The Advantages of Bridge Loans for Construction Projects in Florida

If you work in construction in Florida, you know that securing the right financing is an essential piece of the puzzle. However, getting funding on the right terms isn’t always easy. Bridge loans offer a valuable tool for construction projects that may make financing the full project easier. With the development boom in Florida, this is especially important.

Bridge Loans and How They Work

Bridge loans are a type of short-term loan that allows the borrower to get money secured by equity in a current asset. Although there are many types of bridge loans, they are most often used when making real estate transactions. In this arrangement, the equity in a current property can be used to raise money to buy another property, typically as the down payment on a larger loan. The bridge loan is then paid off when the original property is sold.

For residential borrowers, this is helpful because it can prevent the need to line up selling a current home and buying a new one. It is also frequently used by commercial borrowers who want to move quickly on opportunities. This can include funding a construction project or buying the land that you want to develop.

Financing Construction

Paying for construction projects often relies on construction financing. These are special loans that may be taken against the value of the land or some other asset to help pay for the development of a property either as new construction or a renovation.

The longer you sit on a property without developing it, the more you are spending and the more opportunity for returns you are missing. Therefore, it is often in the interest of a developer to get a construction project financed quickly. However, it is not always possible to make the necessary down payment on a loan, especially if your cash is tied up in other projects and properties.

Using a bridge loan can help to bridge the gap between where your finances are currently and where you need to be. It can help you get money from the equity you own in various properties to help fund your latest project. It could also be used to help with buying the land that you want to develop. This is especially relevant for time-sensitive opportunities.

Florida Development and Bridge Loans

Florida has experienced an increase in demand for high-end housing options as people have tried to escape colder climates and high taxes during the COVID-19 pandemic. This means there are opportunities to be leveraged if you have the right financing. However, the trend may not last forever. You will need to move quickly to take full advantage of it. For this, a bridge loan may help you to secure the money you need to thrive.

Explore More Today

Discover more about financing construction projects and bridge loans today. HML Solutions is an expert in bridge loans and hard money loans. We can help you get the financing you need for all your construction and other business ventures in Florida. Contact us today to learn more about these financing options.

Property Flippers in West Palm Beach Prefer Hard Money Loans

Flipping houses can be a great source of income, especially if you know how to spot a good deal and keep your costs low. It’s also important to have a flexible source of financing you can use to help you acquire various fix-and-flip projects. Often, homes that are ripe for renovation are snatched up quickly by people who want to turn a quick profit. That’s why you need to be able to get a loan quickly, so you don’t miss out on any great opportunities. Here at HML Solutions, we offer hard money loans for situations like this. Unlike standard loans, a hard money loan is only meant to offer short-term financing. As long as you complete your fix-and-flip project and sell the home for a profit before your loan terms end, you’ll be in good shape. 

Why a Fix and Flip Loan Is Better Than a Traditional Loan for Flipping Houses

You may be wondering why you can’t just take out a traditional loan for a fix-and-flip project. The answer is pretty simple: most mortgage lenders don’t offer financing for such projects. Even if you could get a traditional mortgage loan, it would be the wrong fit for a fix-and-flip situation. You don’t need to get a 30-year mortgage on a house you don’t plan to own for 30 years. In fact, if you manage your project well, you’ll probably fix up and sell the house within a year. That’s why short-term financing is ideal. 

People and businesses who flip houses regularly are better off going through a hard money lender for the type of financing they need. Our hard money loan solutions offer rapid financing, but they do need to be repaid quickly if you want to cut back on costs and fees. You can use a hard money loan for the duration of your project. Or, if you think your project may take longer than a year, you can use a hard money loan to help you acquire the property you want, then replace it with a source of long-term financing once you have the time to do so. 

How Fix-and-Flip Loans Work

Most hard money loans for flipping houses have 12-month terms, though some offer terms as low as six months or as high as 18 months. Some even come with an initial term, but also offer an extension option if you aren’t able to pay them off at the end of the term. 

You’ll find that some fix-and-flip loans come with fixed interest rates, while others come with variable interest rates. However, almost all of them are structured as interest-only payments until the loan comes due. At the end of the loan period, the entire principal balance is due. This is also known as a balloon payment structure. 

