Miami Beach has hundreds of hard money lenders. This is excellent for you in that it helps you shop around for the cheapest price, fastest turnover, and the most reliable match. You are also more likely to find someone in your district who can help you. On the other hand, this abundance also complicates issues, because it makes it harder to know what to look for and who to choose.
Ever since the condo market in Miami Beach collapsed in 2006, developers have become more wary. The condo market was always volatile – right now it is big – but developers never know when the next downfall will occur. For that reason, developers are always looking for formulas to save themselves from harm. For the same reason, banks want buyers who have more skin in the game.
Carlos Russo, president of the Related Group’s condo division in Miami Beach, puts it this way: banks do not know how to measure the demand of the market. They look for possible borrowers who can assure them of big money. If borrowers cannot assure them of that, borrowers are either shunned – or have to turn elsewhere for their loans. And that’s when investors solicit private money lenders.
For your information, hard money lending, also called bridge or private money loans, has become trendy in Miami Beach with more and more people finding them to be superb alternatives to the usually disappointing game of trying to win a loan from the bank. Hard money lenders are more apt to give you that loan: They focus on assets rather than credit; although some do take your credit history into account to palliate the risk.
Private money lending companies are also faster than banks – the processing can be done in as short a time as 1-2 days. This is a huge difference compared to the 30+ days of a bank or credit union! They give you far less hassles: minimal underwriting, no lengthy board meetings, and no returning again and again to answer questions.
Here are four factors that will help you find a reputable and dependable hard money-lender in Miami Beach.
1. Adequate capital – Hard money loans are best for you if you are unable to land the standard mortgage and need money to flip an attractive property now and in short order. Some borrowers also use hard money loans for business purposes. You will need to give the lender a piece of real estate as collateral which will be held in trust by a third-party trustee until the loan is paid back Your loan may be for a year or less, but you could also land other loans that go up to seven years or longer. (Beware: The longer the loan the more horrific the cumulative interest. Generally, you will have to pay double as much as the standard mortgage interest rate).
Choose a company that indicates it has more than enough capital. Private money lenders will not only be lending to others but also may be running long-term loans for you – as many as seven years or more. You’ll need a company that can cover these loans. Ask around until you get one that you trust.
2. Rich Investor profile – When you choose private money lending company, review its portfolio of investors. The more investors it has the better. This is because most private money lending companies bring in investors or investment companies who act as private lenders to specific parties. These investors not only give you more options for loan-structuring. They also show that the lender has enough capital to back multiple short and medium term loans simultaneously.
3. Rapid processing – Most companies offer 1-2 days processing. Some do it in as short as a day. The rapid loans are one major reason why some choose hard money lenders over banks. Banks take as long as 30+ days and, in that time, you may have lost the opportunity or the deal may be gone. Short-term loans are also tremendously propitious for borrowers who want to stand out in a cluttered market environment where a fast offer (or money-in-hand) can grip the seller’s attention.
For this reason, savvy investors typically turn to hard money offers because they need ready access to funds and they need these funds quickly. Potential clients include the developer who needs a few months’ loan to cover completing the construction and needs it fast so that no construction time is wasted. Then, there is the real estate investor who wants to snatch that piece of ‘hot’ property before anyone gobbles it. These people need funds in a hurry. If you’re looking for a reputable lender, make sure that he also works rapidly and efficiently. You’ll want to land that deal!
4. Experience matters – You’ll want a veteran company that has a reputation for integrity and reasonableness. This means a company that is experienced. Experience in this field is particularly important since private money loans are risky as well as difficult and complex to structure and acquire. (This is incidentally why you’ll find its interest to be so much higher than that of standard loans). You don’t want to waste your money or time. Therefore you’ll feel far more comfortable working with companies that have racked a record of longevity, reliability, integrity, and speed.
How do you know who to choose?
Finding a trusted lender is not always easy particularly given Miami Beach’s cluttered market.
There are various ways that you can ferret out a money-lender that you trust. You can hire a broker – many prefer to tread that route. The broker knows the market and can use his connections. You can also Google [your area] + “hard money lenders”. Alternately, you can attend a real estate investor’s club meeting where you’re likely to bang into one or more hard money lenders looking for potential borrowers such asyou. You can also leverage your network for recommendations. Other reliable options include talking to a mortgage company, a title company, or a real estate agency and asking for references.
Today’s real estate market of Miami Beach is moving fast, and hard money or private money loans are more sought than ever. We hope you find a great private money-lender who can help you with each of your needs.
Has this article helped you make that decision?