Hard Money Lenders & Loans in Oregon

What Is A Hard Money Lender?

A hard money lender is a private individual or company that offers short-term, asset-based loans at high interest rates, primarily for real estate investments or projects. These lenders prioritize the collateral value of the property over the borrower's creditworthiness, resulting in faster approvals and funding compared to traditional banks.

Unlike traditional loans, which rely heavily on credit history and income, hard money loans focus primarily on the collateral value for approval. Conventional lenders seek borrowers with a solid repayment history, as it indicates their ability to meet loan obligations.

Although a borrower may have an excellent credit score and considerable income, traditional loan approvals are not guaranteed and can be a lengthy process. In contrast, hard money lenders emphasize collateral, giving less weight to credit history. While not suitable for everyone, hard money loans can be advantageous in specific situations that require a swift, collateral-based financing solution.

Strategies Using Hard Money

There are different instances when a real estate investor will be more likely to use a hard money loan versus a traditional loan. Real estate investors might find themselves using a hard money loan in the following instances.

Fix & Flip

One of the most important things to understand when considering hard money is that each lender considers things differently than the next lender. Each lender is going to have his/her own criteria but most of them will base their loan off of a percentage of the after repair value or AVR. The following could also be considered when looking at a hard money loan:

Independent appraisers AVR
In-house AVR
Percentage of total costs
Percentage of the purchase price of the property

All lenders are different so be prepared for the hard money lender to consider any combination of the above before settling on the loan.

BRRRR

If you are a real estate investor looking to execute the BRRRR strategy then the first thing you are going to want to do is secure a lender. One of the biggest mistakes that real estate investors make in the BRRRR strategy is only looking for a lender right when they need one. The best thing that you can do for yourself is to begin searching for, vetting and building a relationship with a lender as early in the process as possible. Meeting with lenders earlier will highlight any issues you might have with credit or income that you might need to get fixed before you really need the money for repairs. Getting this handled early will save you a big headache in the future.

Short Term Financing

A short term loan is the traditional loan when a real estate investor is fix and flipping a property. With this type of loan you will typically only have 2-3 months to rehab and then resell your property for a profit. Short term financing is a good idea for properties that have a lower volume of fixes and repairs before putting the property back up for sale. Due to the short time period before the loan expires, you don’t want to get caught up with too many long term projects and have time run out. This would be homes that only need cosmetic repairs, upgraded appliances or minor repair work.

Questions To Ask A Hard Money Lender

Based on the best practice of reaching out to multiple lenders, you will want to make sure you have a proper list of questions available to you to vet out which lender is best for you. Here are some questions that you should ask a potential lender:

Are you the actual lender or just a broker?
Do you check personal credit? What score are you looking for?
What project details and documents do you need to make a quote?
How long will it take to get a quote?
Where does your money come from? Is this money in your control or do you receive it from a third party?
What happens if my loan needs to be extended?
How do you handle interest? Is it upfront, monthly or at the end?