There are hundreds of hard money lenders in Miami but how do you find the right hard money lender for you?
First of all hard money loans, sometimes referred to as bridge loans, are short-term lending instruments that real estate investors can use to finance an investment project. These loans are idea for house-flippers or real estate developers who plan to either renovate homes or develop property then sell it for profit. These loans are issued by a hard money lender instead of traditional lenders such as banks.
Hard money lending is becoming popular in Miami as many borrowers have found the conventional lenders such as banks to be too strict with their rules and regulations. Hard money lenders have less rules and regulations than banks do which makes it easier for borrowers to get the money they need for their investments and projects. In addition to being more lenient, hard money lenders are also much faster and processing can be done in a matter of days.
These are the key aspects to remember when choosing a hard money lender according to Bigger Pockets:
#1. Funds availability of that Lender – you don’t want to be held up by slow funding or even too short a time period allowed by that Lender.
#2. Reasonable Terms and Finance Rates – compare them with other Lenders. Hard Money generally averages 10-12% interest only with no upfront fees.
#3. Good References from Other Clients – testimonials [or lack of] on a website or Yelp or Google+ can really tell you a lot about a particular Lender or company.
#4. Licensed, Bonded and Insured – there are numerous regulations and insurances that a hard money Lender is required to follow, all for your safety.
Here are the pros to finding a hard money lender according to Investopedia:
- Convenience – Applying for a mortgage is time-consuming, particularly thanks to new regulations on mortgage lending implemented as part of the Dodd-Frank Act. It can take months to close on a loan, which puts investors at risk of losing out on a particular investment property. With a hard money loan, it’s possible to get funding in a matter of weeks. That’s important if you’re funding a large-scale development project and can’t afford deviations from the timeline to completion.
- Flexible terms – Because hard money loans are offered by private lenders, it’s possible for investors to have more room for negotiation of the loan terms. You may be able to tailor the repayment schedule to your needs, for example, or get certain fees, such as the origination fee, reduced or eliminated during the underwriting process.
- Collateral – With a hard money loan, the property itself usually serves as collateral for the loan, but again, lenders may allow investors a bit of leeway here. Some lenders, for instance, may allow you to secure the loan using personal assets, such as a retirement account or a residential property you own.
Today’s real estate market of Miami Beach is growing quickly and hard money loans are becoming more and more popular. What you want to look for when choosing a hard money lender is experience, communication, fast processing, adequate capital, and flexibility. Find out more here.