hard money loans

AZ Hard Money Lenders

By on October 24, 2022   /   hard money loans  

what is the difference between hard and soft money

If you’re searching for hard money lenders to get involved with real estate investments in Arizona, Brad Loans can help!  When it comes to creating wealth, real estate investments are a good option for many investors, as well as being effective for adding diversity to your portfolio. While real estate crowdfunding or REITs (real estate investment trusts) let you to invest more passively, there are a lot of investors that prefer to own the property directly. If parting with a large sum of money upfront makes you uncomfortable, then a hard money loan may be the way to go. Although these types of loans give you advantages over regular financing, there are some potential drawbacks that you should be aware of.

Hard money lenders work primarily with real estate investors and provide capital for renovating and purchasing properties. They have a well-rounded understanding of the unique needs of the investor and because of this, they work much differently than the typical mortgage lender.

How Does A Hard Money Loan Work?

A bridge loan or hard money loan is a tool for short term lending which is used by real estate investors for financing investment projects. It is quite common for bridge loans to be used by real estate developers or house flippers that have a goal of developing or renovating properties than selling them for profit. Private lenders will issue hard money loans, instead of financial institutions like banks or credit unions.

Traditional bank loans tend to focus on the creditworthiness of the borrow, while hard money loans aren’t based on solely on your credit. It is based on your ability to pay back the loan along with the merit of the real estate investment opportunity and property value to approve the loan. The lender will pay close attention to the after repair value or ARV, which is an estimate of the property value after the renovation or development has been completed.  Lenders will also take into account your plan for what needs to be done to a property, who will do it, and how it will be paid for.  The overall business plan is a larger factor in these lending situations than the credit history of the borrower.

Why Use Hard Money For Real Estate Investing?

Hard money lenders are in the business of funding real estate property investments – not the standard dream house of the homeowner. Usually, investment properties need work so they can be sold at their full value. Either through resale (the classic “Fix & Flip”) or for renovating and buying a property for rental.

If a real estate investor does not have deep pockets, a hard money loan is a viable option so they do not have to pay cash for every property they buy. Although having shorter terms and higher rates, hard money borrowing is simply a game of numbers. When everything you are investing comes together for profit, a  hard money loan can be a good choice.

If you are unsure of the higher rates and lack another source of funding you may have to walk away from a great deal, so it may well be the case a hard money loan is a good choice after all.

The Top Three Reasons To Borrow Hard Money For Investment Properties

  • Timing: Investment real estate is understood very well by hard money lenders. They move rapidly to get applications approved and fund the renovation and property project.
  • Approval Criteria: When other people will not finance certain properties, hard money lenders will.
  • Flexibility: If something goes wrong accidentally, hard money lenders are there to help and are considerably more nimble and agile than a big institution.

What Hard Money Lenders Consider When Funding A Property

Lenders will often use a decision matrix known as “The Six C’s” when they consider their options to fund a property. The goal is to minimize risk while still making money.

Lenders are looking for more than higher yields. They eat secure, safe investments that make a return on their capital and a return on investment that is solid. They need to know when they will be paid back and how. Relationship building is important to hard money lenders as they like to build repeat business with investors.

The Six C’s Of Hard Money Lending

  • Collateral: As lenders are in the money business as opposed to the real estate business – they carefully consider the marketability, physical condition, and potential profit among others all to determine the form of equity cushion offered by the property in its loan-to-value (LTV.) They ask “What are we left with?” should the property have to be foreclosed on.
  • Conditions: In order to minimize risk, lenders look carefully into the conditions surrounding the area, what is the investment target area and the availability of resources, demands for the property, other property inventory and is the property for rental or resale?
  • Capacity: lenders need to know the borrower has the capacity and the means to carry out the terms of the loan and the proposed renovations. They will look at partnerships, experience, outcomes, existing obligations and resources of the borrower.
  • Capital: “No Money Down. is a misleading notion in the world of real estate investing. Lenders want you to have some skin in the game at the closing table.
  • Character: lenders may also look at the character of the political borrower. They look for judgments, liens, and background checks as well as derogatory public records and their criminal background.
  • Credit: Credit is not the most important thing when it comes to asset-based, hard money lending. Good credit can be a deciding factor though but it is combined with how good the other five

How To Get A Hard Money Loan

How To Get A Hard Money Loan With Bad Credit

Conventional loans are virtually impossible to get with bad credit, or no credit.  Hard money lenders look more at your ability to pay back the loan and the overall merit of the real estate purchase.  With the right down payment or collateral property people will bad credit are able to purchase the properties they want to live in, or they would like to invest in.  A major advantage of hard money lending is that homebuyers or real estate investors can get funding despite credit challenges.

