties for a short term period of six months or a year. Hard money lender use a different terms than the traditional lenders such as bank. Most lenders charge 14 to 16% and points for their money. Points are percentage of total loan and it can add costs quickly when a lender is charging 2-3 or even 4 points on loan.

Why Investors use Hard Money to Finance Investment Property?

The main advantage of a hard money lender is that they may loan the entire amount of money you need to complete a deal. Most lenders base the amount of loan on ARV (After Repair Value). You would have heard that they can loan 65 to 70% of AVR; which is not purchased price i.e. how much home will be worth once you fix the home.

How hard money deal is structured on investment property?

Let us take an example of how one hard money lender structures a deal. You have bought a house for $60,000 having AVR $130,000 and the lender says they will go up to 70% AVR on property. The lenders will loan up to $91,000 on the house based on the AVR. The hard money lender requires bids or estimates for repairs and they will pay out money for the repairs such as construction loans. They will pay 25% of the repairs required at closing and other payment will come it 25% increment and 4 points, but they will reduce the points paid after you do a few deals with them.

The cost to close this deal with a California hard money lender can add up rapidly. The interest on this deal will cost you $6,825 and the points will cost you $3,640 if you use the money for 6 months period. There are lenders that will charge lower interest and points, but will want a split of your profits. Hard money lenders can help you secure a property below market value when you have not other options.   

Top 4 ways why working with hard money lenders is the new black?

What is hard money loan?

A hard money loan is a particular sort of asset-based credit financing through which a borrower gets funds secured by a tangible property. Hard money loans are usually issued by private venture capitalists or corporations.

Hard money lenders

A hard-money lender offers short-term advances to people acquiring private or commercial property. This financing is likewise accessible for land purchases. Stakeholders use hard-money to purchase investment properties comparatively quickly. A hard-money loan is normally easier to obtain than traditional funding; therefore, the cost of the loan is extensively higher.

Benefits of working with hard money lenders

Hard money lenders can offer advantages that numerous traditional and conventional moneylenders can't. They normally have smaller amount of borrower qualifications and take less time to close than a customary loan. Here are best advantages of private lending or working with hard money lenders:

1. Fast and Quick Approval of Loans

Unlike other traditional foundations of banking, hard money lenders do not place as strong an accentuation on having high financial assessments for people. The procedure of documentation is additionally very simple and not burdensome, that makes it easy to approve advances in only a couple of days, rather than weeks or months, and makes it fast and easy to acquire loans.

2. Provides Greater Flexibility to the Borrowers

A hard money lender can give quick assistance to acquire hard money business loans to purchase a property or even begin a small business. Due to better loaning terms and less paperwork you can get loans in no time. Most of these hard money financiers accept various types of security. Along these lines, you can utilize it for your own home or even for future cash flows emerging from a property as a guarantee. Private loan specialists can structure reimbursement and collateral discharge terms in ways that are equally beneficial to both borrower and moneylender. Greater flexibility frequently brings about better results.

3. Lower Down Payments

In today’s market, venture capitalist obtaining a traditional loan would expect to pay 20-25% down payment just to obtain the property, and afterward, think about out of the pocket money to complete renovations. As an option, an investor might have the capacity to utilize hard cash financing for the purchase and repairs, while placing just 10% down on the aggregate expense.

4. No Prepayment Penalties

If your business is going predominantly well, the last thing you want is to be penalized for your accomplishment. Yet conventional financial institutions frequently charge robust prepayment penalties if circumstances change and a loan is completely or partially repaid before the due date. Private lenders have entirely invested in your victory and usually structure finances without prepayment penalties or included fees. It's one all the more way a private moneylender can add to your prosperity.

Respectable hard money lenders need the same thing as their borrowers – a fruitful and cost-effective investment experience.

Finding a Hard Money Lender to Work With

There is a wide range of approaches to find a legitimate hard money lender. One simple approach to locate a nearby hard money lender is to search Google for your area along with the keywords “hard money lenders”. There will be individual organizations in the list items as well as lists of hard money lenders incorporated by others. Another approach to find a hard money lender is by going to your nearby real estate investor club meeting. These club meetings are arranged in many cities and are generally attended by hard money lenders hoping to coordinate with potential borrowers.

