Hard Money Lender Miami-Dade County

Hard money lenders, distinct from traditional banks, are non-bank asset-based lenders. They prioritize the property’s value over the borrower’s qualifications, resulting in a quicker underwriting process and faster loan funding, often within a week. This expedited process contrasts with the lengthier timelines associated with traditional bank loans, which can take 2-3 months or more. Consequently, real estate investors, particularly those acquiring foreclosed properties at auctions, frequently choose hard money lenders to facilitate the swift closing required by auction terms.

It’s essential to recognize that hard money lenders exclusively lend on investment real estate and do not provide mortgages for residential purposes. Properties financed by hard money lenders are designated for investment use and cannot be occupied as primary residences.

With hard money loans, borrowers enjoy the advantage of faster approval and funding compared to conventional bank mortgages, but with interest rates ranging from 9-12% due to the increased ease of obtaining these loans. Origination points tend to fall between 1 to 3 and are settled at closing. These loans typically have a short lifecycle of one or two years and are disbursed in two main phases: the initial funding that covers between 70-85% of the property’s acquisition cost, and the renovation financing, which potentially covers 100% of refurbishment expenses. Note that renovation financing is only provided if there is a need, and the disbursement follows the completion of work stages. For instance, if the renovation budget is $50,000 and the borrower finishes $15,000 worth of renovation, the lender will release $15,000 and continue to do so in stages. To ensure the loan remains safe, hard money lenders cap the final total loan allocation at 65% of the property’s value post-renovation or the ARV.

Commercial entities, such as LLCs, are the exclusive beneficiaries of hard money loans due to their classification as commercial loans. Individuals seeking such financing need not fret—with minimal fuss, one can establish an LLC, even singlehandedly.

Lenders specializing in hard money loans take into account the asset’s purchase price along with its After Repair Value (ARV) to ensure a secure return on the funds lent. Acquiring a property at or beneath the market rate is vital for loan approval. Furthermore, if the loan encompasses renovation costs, the lender will diligently monitor that the refurbishment adheres to the pre-set schedule. Clean title status is mandatory; any legal encumbrances such as liens must be resolved before the funds are released.

The lender’s objective is synonymous with their client’s—pursuing a lucrative investment venture. Thereby ensuring that the ARV is considerable enough to cover all expenses while still yielding a profitable margin for the investor.

A hard money loan is typically utilized in the following situations:

• Repair and sell (“fix and flip”): Targeting properties for repair and resale, especially when overlooked by traditional banks due to various issues.
• Upgrade to lease: Acquiring and updating properties that don’t qualify for bank funding with plans to refinance post-leasing.
• Quick purchase execution: Bridging the time gap of lengthy bank processing for urgent property deals like auctions with prompt lending.
• Immediate refinancing: Utilizing owned properties for fast-track cash-out refinancing.
• Purchasing through an LLC: Offering solutions when buying property in an LLC to overcome typical banking hurdles.