Hard Money Loans: Fast Funding for Commercial Real Estate Investments

If you’re in the business of real estate investments, you know that securing a fast and reliable source of funding for your projects can be essential to your success. Real estate investors must be prepared to move quickly when fantastic deals come their way. Often, traditional bank loans are not an option due to the lengthy application and approval process or the stringent underwriting process. At HML Solutions, we are experts in hard money loans. Our loan program is designed for real estate professionals looking for speedy funding for their next project.

Hard Money Loan Benefits

The real estate business is unique. Banks often do not understand the nature of your business or your special financing needs. As a leader in the hard money lending industry, we at HMLS have a keen understanding of what you do and what you need. Our hard money loans offer many benefits to professionals like yourself:

  • Approval is based on the value of your property, not your creditworthiness.
  • The process is fast with loan closing often taking place within a few days.
  • You can receive up to 70% of the value of your property.
  • Funds can be used for a variety of purposes, including purchase and renovation.

The Application Process

Because approval for our hard money loans is based on the value of the property being purchased, we will work with you to determine a correct valuation of the investment property you are considering. To assure that your loan is processed quickly and that you gain access to the highest level of capital possible, we will want to seek out multiple assessments. These might include:

  • A professional property value appraisal
  • Tax assessment records
  • A broker’s price opinion
  • Local market reports

Once these valuation tools are made available, we can determine an accurate loan amount and move forward with the approval process.

In addition to placing an accurate value on your property, we will want to see your detailed plans for the property in question. This will include blueprints, schematics, budgets and contractor bids. 

The Bottom Line

At HMLS we have built our reputation on reliability and honesty. We want to offer you the best product for your needs. No financial solution is perfect for everyone, but a hard money loan can help you secure a valuable property quickly which can make all the difference in the real estate business. You will want to make sure that you have accurately assessed the turn around potential of your property since hard money loans are designed to be a short-term financing solution; typically given for a period of 6 to 24 months. Since hard money loans provide up to 70% of your property value in funds, you will need to have an alternative plan in place for the remainder of the property costs. 

Contact Us Today

Reach out to the loan specialists at HML Solutions to schedule a consultation about your financing needs today. We can help you secure the capital you need to take advantage of a great real estate opportunity. 

Using Bridge Loans to Finance Your Next Fix and Flip Project in South Florida

House flipping has grown in popularity across the United States. It’s a great way to make money if you have the capital and remodeling know-how to turn real estate investments into stellar properties. With a wide range of available properties and a dynamite seller’s market, South Florida is the perfect place to maximize your profits with smart house improvements. How can fix and flip loans from HML Solutions turn your next project into an incredible success?

Why Choose a Fix and Flip Loan?

House flippers always need sufficient capital. For your first house flip project, you need money to purchase the property, cover materials costs, pay builders and take care of other improvements. Selling this initial home gives you more working capital for your next project, but you still need money for the down payment and remodeling expenses.

A traditional loan can be difficult to work with because it takes a long time to get approved. Sometimes, it takes 3–5 months or more to qualify. By that time, the excellent deal you had your eye on is probably long gone.

Another obstacle with conventional loans is that they rarely include money for remodeling costs — only the as-is purchase price of the property. That leaves a lot of expenses that house flippers would need to cover out of pocket.

Fix and flip financing is different. It gives you capital when you need it, helping you snap up foreclosures and amazing deals ASAP. You can get a bridge loan for remodeling, expansion, repairs or property improvements. If that sounds like a phenomenal tool for your business goals, it’s probably because fix and flip loans were specifically designed for this type of project.

What Are the Benefits of Bridge Loans for House Flipping?

Bridge loans are an amazing fit for house flippers because they’re fast and flexible. Here are just some of the benefits:

