Commercial hard money lenders continue to work their way into the fabric of modern real estate, often times by offering funding where it otherwise cannot be secured. Most interested in acquiring commercial property must leverage the secured loans offered by private investors, as large banks continue to remain frugal after the collapse of the real estate market mere years ago. But, each lending group is different, and determining which hard money commercial loans make sense and which do not can be difficult. To assist in this regard, we have created a brief guide that outlines the best ways to know which lenders deserve your attention, and which you should leave out of your rolodex!
(1) Examining Expertise
Before contacting a hard money firm, a little bit of research is necessary to determine whether or not they are worth your time. Examining the organization’s website is a great place to start. Do they have informative and helpful resources that outline the process? Is the firm’s contact information “front and center”, letting you know that they are easy to contact? A lack of these components may tip you off that the firm being researched doesn’t have the expertise or professionalism to handle your loan!
If you’d like to take things a step further, why not create a list of questions? Contact the lender, asking them about particulars and gauging their responses. If you feel comfortable with the answers, you know that you found someone you can work with.
(2) Outlining the Process
While most hard money commercial lenders use similar processes to quickly fund your real estate endeavors, some may have particular nuances that make them a bit quicker than the others. But, be sure that you aren’t sacrificing accountability in exchange for a speedy approval!
The application process should be expedited, yet thorough. Inquiring about the various steps of the process is another great way to determine whether or not a particular lender is right for you. How quickly can you expect an appraisal? How soon will the funds be available? When you understand the timeline, you’re better prepared to make a smart borrowing decision.
(3) Terms of the Loan
When it comes to secured real estate loans, the terms will not vary greatly. But, this doesn’t mean that you will get the same offers from every lender that takes your application. For most hard money commercial loans, you can expect to receive 70% of the property’s value, as the remaining 30% is what ultimately “secures” the loan for the capital investors. The interest rate will likely be higher than the average lending institution, but this is countered by the ease of acceptance and the speedy process. Review the loan terms and create your property plan before finalizing the loan!
Real estate investors have quickly learned that commercial hard money lenders are the perfect bridge between a distressed property and its new buyer. Understanding which lenders make the most sense for your situation can help you avoid problematic transactions, and help to ensure that your profits remain intact!