Considering a hard money loan? Hard money loans, or private loans, get a bad wrap. But there are genuinely appropriate lending scenarios when a hard money loan is the best option. Take a look at the following hard-money lending situations and borrower profiles. These are just some of the critical times when a hard money loan can save the day and the deal:
A short-term hard money bridge loan for business purposes may be the right choice for:
1. The real estate developer or investor whose subject property is denied a conventional loan due to “poor condition.”
A hard-money, short-term bridge loan can save the deal and allow the investor or developer the time needed to fix up the property, improve their investment, and qualify for a conventional loan.
2. The commercial building, multi-family, or mixed-use property owner who needs to make improvements to attract tenants.
Sometimes there are legitimate business reasons why a commercial or multi-unit property owner may need to avoid the lengthy application and documentation processes that banks require for commercial real estate financing. Market pressures, new government laws, and regulations, may make it necessary for improvements to be made right away. A hard-money commercial loan can help expedite access to funding and keep a commercial or multi-unit property competitive and in compliance.
3. The seasoned real estate investor facing a 1031 exchange deadline.
A hard money bridge loan may be particularly helpful when a deadline is looming and quick financing is needed to meet the short timeline of a 1031 exchange.
4. The new or existing business owner who needs an infusion of cash.
A hard money bridge loan may be helpful to the entrepreneur starting a new business where they may not have the P&L and other documentation required to meet conventional criteria for approval of a business loan.
Short-term hard money bridge loans for residential real estate transactions may help:
5. The heirs to an estate who need to pay back-owed property tax or tackle deferred maintenance in preparation to sell the inherited property.
Sometimes the lengthy application process that banks require can work against the timing of probate, market-pressures, or situational need. It’s in these instances that a hard-money loan can bridge that timing gap. This can help a borrower to complete needed improvements or settle debts before renovating and preparing a property for sale.
6. The successor trustee who needs to buy out other heirs to the subject property.
Typically, banks and other traditional lending institutions will not lend money to a successor trustee representing a trust as they are not considered and individual. A short-term, hard money bridge loan can enable a successor trustee to buy-out the other heirs to a property that belongs to the trust. Then once the title is transferred and loans are in good standing, the borrower can then refinance to a conventional loan.
7. The owner or new buyer of a vacant lot, tear-down, undeveloped acreage, or ranch land.
Typically, banks and other traditional lending institutions require a loan-to-value that is difficult to meet for owners who are looking to improve or build on their land. This is also difficult for buyers who wish to purchase an undeveloped property. A hard money loan can come in handy and allow the borrower to secure the funding they need.
If you think you need a hard money loan, reach out for help.
These are just seven of the most common lending scenarios when a hard money loan is the best option. But whatever your unique borrower situation, Excel Trust Deed Investments can help. ExcelTDI can point you in the right direction and determine if a hard money loan is right for you. We’ve been helping buyers, business owners, real estate developers, and investors with hard-money loans since 1986. Submit your preliminary loan request here or contact us today at (408) 564 7690.
Founder, VP Investment Lending
Excel Trust Deed Investments
Sheldon founded Excel Trust Deed Investments (formerly Excel Financial) in 1986. Specializing in expedited and efficient loan closings, he applies creative problem-solving skills to every facet of the private lending process for his clients.