To make this simpler, if you have a 12-month hard money loan, your monthly payments will only go toward interest until the end of the 12 months. At the end of the loan period, you’ll need to pay the entire loan balance at once. 

When you take out a loan for flipping a house, the amount will be sufficient to cover the entire project cost (which includes repairs, renovations and the cost to buy the house). The maximum allowable amount for the loan depends on the lender you go through. However, most lenders calculate the maximum allowable amount through either of these approaches:

  • Loan-to-value (LTV). Through this option, the loan amount is issued based on a percentage of the property’s projected value (once associated renovations and repairs are finished).
  • Loan-to-cost (LTC). When this approach is used, a loan amount is issued based on a percentage of the anticipated renovation cost. 

In most cases, you’ll be given the option that produces the smaller loan amount. This is beneficial to you because it gives you the smallest possible loan payoff amount. 

House-Flipping Experience and Loan Eligibility

If you’ve never flipped a house before, you may be wondering if you’re eligible for a house-flipping loan. Fortunately, previous house-flipping experience is not a requirement to get this type of loan from some lenders. However, you may find that some lenders refuse to work with first-time house-flippers. We’re not one of those lenders. As long as you meet our qualifications, we’ll extend financing to you even if this is the first time you’re venturing into the fix-and-flip industry. 

Down Payment Considerations

Most private lenders require that borrowers provide a down payment when getting a fix-and-flip loan. The amount of this down payment will depend on the estimated cost of repairs as well as the total cost of the home. Your lender may finance as much as 90% of the cost of your project, but is likely to finance only up to 75% of its after-repair projected value. Keep this in mind when you’re trying to determine how much of a down payment you’ll need to secure a loan for your project. 

Required Documentation

Most lenders require the same documentation when you apply for a fix-and-flip loan. Plan to provide the following:

  • Copy of your driver’s license or other ID issued by the government
  • Bank statements
  • Personal tax returns
  • Executed sales contract for the property
  • LLC operating agreement (if applicable)
  • Renovation and repair estimates from a licensed contractor
  • Documentation for previous fix-and-flip projects you’ve done

If you have any questions about the documentation you’ll need if you apply for one of our fix-and-flip loans, just give us a call. We’ll help you prepare to make the application as quick and easy as possible. When it comes to meeting our qualifications for a hard money loan, we do require a minimum credit score. However, the determination to extend financing is based more on the property in question and your plan to renovate it. We’ll take a look at the home’s after-repair value to determine if it’s realistic or worth financing. We’ll also analyze the renovation timeline and budget. 

Potential Drawbacks of Fix-and-Flip Loans

While fix-and-flip loans are ideal for very specific situations, they do come with potential drawbacks. Here are a few of them:

  • Fees. Fix-and-flip loans often come with a variety of fees that can quickly add up, including an origination fee. 
  • Carrying costs. When you consider all of the expenses that go into fix-and-flip loans, don’t overlook carrying costs. These costs include all the money you spend throughout your period of property ownership. To put this into perspective, if you own the property for 12 months, you’ll be paying insurance and property taxes for that year. If you also have a mortgage payment, it will increase your overall costs. As long as your property sells promptly and for the amount you expect when you finish your renovations, you should be OK. But you do need to plan for potential challenges selling the property or getting the price you want out of it. 
  • High interest rates. One thing you’ll notice about fix-and-flip loans is that they have higher interest rates than regular mortgages. The rates you receive as a borrower depend on current rate ranges as well as your credit profile and the value of the property in question. 

Getting a hard money loan can be very beneficial for certain projects, but it’s important to consider both the benefits and the potential downsides. If the benefits outweigh the drawbacks, then this type of loan may, in fact, be ideal for your needs. 

Getting a Hard Money Loan in the Name of an LLC

What if you want to take out a hard money loan in the name of an LLC instead of in your own personal name? Is this scenario possible? The answer is, yes. In fact, most hard money lenders prefer to extend hard money loans to LLCs. There are some that will not issue fix-and-flip loans to individuals at all. So if you don’t currently have an LLC set up, you may want to consider doing so if you plan to take out multiple fix-and-flip loans going forward. 

