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West Forest Capital

COVID Effects on Long Island Hard Money Lenders


Much like the rest of the world, hard money lenders in Long Island have had quite an up and down year.  In fact, nearly every part of the industry, from borrower credit profile to asset eligibility, advance rates, interest rates, and rehab fund disbursements have all been affected. 

In the spring of 2020, Long Island Hard Money Lenders radically changed their lending criteria.  Many lenders stopped lending all together, nearly freezing the fix and flip and distressed buying markets.  One of our most notable achievements here at West Forest Capital is that we never – not even for one day – stopped offering our products.  In our mind, we made a commitment to our clients and the Long Island market, and we were going to stick with it.  (As an aside, this dedication grew our business nearly 2x this year).

Percentage of Purchase Price and Rehab Funds

After the shock of the initial crisis passed, in May and June, some of the national lenders that operate on Long Island did return.  Advance rates were significantly different, however, with the most experienced borrowers getting 80% and those with less experience from 65-70% (later, in the fall of 2020, those numbers moved by about 5%).  Because disbursing rehab funds creates value and does not pose much risk for lenders, the percentage of rehab funded never changed substantially, always hovering at 90%-100% both pre-COVID and post-COVID.  One other note on the structure of the loans – due to the macro market uncertainty that is still very much present, some lenders have required interest reserves (upwards of 6 months) to be included as part of the deal.  Interest reserves lower the total amount the borrower receives at closing, but in exchange, the borrower doesn’t have to pay interest on the loan.

Expanded Location Lending

As COVID greatly increased demand for the suburbs, Long Island was one of the biggest beneficiaries.  Long Island hard money lenders reacted to this change in demand and increased the areas that they cover.  For example, if previously lenders where comfortable with Nassau County but did not lend in all areas of Suffolk County, that has now changed as migration from NYC and areas nearby has accelerated.  In fact, we are seeing significant increasing demand for hard money loans in the region between Smithtown and the Hamptons. 

Interest Rates

Immediately as COVID hit and lenders became more conservative in their underwriting criteria, interest rates were also raised by 1-2%.  However, now, more than 6 months removed from the depth of the crisis the market has shifted rates back to their original pre-COVID levels of 9-11% for single family fix and flip.   For mixed use, commercial, and industrial properties rates remain slightly higher than pre-COVID, at 11-12%.

Borrower’s Credit

Pre-COVID minimum FICO scores were often 620 or 640.  Now, many lenders have changed their minimum requirements to either 650 or 660.  (it’s worthwhile to note that West Forest Capital does not have a minimum FICO).  Long Island hard money lenders are now also doing a deeper dive on the underlying borrower and their credit profile.  Tax returns and bank statements have been more frequently requested and reviewed.  Unless very experienced in real estate, some lenders have required the borrower be employed outside of their real estate business (we do not require this).

Asset Type

Long Island hard money lenders have changed their underwriting “box” in terms of what properties they are willing to lend on.  Pre-COVID, lenders were much more lax, lending on industrial and commercial properties, in addition to fix and flip.  Post-COVID we are seeing a lot more lenders stop funding commercial and industrial asset types, and even mixed-use.   In fact, as a lender that continues to lend on all the above property types, we are seeing a huge uptick in loan requests, particularly on mixed-use buildings. 

Where we can help

As mentioned above, West Forest Capital can lend on any property type – because we are set up as a partnership, we do not have restrictions.  We also do not utilize an underwriting “box” and can fund unusual properties that cannot be funded by other hard money lenders.  Even on these types of properties, however, our rates remain reasonable and our communication and service second to none! Call us (212-537-5833) with your deal scenario and see how we can help right away.

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To get started with your hard money loan,
please call us at 212-537-5833 or text us at 917-267-9523.

Hard Money Loans: FAQs

Hard money loans are short-term loans that are used to acquire investment properties to rehab and then flip for resale or rent. These loans are used by real estate investors and others who are looking to finance non-owner occupied real estate.

Yes, we can often pre-approve you on the same day as when you apply. For a pre-approval letter, please call us at 212-537-5833 or text us at 917-267-9523.

Yes, we do fund rehab costs through a hard money loan. In fact, we can fund 100% of your rehab costs. To do so, you will need to complete a portion of the project. We then send an inspector to review it, and we distribute the funds for the completed work. The entire process takes 2 to 3 days.

Yes, we provide extensions up to 6 months or longer on a case-by-case basis. We understand the timeframe complexities when rehabbing or building a new project – we will work with you.

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