Everything You Need To Know About Hard Money Loans in Palm Beach, FL
To make money, you need money. That’s true whether you’re looking to purchase inventory at great prices or planning on selling a luxury condo at a fantastic profit. Palm Beach abounds with great opportunities for making money, but first you need the capital to cover the cost. That’s where hard money loans in Palm Beach, FL can be your ticket to success.
Hard money loans can help you get the capital you need exactly when you need it. That way, you can take advantage of smart real estate opportunities as soon as they appear. Going through traditional lenders is often time-consuming and qualifying can be difficult. A hard money loan from HMLS lets you get around these hassles and reach your goals as quickly as possible. But just what are hard money loans and why should you consider them?
Hard Money Loans: The Basics
In simple terms, a hard money loan is one that uses collateral instead of your credit score as the main factor in backing the loan. Offering loans always carries some risk for banks and other lenders, because the person getting the loan may not pay it back.
That’s why, normally, lenders set high credit score requirements to limit the risk of losing their money. Unfortunately, this eliminates financing options for many business owners in Florida because few companies actually have stellar credit all the time.
Hard money loans bypass this credit requirement by using property as collateral. When a business wants to buy a piece of construction machinery, for example, the equipment itself acts as collateral, or loan security. The same thing happens with hard money loans for real estate. The property acts as collateral for the loan. This type of collateral works for pretty much any type of real estate:
- Office buildings
- Retail stores
- Investment properties
- Medical/dental offices
- Condos
- Outdoor malls
- Restaurants/coffee shops
- Automotive dealerships
These are just a few examples of real estate you can use hard money loans for. The main requirement is that the property is valuable enough to cover the cost of the loan, closing costs and other expenses.
Options for Hard Money Loans in Palm Beach, FL
In Palm Beach, most hard money loans revolve around real estate properties. The housing market is valuable and provides amazing benefits for buyers, sellers, real estate developers and house flippers alike. The way you use the money often depends on if it’s a buyers’ market or a sellers’ market, as well as the connections your business has.
For example, in a sellers’ market, you can get top dollar for investment properties that you’ve been hanging onto. In this type of market, it may be worth performing additional renovations on luxury homes to make them even more attractive to buyers. A few relatively small additions, such as an outdoor kitchen or lanai, can provide major profits. Hard money loans help by giving you an extra push of financing for this type of remodeling projects, which is something that traditional banks wouldn’t even consider.
The same thing goes when you have important friends in the industry. Maybe you’ve heard whispers of a gorgeous home that the owners haven’t put on the market yet. With a hard money loan, you can convince buyers to sell to you because you have the ability to close more quickly than companies using traditional financing.
Ways To Use Hard Money Loans for Real Estate
There are many options for real estate financing. This type of loan is pretty flexible, so it adapts well to the primary focus of your business:
- Commercial Real Estate Properties: Use a hard money loan to purchase commercial real estate, from stores to gyms. You can use this type of loan whether you’re planning on reselling the property right away, renting it out to Palm Beach businesses or waiting for the perfect market.
- Residential Investment Properties: Purchase properties in Palm Beach to sell to interested parties, including families, couples and individuals. You can use a hard money loan for luxury apartments, houses, condos, ultra-luxury homes, waterfront properties, townhouses, duplexes, single-family homes and multifamily properties. In other words, the sky is the limit.
- Fix-and-Flip Projects: A hard money loan can completely cover the needs of fix-and-flip financing. In fact, hard money financing was practically made for house flipping! The two go together perfectly: you get the capital needed to buy and improve properties easily, and you sell the house quickly, paying off the loan without issues.
- Remodeling Costs: If you already own investment real estate or an owner-occupied commercial property, you can use this property to get a hard money loan for remodeling. This is helpful for medical practices to expand their building and equipment. Restaurants, bistros, stores, movie theaters and other businesses can use the funds to give their property modern accents and incredible design flair.
FAQs About Hard Money Loans
It’s normal to want to know exactly what you can expect when you sign up for a hard money loan. The best lenders are happy to answer your questions. There’s nothing “shady” about this type of lending. Choose a hard money lender that tells you upfront about any costs or fees you can expect.
What Credit Score Do You Need for a Hard Money Loan in Palm Beach?
Honestly, your credit score isn’t important for approval. Qualifying depends more on the property than your finances. That said, if you do have good personal or business credit, you can qualify for a lower interest rate.
What Are the Terms of Hard Money Loans?
Generally speaking, you can get terms of between 6 and 12 months. It’s a good idea to choose the terms that fit your project the best. If you know you’re going to sell the property quickly, shorter terms can save you money on interest.
How Much Is the Interest Rate for Hard Money Loans in Florida?
Interest rates are always changing for all types of financing. Hard money loans often carry rates between 8% and 12%, but this can change depending on the US and local market. You can expect a higher interest rate with short-term financing than with long-term financing. In exchange, you get funds more quickly and easily.
What Other Fees Do Hard Money Loans Carry?
Every hard money lender structures fees differently. Some charge origination fees, costs for property appraisal and paperwork processing. You will probably have to pay for insurance as well. Never hesitate to ask pointed questions about fees and costs, including how interest is calculated and when payments are due.
This also applies to penalties. Ask what penalties exist if you miss a payment. Find out whether prepayment penalties apply if you want to transfer the balance ahead of time. You want a lender that explains everything clearly.
The Best Ways To Use Hard Money Loans
It’s important to understand that hard money loans are designed as short-term financing. They’re different from long-term loans such as mortgages and SBA loans. They can be amazing for generating profits for your business, but you have to use them wisely to get the maximum benefit. How do they work best?
Basically, you should use a hard money loan for the initial purchase process. Where they really shine is in closing quickly on properties. This type of financing also fills a need when it comes to things that other lenders won’t touch, such as costs for remodeling or house flipping. Traditional lenders don’t want to deal with the risk of homes that need a lot of work before they go on the market. A hard money loan is the ideal solution for that.
Your goal should be to pay off the hard money loan as quickly as possible. This reduces the total amount of interest you pay and maximizes your profits. Doing this isn’t too difficult for experienced real estate businesses because you can just use the profits from your last sale to pay off the hard money loan for your current property. This keeps your business running smoothly.
Another option is to transfer the balance from a short-term hard money loan to a long-term SBA loan or conventional mortgage. This is a popular solution for getting around the approval and waiting time associated with mortgages. You take out a hard money loan to close quickly on your chosen property while you wait for the mortgage to go through. Once that’s available, you pay off the hard money loan balance and take your time paying back the long-term, low-interest loan at your leisure.
The Advantages of Hard Money Loans in Palm Beach, FL
It’s no secret that Palm Beach is a real estate investor’s dream. The market is ripe for profits — if you have the capital to take advantage of it. Hard money loans give you capital much more quickly than traditional bank financing: a couple of weeks instead of 3–5 months. You can get funds for nearly any type of property in any condition, turning smart remodeling choices into major profits for your house flipping business. As long as you know what you’re doing, hard money loans are an incredible tool for making money.
Learn more about hard money loans in Palm Beach, FL by contact the team at HML Solutions.