  • Accelerated approval and funds deposit: One of the biggest advantages of asset-based loans is that you can get capital ASAP. Sometimes, you can get approved in 24 hours. That’s a huge help when you’re buying a property from an auction and the bank wants to see proof of funds. As far as receiving the deposit in your account, this generally takes one week, up to a max of three weeks.
  • Everything you need for improvements: You can get extra working capital in a bridge loan for remodeling needs. Lenders with experience in fix and flip financing are happy to back your project from beginning to end. That way, you can maximize your profits with details that add value to a property, including outdoor kitchens, open-concept dining rooms, luxurious kitchen buildouts, lanais, infinity pools and other attention-grabbing improvements.
  • Flexibility to make decisions: Conventional mortgages require you to spell out everything in writing for a loan board. Not only do you have to outline the property you want to purchase, but also specifics about resale and market price. With a bridge loan, you have far more freedom. You decide how best to manage the funds for each project. You choose the sale price for the property afterward and decide when to sell and to whom.
  • Emergency funds during projects: Sometimes, house flippers are nearing the end of a project when they discover surprises. For example, a wall slated for removal may turn out to be a support wall, requiring additional expense to replace. Or the property may have water damage that wasn’t apparent at first. Traditional banks won’t provide financing for these needs, but a bridge loan can get you through to the end of the project smoothly.
  • Low credit score requirements: Another big benefit of bridge financing is how easy it is to qualify. Real estate businesses of any size appreciate this, but it’s especially beneficial for first-time house flippers and couples using their own funds to support fix and flip projects. With a bridge loan, you can qualify even if you have less-than-optimal personal or business credit, or large credit issues in the past.
  • Simple application: Getting started with a bridge loan is relatively easy. It’s not usually necessary to submit years of tax returns, W2s, balance sheets or other financial documents. In fact, your personal or business finances aren’t that important for approval. Mainly, what the lender needs to see are documents related to the property you’re planning on purchasing.

How Do Loans for House Flipping Work?

Fix and flip loans are also known as bridge loans, hard money loans or asset-based financing. They’re different from traditional mortgages for real estate in that approval is based on the value of an asset instead of your credit score. A piece of real estate acts as collateral, or security, for the loan. This lets you qualify for loan amounts that you may not be able to get otherwise.

Generally speaking, the real estate used as the basis for the bridge loan is the one you’re planning on buying. After an appraisal of the property’s current value, you would receive a loan for a portion of that value. This is known as the loan-to-value ratio, or LTV. Many bridge loans carry LTV ratios of 65–70%, and some go as high as 90% depending on the type of property, its condition and its location.

What does this mean for house flippers in practice? Imagine that the property you’re interested in is on the market for $100,000. You apply for a bridge loan with an LTV of 70%. You would receive $70,000 to use for the purchase and remodeling. You would need to have $30,000 available for a down payment.

If you’ve been flipping houses for a while, you can also benefit from an option that lets you use one of your currently owned homes as collateral, with or without the new property included in the loan. This can fully finance the entire purchase or give you money for a down payment, whatever works best for your capital and goals. It’s a good idea to talk with the fix and flip financing advisor before making a decision because they may be able to customize the loan in a way that benefits your cash flow optimally.

What Should You Know About Fix and Flip Loans?

To get the most out of your investment and reach your goals, it’s important to plan ahead. Loans for house flipping are very useful, but you also need to consider how much this type of financing will cost.

Bridge loans have a higher interest rate than conventional mortgages. This is to be expected because the lender is assuming a much higher risk, especially when homes need renovations. There are other costs associated with bridge loans, such as origination fees. A good lender will let you know what you can expect in terms of interest rates, fees, insurance requirements and other needs. Feel free to ask questions if there’s anything you don’t understand.

Another thing to consider is that the terms of the loan are shorter than most home loans. Instead of having 20 years to make payments, you generally have to repay the loan in 12 to 24 months. For house flippers this isn’t usually a problem, however, as you should be aiming to sell the property quickly. In many parts of South Florida, it’s common for homes to sell in 90–180 days.

The more information you have before signing on the dotted line — and the more transparent the lender — the easier it is to get a great loan and still make a lot of money on the project. Most of the time, house flippers use the proceeds of the sale to pay off the bridge loan directly. Another option used by some property investors is to transfer the balance to a long-term loan once it gets approved.

How Can You Make Fixing and Flipping Homes a Success?

One great tip for avoiding issues is to make sure your calculations include all of the items you need before applying for the bridge loan. Having an appraisal is standard for this type of financing, and it can help you make sure you get a fair LTV ratio for remodeling costs.

Unless you’ve worked extensively with the same group of contractors in the past, resist the temptation to guesstimate the total project cost. Request a specific bid from each professional, including cabinet makers, flooring installers, roofing companies and plumbers. This way, you avoid running out of funds that you would’ve qualified for easily. Many experienced flippers recommend adding another 10 or 15% on top of your estimate for good measure, just in case something unexpected comes up.

Don’t forget to investigate the local market. Before doubling down on a foreclosure or another purchase, make sure you’re going to be making at least 10–15% after everything is said and done. A profit of less than $25,000 may not be worth the time or risk. Figure in the costs that your real estate agent charges for making the sale.

South Florida has an exceptional housing market. There are single-family homes, luxury apartments, condos and even million-dollar listings just waiting to be improved and resold. The capital needs of your business depend on the number of properties you remodel every year, the size of your team and your personal style. For many fix and flip pros, bridge loans fit like a glove. Contact HML Solutions today to get the financing you need.

