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A hand holds a note that reads “Hard Money Loan”. Behind it, there is money on a table.

In the fast-paced world of real estate investing, timing is everything. Securing the right funding at the right time can make or break a deal, especially in a competitive market.

Traditional financing methods often involve lengthy approval processes, which can cause investors to miss out on lucrative opportunities. Enter the hard money lender—a financing option known for speed, flexibility, and simplicity.

For investors and property developers seeking quick capital, hard money lenders in Northern California offer a range of benefits that can streamline projects and boost profitability. Let’s explore the specific advantages of using a hard money lender.

What is A Hard Money Lender?

A hard money lender is a private individual or company that provides short-term, asset-based loans. They focus more on the value of the collateral than the borrower’s creditworthiness and are most often used for real estate bridge loans to get borrowers from Point A to Point B.

These lenders can offer quick and flexible funding solutions for real estate investors, developers, and those seeking unconventional or time-sensitive financing. Hard money loans often come with higher interest rates but are valued for their speed, simplicity, and adaptability.

When to Use a Hard Money Lender

For the projects listed below, a hard money lender may be a better choice for you than more traditional avenues of lending:

Fix-and-Flip Projects

Investors can quickly purchase distressed properties, renovate them, and sell them for a profit.

Bridge Financing

When transitioning from one property to another, a hard money loan can provide temporary financing until long-term funding is secured.

Distressed Property Acquisition

Investors can buy foreclosures or properties in disrepair that traditional lenders may deem too risky.

Land Development

Investors can use hard money to secure raw land or undeveloped properties with high potential.

What Are the Benefits of Hard Money Lending?

Take the following benefits of hard money lending into consideration as you go over your financial options:

Speed and Efficiency

Hard money lenders are known for having a quick approval process. Unlike traditional lenders that require extensive documentation and underwriting that can take weeks or even months, hard money loans can be approved in a matter of days!

This is because hard money lenders primarily focus on the value of the collateral (usually a real estate property) rather than the borrower’s financial history. This quick turnaround is crucial for investors who require more immediate funding to secure a property or complete a time-sensitive project.

Flexibility in Loan Terms

Traditional lenders often have rigid terms and conditions that can be difficult to meet. Hard money lenders can provide more flexibility and are often able to customize loan terms to meet the unique needs of each borrower and project.

Whether it’s adjusting the loan-to-value ratio or extending the repayment schedule, hard money lenders can offer tailored solutions that align with specific goals. This adaptability is particularly valuable for borrowers with unconventional or challenging projects that may not fit the criteria for traditional financing.

Asset-Based Lending

Hard money loans are focused on securing loans by the value of the property rather than the borrower’s credit score or financial background. This makes it possible for borrowers with less-than-perfect credit to access funding.

The asset-based nature of the loan also means that if the property’s value is sufficient, borrowers can secure a loan even if they have previously faced financial setbacks.

Creative Financing Solutions

In some cases, traditional lenders are unwilling to finance properties in disrepair or unconventional developments. Hard money lenders, on the other hand, are often more willing to fund these types of projects due to their specialized knowledge and willingness to assess the property’s potential value after repairs.

This flexibility is particularly useful for investors involved in fix-and-flip projects or those seeking to acquire and rehabilitate distressed properties. With creative financing solutions, hard money lenders can help investors breathe new life into properties that traditional lenders might overlook.

Competitive Edge in Bidding

Real estate investors often find themselves in bidding wars over prime properties, and, as the adage goes, cash is king! With a hard money loan, investors can fund quickly due to the swift funding process.

This competitive advantage can be the difference between winning and losing a deal, as sellers are often more inclined to accept a cash offer.

Short-Term Investment Solution

Hard money loans are generally intended for short-term use, often ranging from six months to a couple of years. This is ideal for fix-and-flip investors or those who need temporary funding while waiting for a longer-term financing solution.

By offering a bridge to more conventional financing or serving as a temporary fix, hard money loans can provide investors with the flexibility they need to complete their projects.

Potential Downsides of Hard Money Loans to Consider

While hard money loans offer numerous benefits, you should also be aware of potential downsides. Despite these drawbacks, savvy investors find that the advantages often outweigh the costs, particularly for time-sensitive or unconventional projects.

Higher Interest Rates

Interest rates are often higher than traditional loans because lenders are taking on a greater risk.

Clear Planning

A shorter loan term means that borrowers must have a clear exit strategy in place to repay the loan, whether through a sale, refinancing, or another means.

Faster Funding for Your Project with Altus Capital Group

Interested in exploring how a hard money loan can boost your real estate investment strategy?