It’s easy to get a hard money loan and you start by simply filling out a hard money loan application.  Less financial documentation and time is needed to find out if you quality for the loan you need.

Hard Money Loan Benefits

Clearly there are limitations to convention loans offered by banks, especially for fix and flip opportunities.  They take longer and are limited by bank conducted property appraisals. Hard money loans offer huge advantages for investors and home buyers.

Much Faster Application Process: The application process requires less documentation and is conducted much more quickly.  The borrower’s financial history will be looked at but more importantly if the borrower is able to produce a down payment and the project’s merits.  Many loan applications can be approved and funded in as little as 7-10 days!  Compared to the month or more that conventional loans you will have a much greater chance of getting the property secured for your real estate investment project, or the home of your dreams.

Greater Fix & Flip Flexibility: Hard money lenders evaluate the feasibility of project to turn a profit based on what it will generate during the renovations or upon completion of the project when it is sold.  The condition of the property is taken into consideration but hard money lenders are not as concerned with the present value of the property as they understand that an integral element of the process is to improvement of the property.   A factor that hard money lenders value is, how quickly a real estate investment will make them back their investment, plus the interest on the loan.  Read more about: Fix And Flip Loans

Funding For Bad Credit: Whether you’ve just started out and don’t have any established credit history or if you have had problems with your credit, hard money lenders have much more flexibility to who they make loans to.  This is a major advantage for a lot of consumers that have unavoidable credit challenges but still want to purchase a home, or want to get involved with real estate investing.

Hard Money Lenders In Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender! We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

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Hard Money Loan Requirements

By on September 29, 2022   /   hard money loans  

Hard Money Loan Requirements

Hard money loans are great financing options for real estate investors wishing to fix and flip a property. There are 7 requirements to secure a hard money loan.

What Is A Hard Money Loan?

The definition of hard money loan is: A last resort loan or short-term loan to close a bridge or gap in your finances. A hard money loan is not based on credit but it is backed by the overall value of the property.

Due to the property being used as the protection against default from the borrower, these type of loans usually have a low loan-to-value ratio also known as (LTV) typically lower than other traditional loans.

  • Hard money loans are mainly used for real estate transactions and are money from a company or an individual and not a financial institute.
  • A hard money loan, typically taken out for a brief period of time, is a way to raise money fast, but at higher costs and a lower loan to value (LTV) ratio.
  • Since hard money loans aren’t commonly executed, the funding deadline is extremely reduced.
  • The conditions of hard money loans may frequently be negotiated between the lender and the borrower. These types of loans usually use property as the collateral.
  • Repayment could lead to default but nevertheless end up in a profitable business deal for the lender.

Step 1. Save Up A Down Payment

A down payment on a hard money loan is oftentimes larger than a down payment made on a traditional mortgage. This is simply because the loan is only backed by the property in question. The down payment on this loan is the difference between the purchase price plus the budget, and 70% of the ARV.

For instance, let’s assume an investor is purchasing a property for $200,000, with a $50,000 budget. The down payment would then by 70% ARV – purchase – budget. So, $300,000 x 70% – $210,000 – $50,000 equates to a $40,000 down payment. Bear in mind you also must cover the property insurance, fees, closing costs and other underwriting expenses.

Step 2. Set Up LLC.

Few of these projects in real estate go exactly as planned. Setting up an LLC for your investment(s) is the best way to protect your personal assets, while limiting your risks at the same time.

Most hard money lenders tend to only lend to corporations and LLCs. Hard money lenders will not issue consumer loans, so working with an LLC ensures the loan is strictly a business transaction.

Step 3. Find A Reputable Hard Money Lender

Not all hard money lenders are the same. These are privately-owned businesses and individuals, so it’s crucial to weigh these factors when searching for a lender:

  • Reputation: Does the lender have a good reputation among local builders and home flippers?
  • Speed: How fast can the lender get you the funds you need for the project?
  • Affordability: Shop around for competitive rates since hard money lenders have higher interest rates than traditional loans.
  • Location: Make sure you always work with a local lender.

Step 4. Prepare Your Proof Of Income

Getting approved for hard money loans will require much less paperwork than applying for a traditional loan. One of the few requirements is providing proof of income. Your lender needs to know that you can make the required monthly payments prior to giving you said loan.

Step 5. Set Up A Payment Strategy

These are short-term investments, with usual terms of 12-24 months. This means you will need an exit strategy from the start.

The most common strategy is selling the property within the loan period. Most hard money loans are passed out for flips or construction projects. Investors typically sell the property at a profit once the work is completed.

Step 6. Apply For The Loan

Applying for these loans is surprisingly simple. There are very few requirements, as mentioned above, and hard money lenders usually have applications available online.