Credit Score Eligibility Information

You may be wondering what kind of credit score you’ll need to be eligible for a fix-and-flip loan. While all lenders are different, you’ll likely find that a minimum FICO score of at least 600 is required. This score falls into the “fair” credit category. Keep in mind that although this is likely the minimum score you’ll need, the higher your score is, the more likely you are to get good loan terms and rates. However, it can be comforting to know that you don’t need to have an exceptional credit score to qualify for a fix-and-flip loan. 

Learn More

If you aren’t highly experienced in fix-and-flip loans, you may find the terms to be confusing. If this is the case, don’t worry! We’d love to help you understand these loans better and how they can benefit you in certain situations. Don’t hesitate to contact us and rely on the expertise and knowledge of our friendly financial consultants. We’re here to help you choose the best loan product for your needs. Contact us today to schedule your obligation-free consultation or to request your application. 

Demand for Luxury Rentals Rises in South Florida

South Florida is seeing a rise in demand for high-end rentals and luxury condominiums. This represents a significant departure from recent trends and may impact real estate projects in the area. The region appears to be attracting an increased number of affluent Americans and the current inventory may not be able to keep up.

Increased Demand for Luxury Properties

As affluent buyers and renters arrive in South Florida, they are seeking luxury rentals and condominiums that can satisfy their lifestyle needs. This group is primarily made up of wealthy families coming from other states, particularly those with relatively high property taxes and/or harsh winters.

Historically, places like New England, New York and California have been hubs for affluent individuals and families because they are also centers of commerce and industry. However, the COVID-19 pandemic greatly increased the interest in and availability of work-from-home opportunities. This has encouraged many people to seek out new homes in areas with lower taxes and more pleasant weather.

These families are bringing significant wealth into the area. Thus, they are also looking for homes that can suit their lifestyles and expectations.

Buyers Looking for Larger Spaces

One of the most notable trends is the emphasis on larger condominiums. There are not a lot of single-family homes available in South Florida. So, many of these newcomers are looking primarily at larger condos either as purchases or rentals.

However, the availability of larger condos is also limited. People arriving with a family of four or more, especially with kids who are accustomed to having their own bedrooms, want condos with three or more bedrooms. Much of the available inventory is one- and two-bedroom units. Developers who built the currently available inventory were not expecting such an explosion of newly arrived families.

Three-bedroom condos are especially in-demand. However, these are relatively rare throughout the South Florida region.

In some cases, new arrivals are coming from massive homes in other states and seeking to downsize to avoid the maintenance needs. However, they are still looking for homes of 6,000 or more square feet. Currently, there are not enough properties to meet the demand.

Risk for Developers

The obvious solution to this issue is to create more supply. However, there is a significant risk. Much of this trend has correlated with the COVID-19 pandemic. Therefore, it could end as quickly as it began. There is no guarantee that people will continue to remote work from Florida for a job in New York.

Therefore, if developers invest in larger condos and homes, they may find themselves holding inventory that is no longer in demand. While some multiunit properties can be converted into smaller units, large single-family homes may drop substantially in value.

Learn More Today

The increased demand for luxury rentals and purchases in South Florida is an interesting trend. It is unclear at present how long the trend will continue. It may be a long-term shift in where people live and work. However, it may also be a temporary change that fades once post-pandemic normalcy returns. Learn more about this trend and more with HML Solutions.

A Comprehensive Guide to Bridge and Hard Money Loans for Entrepreneurs in West Palm Beach

For entrepreneurs, financing is a crucial aspect of success when launching a business. You must have the proper funding to get your business off the ground. Because there are several types of financing to choose from, you may have a difficult time deciding whether a traditional bank loan or an alternative avenue of funding is best for you. Although they can be more expensive than bank loans, hard money loans are a great financing option for many businesses. Here is everything you need to know to determine if bridge and hard money loans are the right financial solution for your company.

What Are Hard Money Loans?

A hard money loan is a form of financing that is secured by putting an asset up for collateral. These loans are most often used to finance real estate investment, and they are typically secured for short-term financing until the business begins to turn a profit and can fund its own investments. Although hard money loans are sometimes considered a last resort, they often play a crucial role in flipping real estate properties.

