What are Hard Lenders looking for?

7 Replies

I'm just debating a few alternatives as hubby& I look to purchase our first investment property. Can anyone share their experience in obtaining loans from Hard Lenders? Do they have general requirements such as Investment experience , assets, etc?  We would love to avoid the banks with all the hoops they make you jump through!

@Ginny Denson

Hard money lenders are going to look at everything you mentioned but each lender will weight that information differently.  For many lenders the most important factors are the asset itself and your ability to pay back the debt (credit).  

Now when you say you are looking to purchase your first investment property do you mean to flip?  Hard money is a short term vehicle and not something you would want to use to acquire a rental property for example.  It will be hard to avoid banks for any long term investments unless you can set up owner finance deals.  

Hard money is certainly the easiest/ fastest way to get money just make sure you have a proper exit strategy in place.  You do not want to get caught in a hard money loan with no outs.  

@Andrew Michael

Actually, there are hard money lenders that offer permanent financing.  Rates are going to be in the 5-8%.  Definitely more expensive than banks, but a lot of people don't qualify for bank financing, so this would be a good route for them.

@Ginny Denson

Andrew's right though; we can't provide any advice unless you let us know what you're trying to do.  You can get a hard money loan without having any experience; they care more about the deal itself than your personal credentials.  Although your experience, liquidity, credit, and net worth can get you better rates.

If you're looking to fix something up and then hold it, plan for this carefully.  Look for the back-end financing first (the lender that will refinance you out of the initial hard money loan) and see what their requirements are.  Especially in regards to seasoning and whether they want you to put it in your own personal name (for conventional loans) or in an entity (for commercial loans).

@Nghi Le  

You are correct there are some hard money long term products out there but I'd still rather see people use these as "short term" vehicles and refi out once the property is seasoned, their credit is repaired, etc. Especially if being utilized simply due to convenience.  

There are a number of longer term, "hard money" loan products out there right now focusing on "buy and hold"

If a borrower needs rehab funds, they begin with a fix and flip loan, and then they pay off using the next loan product.  It's no different than going conventional to pay off the loan, but if you can't get it, lenders are offering longer term products. 

As  mentioned, rates are between 5-9%  I'm seeing more 7-9%, with 6 mos minimums out to 3,5,7 years, interest only.  

Hard money is for a flip, not a rental property. Undecided as whether to buy a flip or a multi family as our first!

BTw, when I said it's "no different", I mean in structure.  It's certainly different in terms of rates.

@Andrew Michael

I'm seeing 30-yr fixed long-term hard money products as well.  But in the end, I guess it's just based on how you define "hard money".  Maybe these are better classified as commercial lenders (even though they lend on flips too)?

Some people just don't like to deal with the hassle of banks.  They might have weird guidelines that can disqualify a property.  They're also not asset-based lenders, which means they don't like dealing with people who don't have a W2.  And conventional loans have that 10-property limit.

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