Hard Money Lender West Palm Beach

Hard money lenders, unlike traditional banks, are non-bank asset-based lenders. Their lending criteria focus primarily on the property’s value rather than the borrower’s qualifications. This streamlined underwriting process enables rapid loan funding, often within a week, compared to the lengthy timelines typical of traditional bank loans, which can take 2-3 months or more. Consequently, real estate investors, especially those purchasing foreclosed properties at auctions, commonly opt for hard money lenders to meet the accelerated closing requirements.

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.

Hard money loans provide a quicker and more accessible financing option than traditional mortgages, which is why they carry a higher interest rate, typically ranging from 9-12%. Additionally, borrowers can expect to pay 1 to 3 points at the loan’s initiation. The loan duration usually spans 1 to 2 years and consists of two segments: the acquisition phase and the rehabilitation phase. For acquisition, you can borrow 70-85% of the property’s purchase price. For property rehabilitation to modernize it, lenders may cover up to 100% of the costs. However, if no renovation is needed, the loan will not include this aspect. Funds for rehabilitation are released incrementally based on the completion of different work stages. Take an example of a $50,000 rehab requirement; after the initial segment of work costing $15,000 is done, the lender reimburses this amount. This process is repeated until completion. The combined amount lent for purchase and rehab is calculated not to surpass 65% of the home’s value after repairs, termed the “ARV”.

Hard money loans, falling under the commercial lending umbrella, are exclusively for business entities like LLCs, not individuals. However, forming an LLC is straightforward and allows for single-member ownership, enabling you to qualify for the loan.

In assessing loan viability, hard money lenders examine the property’s buying price and predict its value post-renovation, known as ARV. A property’s attractiveness for a loan increases when priced at or below market value. Should the loan also cover rehabilitation efforts, lenders rigorously ensure the renovations stay on track. A prerequisite for loan disbursement is a property that has a clear title, free of any legal complications.

Lenders have a vested interest in their clients’ profitable deals, confirming that the ARV provides ample coverage for acquisition, rehabbing, and additional costs, while still offering a substantial return on investment.

Common scenarios where a hard money loan is employed include:

• Employ hard money loans for effective fix and flip operations, focusing on properties that are unattractive to banks.
• Strategize the refurbishment and rental of bank-rejected properties using hard money loans, proceeding with bank refinancing upon stabilization.
• Engage hard money lending for prompt and efficient closings in time-sensitive property acquisitions like foreclosure auctions.
• Experience the agility of hard money lenders who can finance deals within a week, as opposed to the lengthy processing of banks.
• Leverage your property swiftly for cash-out refinancing with the strategic use of hard money loans.
• Refinance existing mortgages effectively before their due dates by tapping into the expediencies of hard money loans.
• Navigate the purchase of LLC-held properties with the financial flexibility of hard money loans, sidestepping traditional bank restrictions.