How to Use Hard Money Loans for Commercial Real Estate Investments

A hard money loan is a loan that is secured by a hard asset such as real estate property, rather than the creditworthiness of the borrower. These loans are a good option for those who invest in real estate as rental or development properties or for fix and flip projects. 

Hard Money Loans

Hard money loans, also referred to as bridge loans or asset-based loans, are a type of short-term financing that is secured by a hard asset. Borrowers must go through a private lender or individual investor to acquire these loans, as traditional institutions such as banks do not offer them. Hard money loans are commonly acquired by house flippers and those who invest and develop real estate who want to avoid the drawn-out approval process that most banks and other traditional financial institutions have people go through. As a result, hard money loans are often quicker and easier to acquire than loans through a traditional financial institution. 

Should You Use Hard Money Loans for Real Estate Investments?

The primary purpose of acquiring a hard money loan is to be able to purchase property and eventually make a profit on the property. Many banks and credit unions have an arduous approval process for their loans, so hard money loans are a better option for those wanting to quickly start on a real estate development project. The approval process for hard money loans is quicker because their approval process looks at the assets of the borrower and is usually secured by a mortgage. 

However, there are downsides to this type of loan. The convenience of a speedy approval process comes at a price, as hard money loans come with additional costs, fees, and higher percentage points than you would see with many other loans. These faster loans also come with a shorter repayment period, which may range from eight months to two years, but rarely exceeding two years. Anyone thinking about taking out this type of loan should consider this shortened repayment period and whether or not they will be able to make a profit and repay the loan in that amount of time. 

What Are the Interest Rates and Fees?

Hard money loans charge borrowers fees known as “points” that range anywhere from 2% to 4% of the total amount of the loan. Interest rates vary between different lenders and may be either a fixed rate or a floating rate. As a general estimate, most hard money loan interest rates fall between 10% and 15%. 

What Is Required From the Borrower?

Requirements vary between lenders and are usually more stringent for first-time borrowers. Common items that lenders look at include the borrower’s previous investments and the value of the hard asset used to secure the loan. In addition to the hard asset, most lenders require a down payment between 30% and 40% in order to secure the hard money loan. 

Hard money loans can be very useful when obtaining real estate investments. Talk to the trusted experts at HML Solutions to discuss whether this type of loan is right for you and guide you through the process. 

Hard Money Loan Refinancing in South Florida: Important Considerations

Hard money loans can help with many real estate goals in South Florida. If you’re a homeowner looking to purchase a new house or a business owner wanting to buy a great commercial property, this type of financing can give you the boost of capital needed to seal the deal. Hard money loans are also used frequently by real estate investors and house flippers. When you choose asset-based lending from HML Solutions, you can use hard money loan refinancing to lower your interest rates. How does this process work?

What Are the Advantages of Hard Money Loans?

Hard money loans are a type of asset-based lending. They provide a large amount of capital with short repayment terms. These loans are also known as bridge loans or asset-based loans. When used correctly, they offer several advantages over conventional mortgages:

  • Easy loan application and approval
  • Qualifications based on property value, not your credit score
  • Fast deposit of funds — usually 2 or 3 weeks maximum
  • Complete financing for remodeling, renovations and repairs
  • Available for virtually any residential or commercial property
  • No need for extensive business documents or regular reports to a loan board

Hard money loans are commonly used in real estate to close quickly on properties. They provide financing for your needs when other avenues are too time-consuming or out of reach.

What Is the Purpose of Refinancing Hard Money Loans?

As mentioned, bridge loans shine when used for short-term needs. They’re not a good fit for long-term investments because the interest rates and terms aren’t compatible. At most, you have between 12 and 24 months to pay back asset-based financing.

This is where hard money loan refinancing comes into play. It lets you get around the limitations of bridge loans. This process involves applying for a long-term mortgage and using the funds to transfer the balance from the hard money loan to this new loan.

Hard money lenders are familiar with this type of arrangement. It’s common in the world of real estate. In essence, you get the best of both worlds: fast financing at the beginning of a property purchase and low interest rates once your mortgage gets approved.

Why Do Hard Money Loans Have Higher Interest Rates Than Traditional Loans?

A common question is why you have to worry about refinancing at all. Why do hard money loans have higher interest rates in the first place? There are three main reasons:

  • Lower credit requirements: Hard money lenders look at the value of the property you’re buying instead of your credit score when approving the loan. This means that homeowners and business owners with not-great credit ratings can still qualify for financing, even if they’ve been turned down somewhere else. Traditional lenders have much stricter requirements.
  • Greater risk for the lender: Giving a loan to someone with less-than-stellar credit is risky for lenders. They may not get paid back. Also, many hard money loans involve properties that need repairs. This is a risky proposition because there’s no guarantee the remodeling project will get finished.
  • Flexible terms: Many hard money lenders develop a close working relationship with house flippers and real estate investors. They may waive certain requirements (such as third-party property appraisals) to get the funds approved more quickly when they’re working with a business they trust.