If you are in California area, and if there is something we can do to help you with your Hard Money loans, please let us know. You can also call us at 415.793.3403. We are real people here ready to develop long-term working relationships.

What Is Hard Money: Why to Use Hard Money Loans

“Money is a medium of exchange in the form of banknotes and coins.”

Hard Money vs Soft Money:

Hard money refers to form of money that can’t be made or printed like gold, silver or property. Hard money was supplanted by soft money which is classified as monetary system like paper notes and coins. Soft Money is passed by the government as debt or bonds. It is issued as cash for the nation.

What is hard money?

The Specie Circular was issued by President Andrew Jackson in 1836, an executive order that every single land must be obtained with hard money. Hard Money is used almost entirely in the United States and Canada where these sorts of loans are very common. In commercial real estate, hard money is used as an alternative "last option" for property proprietors looking for capital against the value of their assets.

Hard money is the opposite of fiat money, which is money that takes its value from the administration statement or law which allots the said value to it. The US dollar is an example of a fiat currency. On the other hand, hard money can likewise refer to the cash received from a government or other body. Hard money is generally issued by the government for the expansion of certain projects or for the benefit of specific organizations.

What is hard money loan?

A hard money loan is a specific type of asset-based loan funding through which a borrower gets money secured by actual property. Hard money loans are usually issued by private investors or corporations. Interest rates of this type of loans are normally higher than traditional commercial or housing property loans due to the higher risk and shorter time frame of the loan. Mostly, hard money loans are utilized for projects lasting from a couple of months to a couple of years. The qualifying criteria for a hard money credit fluctuate widely by lender and purpose of loan. Most hard money lenders mainly pass the loan amount based on the worth of the real property being collateralized.

Hard Money Loans California:

There is a strong demand for housing in California but only few can afford it. The business sector has flown away from control leaving investors to consider other solutions. Numerous are turning to hard cash money lenders. Money lender is a person of an organization that lends money at an interest rate. There are many different types of hard money loan programs in California. Among the hesitance of banks to advance funds and the period of time it can take for an advance handling, hard money loan can, thus, be your best option to take.

Why to Use Hard Money Loans?

Hard money is the good source of funding when financial institutions are not an option or the loan is needed in a short time period. Hard money loans are perfect for the following situations:

• When loans for land is needed
• When construction loans are needed
• At the point when the buyer has credit issues.
• When a real estate investor has to act swiftly.
• When the borrower has just discharged from a bankruptcy.
• When the borrower does not have the amount of assets required by the bank for loan.
• When the borrower wants a streamlined qualification procedure. 
• When the borrower holds an excess of investment properties.

If you've any questions, do let us know in comments!

Hard Money - Tips for Investors

Many investors who ended up losing a ton of money during the real estate crash and are probably still losing money today. Hopefully you’re not one of them, but if you are, here’s how to make sure you don’t make the same mistake again.
We believe that it is important for real estate investors to embody and hone in one skill sets that top real estate investors practice.
There are many that have lost lots of money in real estate investments because they were not careful in planning stage. There is a very steep learning curve for those starting in real estate investing. Here are some things to keep in mind before you get started on your journey. So take your time to determine what are your financial goals and the time frame in which you want to achieve them. Remember to be realistic. With the current real estate market, chances are you will not become a millionaire in six flips.

Know about the type of property you want:

If you want a bank-owned property, focus on bank owned property. If you like 3 family homes located within a 6 miles radius from your local college, then be stick to that area, Remember lack of focus in your investing will make you feel like you are running around blindfolded. So get focused and get results.

Look for the right location:

If you buy a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal, stay away from rural areas where there are fewer people and a small pool of potential renters. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate.