What Are the Terms for Hard Money Loans?

While the interest rates for hard money loans are often high, there is usually plenty of room to turn a healthy profit because this type of financing is short-term. The terms for a hard money loan vary among lenders, but you can expect similar terms to the ones listed below.

  • Low interest rates
  • Documentation, appraisal, application, inspection and document processing fees.
  • High LTV rates depending on the project
  • Generous terms

How Is Hard Money Different From Private Money?

Hard money and private loans are similar because they both provide financing by individual lenders rather than a bank, but they have several distinct differences. Private loans may be given for either short or long-term durations, but they are typically extended by people you have a personal relationship with such as friends or family members. This means the money can be used for any reason, but it is often difficult to build enough trust with someone for them to agree to loan you a substantial amount of money.

In contrast, hard money loans are extended by financial companies or individual investors who secure hard assets as collateral. The loans are primarily short-term and rarely last beyond eight years, so if you are searching for long-term financing, you will need to transition to a different type of loan as you near the completion of your hard money loan. This type of financing is most beneficial for helping fix or flip real estate properties.

How Do Hard Money Loans Differ From Traditional Financing Options?

Traditional lenders focus heavily on the borrower, while hard money lenders are typically more concerned with the assets. To receive a hard money loan, you will need to put up collateral, which is why this form of financing is so popular for real estate transactions. The piece of property in question serves as the collateral while you are free to use the money you receive to fix and flip the property before reselling for a profit.

This means that hard money loans are easier to qualify for because you simply need something valuable to use as collateral rather than perfect credit. Banks often limit the amount of financing they will extend to borrowers with multiple properties, while hard money loans have no restrictions. They are most often used for real estate purchases but they can be secured for other purposes such as equipment financing. 

Can Hard Money Finance Real Estate?

Hard money loans don’t require a perfect credit history or a W-2 income, which is why they are popular for real estate investors. However, they are not designed for long-term financing. If you are ready to invest in a rental property that does not need any remodels or renovations and you qualify for a bank loan, you are probably better off securing a lot with lower interest fees from a traditional lender. If you are trying to improve your credit score and do not qualify for a traditional loan yet, you may want to apply for a hard money loan with the intention of securing traditional financing once the loan period is over.

If you’re business works by purchasing and flipping unconventional properties and selling them for a profit, hard money loans are an ideal source of financing. These properties are not intended to stay in your possession for long and are usually sold before the loan period runs out. To ensure you can turn a decent profit, it is best to secure hard money loans that use the 70 percent rule.

What Is the Approval Process for Hard Money Loans?

Your chances of securing a hard money loan are higher if you start building relationships with lenders before you need the money. While these lenders do take credit score into consideration to determine approval, they do not base their entire decision on this one aspect. They are more concerned with seeing if you are trying to resolve any credit issues, which is why developing a working relationship with the lender prior to applying for a hard money loan is a good idea.

Hard money loans require less documentation than other types of financing. You will still be required to show your tax return information for the past two years and your credit score, but because so little paperwork is required, you can expect to close on a hard money loan within two weeks of being approved.

How Do Hard Money Lenders Determine Eligibility

Hard money loans are easier to qualify for than other types of financing, but they still have strict requirements to determine eligibility. Along with analyzing your credit score to determine if you are trying to resolve any issues, lenders also look at your budget and the scope of your project. If you are using the loan to flip a real estate property, the lender will consider the type of property you are working with, because certain properties move quickly and provide them with a better return on their investments.

After analyzing all of these elements, a hard money loan will determine whether or not you are approved for a loan. It is important to remember that you do not need a great credit score to qualify, but you do need to prove that you are managing any issues responsibly.

What Is the Exit Process for Hard Money Loans?

Hard money loans are processed similarly to other types of financing. Once the loan is approved and the contracts are signed, the lender will disperse the money in increments over the loan period. The borrower may be required to produce invoices and pictures of the project to prove that it is staying on budget. The borrower may request a disbursement as the project nears completion. If you think that there is any chance you may want to hold on to a property for longer than the term of a standard hard money loan, you are better off applying for a traditional bank loan because hard money lenders often will not extend the loan beyond eight years.

