Looking to build up your commercial real estate portfolio this year?
Did you know private lending is reshaping the mortgage market?
If you or your investing team don’t qualify for certain types of financing, an asset-based hard money loan may be the way to go.
Sound enticing? Read on to learn the 5 reasons why hard money is the best option for commercial real estate loans!
1. Fast Commercial Real Estate Loans
The application and approval process for a standard bank loan or mortgage doesn’t come easy.
It involves multi-page forms and supporting documents. It can take weeks for a lender to respond or approve them, and the property you want might be off the market by then.
On the other hand, applying for hard money commercial real estate loans takes much less time than dealing with your typical commercial lender.
The underwriting process for a commercial lender can take weeks of back and forth on gathering the documentation they need. And that doesn’t even include the time it takes for an appraisal.
With hard money commercial loans, pre-approval can occur within minutes of speaking to a lender, and you can get funded within a fraction of the time it can take a bank.
2. Stronger Offer
If a property is in high demand, the investor with a hard money loan has the most to offer. With a faster process and less red tape, there are less opportunities to fail with hard money.
And if a lender turns the buyer down for a loan, it essentially kills the deal. Hard money lenders, however, can provide a quick financing when a bank pulls out of a deal, saving it so that you can still buy the property.
3. Help With Navigating Credit
When you want a loan from a bank or mortgage lender, your credit scores and income history play the biggest role in the approval process.
With a hard money loan, lenders focus more on the value of the property, rather than credit and income. The property becomes collateral for the loan, in case you default. This allows you to get a loan even if you don’t have the strong credit and income that banks require.
4. Lender Flexibility
Conventional mortgage lenders often have strict, arbitrary rules set in place. These regulations can prevent borrowers from getting approved for a loan, wasting time (and money) in the process.
They don’t like unusual properties, credit problems or anything else that doesn’t fit “inside the box”.
A hard money lender has greater flexibility in negotiations. Many will find creative ways to ensure that all parties involved get what they want.
5. Partnership Lending Experts
If you choose to work with a hard money lender, you will partner with someone who wants the investment to work out just as much as you do.
As opposed to conventional banks, many hard money lenders have years of experience in real estate lending.
They will bring that experience and expertise to the table throughout the process, including knowing the best way to structure the loan so that it will get approved and will work for you.
A lender that knows the ins and outs of lending from various viewpoints can provide far more value than a traditional bank or mortgage lender who only does one type of loan (the program that their bank offers).
Now that you have some background on the benefits of hard money in real estate, you’re on your way to getting your next commercial property!
Be patient. Don’t rush the process and avoid the common mistakes with hard money loans.
Not sure where to get started with investor financing? Contact us and we’ll be happy to answer any questions!