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Hard Money 101: Everything You Need to Know About Getting Started With Hard Money Loans

FL Commercial Private Money Loans | Florida Mortgage Loan

If you are reluctant to obtain a hard money loan because of legendary stories about predatory practices, rest assured that those days are long gone. Hard money lending by private investors is well recognized as a legitimate way for owners to get cash for growing their business. If you aren’t familiar with hard money lending, let’s review some of the basics.

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What is a hard money loan?

A hard money loan also referred to as a bridge loan or private loan, is a transaction secured by real estate equity. The loans are typically for terms of one to five years. Loans are structured in different ways, but often include only interest payments with a balloon payment at the end of the loan. Hard money investors are more interested in the equity of the property than the credit rating of the owner, although credit rating and regular income to pay the loan are considerations.

What types of properties are considered by hard money investing?

Hard money investors will provide loans for almost any type of commercial property, from single-family homes to warehouses and everything in between. Very few will invest in properties occupied by the owner due to the more complex paperwork involved.

What types of transactions are good candidates for hard money?

Hard money loans are best suited to owners who need money more rapidly than will occur with conventional banks, are interested in shorter terms than conventional banks want to cover, or have less than ideal credit ratings. A property flip, construction loan, or a fast loan for a property investor are all good candidates for hard money financing.

Interest rates and points

Since hard money investors are accepting a higher risk than a conventional bank, the interest rates and points for a hard money loan will be higher than a conventional loan or mortgage. Like any loan, borrowers should shop around to find investors who handle the types of properties owned by the borrower and to determine their current rates.

Loan to value ratios and how they affect loans

Hard money investors can accept loans with a higher ratio of the loan to the value of the property based on the embedded equity available to secure the loan. In some cases, borrowers can obtain hard money loans on properties that are turned down by conventional banks. Keep in mind that the higher the LTV ratio, the higher will be the interest rate as well due to the increased risk to the investor.

If you have a commercial property and can’t get conventional financing to improve the property or grow your business, contact Shop Commercial Mortgage today. We have investors ready and willing to offer you the money you need for short-term bridge financing. We are Florida’s commercial hard money lender with good LTVs and no upfront fees.

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