What Are the Advantages of Hard Money Loans?

The primary disadvantage of hard money loans is that they cost more than other types of financing. Although you may end up spending a lot on interest rates, hard money loans are advantageous for the following reasons.

  1. They can take over when traditional types of financing fall through when a property is under contract.
  2. They are quick and can often be closed within 10 business days.
  3. You can often qualify for a hard money loan even if you are not eligible for other types of financing.
  4. The approval process is less stringent than with traditional bank loans.
  5. They work with properties that many banks are not willing to finance.

What Should You Look for in a Hard Money Lender?

As in every industry, there are a few hard money lenders that want to see you fail so they can make more money on your loan. However, these lenders are by far in the minority. You can make sure you don’t end up working for one of the unscrupulous lenders by vetting them just as you would anyone else you choose to work with.

Striking up a professional working relationship with potential lenders will help you gauge their intentions. You can find candidates through the Real Estate Investor’s Association, and you can ask for referrals from your colleagues. The best way to determine if a hard money lender is reputable, however, is to look at past investments. Lenders with good track records on investments should be safe to work with.

A hard money loan is a great financial option for many businesses. While it may be structured differently than traditional bank loans, a hard money loan is often easier to qualify for. If you think this avenue of financing is right for your business, HML Solutions is happy to extend a hard money loan to help your company thrive in the competitive marketplace. Contact us today to apply.

Florida Property Investors: Covering Immediate Costs While Waiting for Funding

The perfect property investment is lined up and you are ready to make renovations so you can start generating revenue. The only snag is that the funding you initially requested is going to take a month or longer to disburse. This is an all too familiar situation for many property investors throughout Florida. Fortunately, there is a way to keep property acquisitions and renovations on track without getting caught up in the bureaucratic red tape of traditional lending institutions.

Florida Property Investors Need Faster Financing

Traditional lenders finance commercial real estate transactions in Florida. Yet over the past decade or so, banks and other institutions have been changing how they approach investment properties. Ever since the Great Recession – when traditional lenders handed out loans that caused the commercial real estate bubble to burst – banks have been tightening their requirements for borrowers. Higher credit and collateral requirements, combined with lower loan amounts, have made it more difficult for property investors in Florida to get the adequate financing for their commercial real estate projects. Add to this long processing times and the need to cover immediate expenses, such as closing costs, permits, and hiring contractors, and Florida property investors can feel marginalized at times.

Finding a Better Solution

When Florida property investors need ample funding without jumping through hoops to get traditional loans, they use bridge and hard money financing. Bridge and hard money loans are not dependent on credit histories or collateral. Instead, they are structured around the overall value of the property involved in the project. The faster processing times and higher lending ceilings allow property investors in Florida to get the financing they need for acquisitions, renovations, and even new construction. Bridge and hard money loans also allow local investors to cover time-sensitive costs to keep projects on schedule, so they can get to the finish line faster and start generating revenue from their properties.

Finding the Best Bridge and Hard Money Loans in Florida

Florida’s property market is unlike any other in the United States. Even between counties and cities, property markets are impacted by different micropressures which can greatly affect the financing needed for projects and transactions. Additionally, because every project is unique, there is no such thing as a “one size fits all” solution. Florida property investors need bridge and hard money loans from a lender who is intimately familiar with local real estate markets. That’s where HML Solutions comes in. At HML Solutions, we specialize in bridge and hard money loans specifically designed for Florida’s property markets. From Escambia County in the panhandle over to Nassau, on down to Miami-Dade, and everywhere in between, our team works directly with local property investors to tailor solutions so they can reach their goals quickly and efficiently. Since we handle all applications and processing in-house, we can make funds available much faster than traditional lending channels.

If you need financing to cover immediate expenses for your next property transaction or project, contact the people who know Florida better than any other lender. Contact the experts at HML Solutions.

Financing Partner Buy-Outs in West Palm Beach

2021 is turning out to be year of mergers, acquisitions, and partner buy-outs in West Palm Beach. From niche businesses to freight companies and the commercial development sector, partner buy-outs are trending as the solution to grow businesses and forge ahead as the local economy prepares for the post-pandemic era.