Contact us at Altus Capital Group at (707) 754-9975 today to learn about our tailored lending solutions designed to empower your next project.

a group of men in orange vests and helmets at a construction site

Planning to raise funds for a construction project? Consider a hard money lender. A hard money lender in Northern California offers loans based on the value of collaterals, in addition to borrowers’ creditworthiness. Hard money loans are usually offered by private investors or lenders. Unlike traditional loans from banks or credit unions, hard money loans are secured by the value of the property being purchased or renovated.

Why use a Hard Money Loan to Fund Your Construction Project?

There are several benefits of hard money construction loans. The hard money loan approval process can be less stringent than for traditional loans, with more focus on the collateral than on the borrower’s financial position.

Credit unions and banks have a lengthy, complex and cumbersome approval process and can take several weeks or months to sanction a loan. When it comes to construction projects, time is money. If you opt for a traditional loan, you may end up waiting for months before your bank releases funds. This could mean lost opportunities and costly delays. Because hard money lenders have less stringent requirements, hard money loans are usually approved in a matter of days.

Hard money lenders in Northern California are often more flexible regarding loan terms and requirements. They can customize loan agreements to suit the specific needs of borrowers.  Some hard money loans do not have prepayment penalties, allowing borrowers to pay off their debt early at no extra costs if they choose. Many hard money lenders are willing to offer loans to applicants whose loan applications were rejected by banks or other traditional financial institutions.

Qualifying for a Hard Money Construction Loan

A hard money lender typically stipulates that a borrower must possess a large amount of equity in the property. This requirement is logical as the more equity a borrower has in the property, the less risk there is for the lender if the borrower fails to repay the loan. Hard money lenders typically lend up to 65% of the value of the project budget.

While in most cases, a lower credit score may not make or break your hard money construction loan application, some hard money lenders will consider your credit score. A good credit score usually leads to more favorable loan terms. Some lenders only lend to individuals with prior experience.

When performing a risk assessment, a hard money lender will want to assess the applicant’s financial health which may involve looking at their latest bank statements and tax returns. A financial health assessment is performed to check if the borrower can meet their EMI obligation. Before approving your application, your lender may want to look at complete architectural plans and analyze the scope of work.

Altus Capital Group is a leading hard money lender in Northern California. We provide a diverse array of financial solutions designed to cater to the distinct financing needs for business purpose loans. To learn more, call us today at (707) 754-9975.

Piggy banks in a row

There are numerous funding options available for real estate investing. While banks and credit unions are frequently the first lenders that come to mind, private lending (also called hard money lending) has become a well-liked substitute. We will look at the benefits of private lending in this post and explain why it might be a better choice for real estate investors than conventional lending.

Increased Processing Speed

Private financing has many benefits, one of which is how quickly loans can be handled. Traditional lenders have significantly stricter approval procedures that take much longer and involve a lot more paperwork.

On the other hand, private lenders frequently have a quicker approval process and may usually grant loans in a matter of days or weeks. For real estate investors who have an urgent need to buy or renovate a property, this might be extremely helpful.

Flexibility

The freedom that private lending provides is another benefit. The types of loans and terms that traditional lenders can issue are frequently constrained by stringent laws and restrictions. However, private lenders are freer to design loan packages that specifically address the borrower’s demands. Customized payback terms, adjustable interest rates, and other specialized features that standard lenders are unable to match can be examples of this.

Less Strict Qualifications Criteria

Traditional lenders frequently have stringent qualification standards, which can make it challenging for some consumers to obtain an authorized loan. Debt-to-income ratios, minimum credit score requirements, and other financial standards may be included.

Alternatively, private lenders might be more open to working with borrowers who don’t fit these strict criteria. For real estate investors with less-than-perfect credit or a limited history of income, this can be very advantageous.

Enhanced Personalization

Borrowers can anticipate receiving individualized treatment from private lenders, which is another benefit. It might be challenging for borrowers to engage directly with decision-makers or receive individualized attention because traditional lenders frequently have strict structures and processes in place.

Contrarily, private lenders frequently offer more individualized service and direct access to decision-makers, which makes it simpler for borrowers to acquire the knowledge and assistance they require throughout the loan process.

Private lending is gaining popularity as an alternative to traditional lending options, which have long been the norm in real estate financing. Private lending offers a number of benefits that traditional lenders just cannot match, including quicker processing times, more flexibility, lenient qualification standards, and more individualized service. Private lending can be the best option for real estate investors who are searching for a financing option that fits their unique demands and offers the flexibility and speed necessary to compete in the cutthroat real estate industry.

If you are looking for a quality private money lender in Northern California, give Altus Capital Group a call at (707) 754-9975. We help individuals with their hard money loans to ensure that they have access to the investment capital they need.