Realist Real Estate Investors:

Sure, we are in one of the best buyer’s markets of all times. Yes, there are a lot of distressed properties that need rehab and there are a lot of homeowners upside in their current situations. But that doesn't mean that every offer you make is going to get accepted. Remember, it is a numbers game in real estate. The amount of contracts you get signed is equally proportionate to amount of offers you make.

If you are in California area, and if there is something we can do to help you with your Hard Money loans, please let us know. We are real people here ready to develop long-term relationships with qualified real estate investors.

Choosing The Appropriate Hard Money Loan

Getting a bank or an institutional loan for commercial or residential investment properties are quite a hard job these days. Banks have to look for many different factors when determining whether or not to lend money and loan brokers may even take forever to establish a loan. Between the reticence of banks to loan funds and the length of time it can take for a loan broker, a residential or commercial hard money loan can be your very best option to take.

There are several different types of hard money loans out there. As a borrower or a real estate investor, you should have a sound knowledge of their types. You may choose the one which best suites your needs. We would like to share these types for your convenience.

The first is the “hard money acquisition loan”, it is used to purchase a specific property, typically for improved property or platted land. These loans are best when banks can’t get you the funds in time to complete the deal. If the property is not up to an institutional lender’s standard or there is an issue with credit or liquidity.

The second type is “value added loans”, a type of hard money loan for properties that have higher than normal vacancy rates and can be used to renovate a property to increase cash flow. This is a great loan when a property has a lot more potential income that it's currently generating.

Third one is “hard money land acquisition loans”. It is a way to buy land to improve. Banks and other lenders, including other private lenders, aren't financing many land deals at all so finding a hard money loan for property is going to be your best bet. Fourth is Bridge loan. These are a great way to get from point A to point B in a financial situation. These are short term loans that can be used to purchase a property while waiting on bank financing to come together. These loans typically close in a few weeks instead of the months it can take for a bank loan which could lose you the property.

Another type is “Construction pay off loans”. They are designed to help contractors who have finished a property but it hasn't sold yet. This loan is used to pay off the existing construction loan so the developer avoids losses and doesn't have to short sell the property.

At last we would say, as you can see, this variety of options available can help borrowers and contractors alike to leverage a situation that can't be leveraged any other way. While traditional lenders may not be able to work with you on a standard loan, a hard money loan is much easier to get and a lot quicker to get as well. If you're in need of a loan for a real estate deal, take a look at a hard money loan and the hard money loan rates. It may make the entire deal come together

Private Financing - What It is

Private financing is basically financing your business with the help of private individuals or parties, not by the traditional banks. This type of financing is generally used for personal, investment and commercial purposes. Several sources of private financing includes private and hard money lenders, investment groups and venture capitalists. Private financers are also known as “Angel investors” as they help you when no one supports you.

Private financing is one of the best source of funding in US. The California hard money lenders are well known lenders in the town. California is known as the headquarters of private lenders, many lending companies deal borrowers with professionalism. Private lenders are different from bank loans, banks usually give you loan after a long verification process. Whereas private lenders doesn’t require such verifications, you have immunity over income verification.

Private financing obtained during exchange for stock are an excellent way to get the initial operating capital needed for a startup business, but can be it will expensive in the end. While you are not likely to be paying interest in the early stages of your business, you will pay dearly should you become a success.

All the real estate investors requires capital to complete business transactions. In situations when you don’t have money for finishing business deals and you need it in short time, if you contact a bank for loan, will take considerably long time to approve. Now this is where hard money comes in handy. Since these companies are owned by private individuals so they give more attention to their customers. This lending process doesn’t require income verification form you and it doesn’t require large documentation process needed for applying a loan. Another advantage is that hard money lending is a fast process so it saves time of customers and investor.

It doesn’t matter what method you have chosen in obtaining private financing, you will find that companies are more flexible in lending criteria as compared to banks. Check out private financing companies and brokers online to see which will suit your business needs most effectively.

To conclude, if you don’t have anything in your pocket and need 100% financing to start your business or you want a loan to restart your previous business then hard money loan is a best option for you to complete your goals and dreams.