Understanding Partner Buy-outs

There is a number of factors driving partner buy-outs in West Palm Beach. In some partnerships, one party may simply be burned out after trying to make it through the pandemic. Their motivation may be diminished, or they may want to explore opportunities in a different market. In other cases, partners may have very divergent visions, and leveraging a buy-out may be an amicable way to settle differences and hand over control.

Financing for Partner Buy-Outs

No matter what the reason, partner buy-outs can be simultaneously delicate and time-sensitive affairs. Assets need to be evaluated, management structures need to be reorganized, and new budgets and timelines need to be drawn up to make a buy-out a success. Above all else, there needs to be adequate capital available to execute a partner buy-out, maintain operations, and ensure a smooth transition. That’s a pretty tall order for any commercial operation in West Palm Beach, often requiring additional financing to carry out plans. Unfortunately, there are obstacles in securing funds for a partner buy-out in West Palm Beach. Traditional lending channels take a long time to process loan requests, and approvals are far from guaranteed. To keep buy-outs on track, entrepreneurs in West Palm Beach use bridge and hard money loans. Hard money loan solutions can be arranged quickly, because they are structured around the property and assets involved in the buy-out. This allows the transition and restructuring to stay on track without disrupting day-to-day operations.

At HML Solutions, we specialize in bridge and hard money loans for projects, transactions, and partner buy-outs in the West Palm Beach area. All loan applications are handled in-house so we can provide fast approvals and quick access to funds. To learn more about our bridge and hard money loans for buy-outs in West Palm Beach, contact the team at HML Solutions today.

West Palm Beach Property Investors: Handling Loan Turndowns

Despite the growth in the commercial real estate sector, the percentage of loan turndowns has increased over the past year, with no sign of subsiding. Property investors in West Palm Beach need viable financing solutions with higher approval rates and fewer delays.

Why Loan Turndowns Are on the Rise

Loan turndowns in the commercial real estate sector are nothing new. Traditional lenders played a big part in the real estate market crash of 2008, and have been trying to mitigate risk ever since. In order to protect themselves, traditional lenders have increased credit and collateral requirements while lowering the amounts borrowers can access. The COVID-19 pandemic only exacerbated this situation. More businesses and commercial investors are poised to default on existing loans for property investments, so lenders are tightening their requirements even further. At the same time, the commercial real estate market in West Palm Beach is – and has been – on a major upswing. Demand for both residential and commercial properties is rising as businesses and families need new space to thrive and grow. Yet securing adequate financing in West Palm Beach remains a challenge for property investors.

Financing for Property Investors in West Palm Beach

To avoid loan turndowns, as well as the long approval process associated with traditional lending channels, property investors in West Palm Beach use bridge and hard money loans. Unlike traditional loans, bridge and hard money solutions are not based on in-depth credit histories and bottom-line numbers. Instead, bridge and hard money loans are structured around the value of property and assets involved in the project at hand. This allows loans to be customized to fit the scope of the project and provide the financing necessary to carry the project to successful completion. Qualifying for bridge and hard money loans is much simpler and more efficient than traditional loans, so there is a high approval rate.

Avoid Loan Turndowns

HML Solutions provides bridge and hard money loans to property investors throughout West Palm Beach, for commercial projects of every shape and size. We handle approvals and processing in-house to get you the financing you need, when you need it. Contact HML Solutions today to get the financing you need.

7 Questions You Should Ask About New Construction Loans and Ground Up Construction Financing

This year holds great promise for real estate investors who want to build their single-family rental portfolios and/or engage in multiple fix-and-flip projects. As the economy pulls out of a worldwide pandemic, it is likely that the real estate market will pick back up again.

If you’re a real estate investor who wants to make the most of available opportunities, you’ll need to get ready to apply for new construction loans or ground-up construction financing. Before you apply for any such loan, though, there are a few questions you should ask. These seven questions will help you make well-informed decisions about any loan you take out for real estate investing purposes.

