If you are looking into commercial real estate investing, it is important to take time to consider financing your project with hard money rehab loans. Here is everything you need to know about these secured short term loans.
What exactly are hard money rehab loans?
Hard money loans are given out by hard money mortgage lenders based off of the property you are buying, not your credit score. Typically these loans cost more than the ones given out by a financial institution, and they offer higher interest rates that can start at 15% and be even higher than 18%.
Who generally needs hard money loans?
Hard money loans are great for house flippers and developers as they tend to need cash fast. They are also a good option if you have credit issues, or when a real estate developer needs to act quickly as the money is typically guaranteed to you within 14 days.
Consider the following example. Say you are able to purchase a house at a low price and are confident you can flip it rather quickly, but you have not been approved for a standard mortgage loan. In this case, a hard money loan may be the way to go, as you will be able to have enough funds to finish the project, sell it off at a higher profit, and pay off the investment mortgage lenders in no time.
What property types can I use this loan for?
There are no restrictions, so you are able to invest in commercial, single-family residential, land, and even industrial units.
What are the hard money loan to value ratios?
Hard money loan to value ratios are higher than the typical bank loan. Many lenders will typically lend up to 65% to 75% of the current value of the property, and in some special cases you may be able to borrow up to 100% of the value. However, doing so increases risk on the lender that they will not be able to receive their money back. So, they will charge higher interests rates to make up for it.
Borrowing requirements
Hard money lenders tend to have different borrowing requirements, so it is always a good idea to be upfront with your exact needs at the time of your consultation.
Interested in finding out more about hard money rehab loans? Contact our professionals today.