Step 7. Review Paperwork With An Attorney

The last suggested step to take is reviewing the paperwork with an attorney. An attorney will check the following items:

  • Are all the fees disclosed?
  • Is the payment schedule included and clear?
  • Does the agreement clarify how much of the payment is applied to interest?

Hard Money Lenders in Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender! We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

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What Is A Hard Money Loan?

By on April 3, 2020   /   Blog, hard money loans  

What is a Hard Money Loan?

The definition of hard money loan is: A last resort loan or short-term loan to close a bridge or gap in your finances. A hard money loan is not based on credit but it backed by the overall value of the property.  Due to the property being used as the protection against default from the borrower, these type of loans usually have a low loan-to-value ratio also known as (LTV) typically lower than other traditional loans.

According to Investopedia, “A hard money loan is a type of loan that is secured by real property. Hard money loans are considered loans of “last resort” or short-term bridge loans. These loans are primarily used in real estate transactions, with the lender generally being individuals or companies and not banks.”

  • Hard money loans are mainly used for real estate transactions and are money from a company or an individual and not a financial institute.
  • A hard money loan, typically taken out for a brief period of time, is a way to raise money fast, but at higher costs and a lower loan to value (LTV) ratio.
  • Since hard money loans aren’t commonly executed, the funding deadline is extremely reduced.
  • The conditions of hard money loans may frequently be negotiated between the lender and the borrower. These types of loans usually use property as the collateral.
  • Repayment could lead to default but nevertheless end up in a profitable business deal for the lender.

Brad Loans Explains “Hard Money Loans”

A hard money loan will usually carry higher interest rates than subprime loans or traditional loans. Traditional lenders don’t usually make hard money loans, hard money lenders are usually private investors that see potential in this risky market. Hard Money loans are commonly used in quick flip, short term financial needs or by loan borrowers with bad credit but have equity in the property they own and wish to avoid foreclosure.

How Does a Hard Money Loan Work?

Hard money loans have conditions that are mainly based on the value of the property that is used as collateral, and not on the credit worthiness of the borrower. Because traditional lenders, like banks, don’t execute hard money loans; hard money lenders are usually private individuals or companies that see worth in these types of possibly risky endeavor.

Hard money loans might be wanted by property flippers that plan to renovate and then resell the property that’s used as collateral for the financing—usually within a year, if not sooner. The higher costs of hard money loans are offset by the fact that the borrower plans to pay the loan off somewhat fast—some hard money loans are for 1 to 3 years—and by many of the other benefits, they provide.

Hard money lending may be considered as an investment. There are a lot of individuals who’ve used this as a business format and proactively practice it.

Unique Considerations for Hard Money Loans

The costs of a hard money loans to the borrower is usually higher in comparison to the financing available using government lending programs or banks, considering the higher risk that the lender is undertaking by offering the financing. Nevertheless, the increased expense is a tradeoff for faster access to funding, a less strict approval process, and possibly flexible in the repayment schedule.

Hard money loans can be used in short term financing, in turnaround circumstances and by borrowers that have bad credit but considerable equity in their property. Because they can be issued fast, hard money loans may be used to avoid foreclosure.

The Pros and Cons of Hard Money Loans

Hard money loans have their pros and cons. Keep reading to learn more about the pros and cons of hard money loans.

Pros of Hard Money Loans

One advantage is that the approval process for a hard money loan is usually much faster than applying for a mortgage or other conventional loans using a bank. The private investors that back hard money loans can make decisions faster since they usually do not do credit checks or review a borrower’s credit history—the steps lenders typically take to investigate a potential applicant’s capability to make their loan payments.

These investors are not as concerned about getting repayment because there might be an even greater worth and the possibility for them to resell the property themselves, should the borrower default.

An additional advantage is that because hard money lenders don’t use a conventional, customary, underwriting method, but assess each loan on a case by case basis, applicants can usually negotiate modifications regarding the repayment schedule for the loan. Borrowers may aim for more chances to pay back the loan during the timeframe available to them.

Cons of Hard Money Loans

Because the property on it own is used as the only safeguard against default, hard money loans typically have lower loan to value (LTV) ratios than conventional loans do: around 50 percent to 70 percent vs. 80 percent for standard mortgages (though it may increase if the borrower is a seasoned flipper).

Additionally, their interest rates are prone to be higher. For hard money loans, the rates may be even higher than those of high-risk loans. As of 2019, the rates of hard money loans were ranging from 7.5 percent to 15 percent, subject to the duration of the loan. Comparatively, the prime interest rate was 5.25 percent.

One other disadvantage is that hard money loan lenders may choose to not offer financing for an owner occupied residence considering regulatory monitoring and compliance by laws.

Hard Money Lenders in Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender!  We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

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