Commercial hard money loans: Benefits and Pitfalls

2page_img3Commercial hard money loans have easier qualifications and a faster approval process when compared to traditional bank loans.

Hard money loans differ from traditional loans in a number way and these differences make this type of lending ideal for seasoned real estate investors who need take advantage of an immediate opportunity.

Hard money loans are essentially short term bridge loans used to take advantage of immediate investment opportunities that can translate into a quick profit. Hard money loans can be quickly approved often within a matter of days. These loans are given by private groups or individuals, each with its own criteria about who can qualify. Typically though hard money lenders are concerned with the value of the property that is being financed rather than a borrowers credit score. This makes hard money loans somewhat easier to qualify for than traditional loans. These lenders look at the fundamentals of the property being borrowed against, the amount of cash a borrower has on hand for a downpayment and sometimes the borrowers real-estate investment experience. This is in stark contrast to traditional banks that will reject borrowers out of hand simply because of a poor credit score. Hard money lenders also offer short term loans that a traditional bank would never consider. This makes this type of lending ideal for investors who need to finance a short-term project with a quick turn around. Because these lenders are private groups and individuals there is also more room to negotiate the terms of the loan. Borrowers could potentially tailor the repayment terms, negotiate the interest rate or have specific fees eliminated depending on their situation.

But Hard money loans can be pricey costing borrowers ten percent more than a conventional loan. Hard money lenders assume greater risk, because usually they forgo credit checks on borrowers and therefore have to charge a higher interest rate. Typical rates on hard money loans range from 9 to 14 percent. This is in addition to loan origination fees, a percentage of the total loan amount, which can be up to 4 percent. Hard money lenders also expect a steep down payment, often of 25 to 30 percent.

Commercial hard money loans are best used as short term financing.

The life span of a hard money loan typically ranges from 2 to 4 years. This short term, protects the hard money lender from the risk that a borrower could refinance at a lower interest rate before the loan comes due. This short repayment period means hard money loans are best used for projects can turn a quick profit.

Commercial hard money loans may be a good option for experienced real-estate investors who need to take advantage of an immediate opportunity which can quickly translate into a profit.

It may best to be to have considerable real-estate investment experience before pursuing a hard money loan. These loans are short term and borrowers need to know that their project can quickly achieve a profit within a limited time frame. It is important for borrowers to fully comprehend the terms of any hard money loan and understand the repayment schedule. Still hard money loans are faster and easier to qualify for when compared to traditional bank financing and are a safe bet for seasoned real-estate investors who need to take advantage of an immediate opportunity.


Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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