You’ve spent weeks researching the commercial real estate in your region, finally narrowing your investment prospects down to a few distressed properties. Each location has its own unique benefits and drawbacks, and you’re only a loan approval away from making your decision and acquiring the property. However, every bank you contact about funding your acquisition says that your situation doesn’t meet their “strict lending criteria”.
Well, does that situation pretty much sum it up?
If so, don’t be discouraged, as this is a common tale for real estate speculators today. Fortunately, hard money brokers have helped to fill the lending void, offering up fast, secured loans for those looking to take advantage of the incredible number of distressed properties currently on the market. In fact, many of these properties have already been foreclosed on, and the banks are simply trying to unload them to get the initial capital back – this is an enticing opportunity that is only damped by the irony of a lack of large financial institutional lending!
Using Commercial Hard Money Loans
Creating a plan that outlines the best use of these secured commercial loans requires a bit of planning on the buyer’s part. For example, because only 70% of the property’s value will be available for the loan, how will the rest be funded? And, after covering the remaining 30%, is there enough capital remaining to make any necessary improvements to the property? Once these questions are answered, one can contact a lender and move on to the property’s appraisal.
The buyer isn’t in this situation alone, however. Because the lender doesn’t want to put their investors in a position in which the property is taken as collateral against a defaulted loan, the appraisal and briefing process usually involves the lender taking the time to outline all of these elements with the borrower. It truly is a great example of how the real estate marketplace has evolved in recent years.
Identifying Distressed Opportunities
Because distressed properties can often be had at a fraction of their true value, the opportunities posed by the current lien holder are too great to pass up. But, buyers are advised to remember that they aren’t the only potential buyer seeking to take advantage of the large real estate holdings many banks currently possess. Quickly securing capital is paramount when shopping for distressed properties, leading more real estate speculators to rely on hard money alternatives.
Commercial hard money loans are an important part of today’s real estate marketplace. While they only provide 70% of the property’s purchase capital, they match the fast-paced environment surrounding the recent property boom. Those who fully understand how hard money brokers benefit buyers can take advantage of their expertise, quick approval process, and of course, their ability to help the buyer identify a good purchase from a poor one. All of these elements have helped to push hard money to the forefront of industry conversations, as they continue to pick up where large lending institutions have fallen short.