All of these factors make higher interest rates a fair trade. Of course, the better the relationship you have with the hard money lender, the better the terms you can get.

Where Can You Get Refinancing Options for Hard Money Loans?

Some hard money lenders provide both short-term and long-term loan options. They use asset-based lending for short-term financing and credit checks for the long-term loans. Because you’re partnering with this lender for a hard money loan anyway, it’s a good idea to ask what long-term financing is offered. You may get better interest rates and terms that way — almost like a package deal.

If asset-based lenders don’t provide long-term loans, the next place you may think of for hard money loan refinancing is a traditional bank. Large financial institutions offer a range of residential and commercial mortgages. This option may be favorable when the US market has especially low interest rates.

Unfortunately, there’s also a catch to refinancing via traditional lenders. You have to qualify for the refinanced loan first. This means you have to meet the same credit requirements you would’ve needed from the very beginning. If you have great personal or business credit, you shouldn’t have problems, but people with past credit issues may not qualify.

Where else can you look? Alternative lenders may be a good fit. They generally offer long-term loans with interest rates that fall in between hard money loans and conventional mortgages. You can check out rates and requirements online most of the time.

When Should You Start Hard Money Loan Refinancing?

There are several things you can do to make it easier to qualify for a low-interest loan. One of the most important is applying at the right time. When is that? It depends on what kind of real estate you purchase and what the condition of the property is.

If you’re buying an investment property that works great as is, or you’re planning on reselling it right away, you can apply for refinancing almost immediately. In fact, many real estate investors get started with both types of loans at the same time: the hard money loan and the mortgage.

It can take anywhere from 3 to 5 months for a mortgage to get approved and processed. You can get the ball rolling on this long-term loan, apply for a short-term hard money loan and use the capital to purchase your property. By the time you’re finished closing, the mortgage should be just about ready for hard money loan refinancing.

Things are different for fix-and-flip projects or real estate that needs some improvements. Most banks won’t give you a mortgage for a property that is incomplete, needing repairs or in the middle of a renovation. Fortunately, a hard money loan can cover all of these needs, including closing costs, materials costs and remodeling expenses. Wait until the project is fully finished before submitting your application for refinancing a hard money loan.

What Factors Should You Consider When Applying for Hard Money Loan Refinancing?

It’s important to consider your goals to make sure you get the best deal when refinancing a hard money loan. If you’re a homeowner or a business owner just looking to purchase one new piece of real estate, you’re probably focused on selling your old property ASAP. On the other hand, real estate investors absolutely need to get the lowest interest rates possible with refinancing if they want to maximize their profits. Depending on the market, house flippers may benefit more by just selling the new property and using the proceeds to pay off the hard money loan directly. Whatever your needs, following a few tips can get you excellent results and save you money.

Ask About Prepayment Penalties

Many hard money lenders are willing to give you a loan that doesn’t carry any prepayment penalties. In case you’re wondering, prepayment penalties are fees charged when the loan gets paid off ahead of time to compensate for lost interest payments. A hard money loan with no prepayment penalties may carry slightly higher interest rates, but it’s worth it if you’re planning on refinancing and transferring the hard money loan balance quickly. This option is also a good idea if you believe your property is going to sell immediately.

Get the Property Ready To Rent

In the case of commercial and residential property investors, it’s important to note that “under construction” also includes minor changes to get an apartment or space rent ready. Painting, adding trim, changing cabinets, installing new flooring and performing other cosmetic design changes must be finished before you can apply for long-term financing.

Avoid Applying Everywhere at Once

It’s a smart idea to check out the interest rates, requirements and options for hard money loan refinancing at different lenders. This can help you make a great choice that fits your needs. What you want to avoid, however, is filling in multiple loan applications at different locations.

Some people make this mistake hoping to see which one gets approved. In reality, doing this can get you turned down everywhere, hurt your credit rating and force you to pay higher interest rates. When one lender sees you’ve filled out an application somewhere else, they automatically see it as a red flag for any loan.

How Can a Good Relationship With Your Hard Money Lender Help With Refinancing?

Whatever your goals, choose the right hard money lender. Even if you have to choose a different lender for refinancing, it still pays to maintain a good business relationship with a hard money lender you trust. The new financial institution requests a payoff from the hard money lender, which may contain information about late payments or other problems. When you’ve managed your hard money loan like a pro, it’s easier to qualify for hard money loan refinancing as well. Contact the experts at HML Solutions to learn more.