1. What Percentage of Construction Funds Can and Should I Borrow?

The answer to this question depends on the lender you’re going through and your individual qualifications. Some lenders offer up to 90% of lot construction and purchase costs. Others may offer up to 100% of construction costs if you own the lot you’re building on. Keep in mind that in order to qualify for these types of loan percentages, you need to have a loan to ARV (after-repair value) ratio of 70%. Here at <company name>, we structure our loans to provide maximum benefits to borrowers.

When calculating your leverage options and deciding what percentage of your construction funds you can and should borrow, remember to consider expected closings costs, loan fee structures and how underwriting requirements apply.

2. What’s the Difference Between a Ground-Up Construction Loan and a Traditional Mortgage?

There are a few key ways ground-up construction loans differ from traditional mortgages. Here are the most notable differences.

  • Ground-up construction loans are only meant to be short-term forms of financing, unlike traditional mortgages.
  • Since construction loans are only short-term notes, you may need to refinance your single-family rental property into a permanent mortgage (unless you own the property outright before starting your construction project).
  • Ground-up construction loans are only designed to cover the costs of construction alone, or both construction and purchase of the property.

Traditional mortgage loans are best for some situations. But if you only need short-term construction financing, a ground-up construction loan is a better option.

3. Do I Need a Detailed Project Plan?

When you’re taking out a new construction loan, you need to submit detailed project plans if you want to maximize your chances of being approved. Different lenders may have different requirements when it comes to how detailed project plans need to be. That’s why it’s best to talk to whichever lender you plan to work with in advance to find out what type of project plan you are expected to submit when you apply for a new construction loan. The more you know about project plan requirements, the easier it will be to close on a new loan as quickly as you can.

4. How Do Construction Draws Work?

The construction draw process differs from lender to lender. So before you apply for a loan, take the time to learn about the documentation you’ll need to present for each draw and what fees are associated with each draw. That way you can take steps to have enough cash on-hand to continue working on your project throughout the draw process.

5. Can I Turn the Property Into a Rental?

If you’re working on a construction project for the purposes of selling, then change your mind and decide to turn the property into a rental, there are some steps you need to take. First, you’ll need to change your construction loan into a permanent loan. You will likely need to consult with your lender to find out what steps you need to take to convert a short-term loan into a long-term loan. Knowing your loan conversion options will help you make the most informed decision about the property in question.

6. Are There Penalties if My Project Runs Over the Estimated Timeline?

If your project takes longer than expected and you need to extend financing past the original estimated timeline, you could be subject to loan extension fees and penalties. Of course, this all depends on the lender you go through. Some lenders charge more in fees than others.

Since it’s impossible to avoid some types of delays, including delays due to inclement weather, it’s wise to ask your lender about any extension fees and penalties in advance. You always want to know what will happen if you have to push your timeline out for any reason.

7. How Can I Get Support Throughout My Project?

When selecting a lender for your loan needs, find out if they offer any services that can help your project run smoothly. You’re more likely to be well cared for if you get a loan from a lender that handles the construction draw process and services the loan instead of having a third party manage your affairs.

Do you still have questions about ground-up construction financing? Get in touch with the team at HML Solutions today and we’ll be happy to answer your questions.

New Construction is on the Rise in West Palm Beach

As industries outside the commercial real estate market faced challenges during the pandemic, the property investment sector saw a major upswing that is projected to continue. Specifically, new construction in West Palm Beach has opened opportunities to property flippers, large scale developers, and everyone in between.

Residential Construction in West Palm Beach

Just before the pandemic hit our shores, many people were looking to move into new homes. COVID-19 placed those plans on hold. Additionally, household have grown since the pandemic started, with couples welcoming new children into their lives. Finally, COVID-19 has motivated people to move out of congested multifamily units and into larger apartments or single-family residences. Most importantly, prospective homebuyers are looking for up-to-date or future-proofed homes with new wiring, smart appliances, and office space to work, and for their kids to take remote classes. All of these factors are driving new construction throughout West Palm Beach.

Financing New Construction in West Palm Beach

While the demand for new homes in West Palm Beach is driving new construction, commercial developers and property investors face challenges on the financing side of the equation. Traditional lenders have been tightening their requirements since the pandemic started. Borrowers need excellent credit and more collateral than before to qualify for loans. At the same time, lenders are lowering the amounts offered to minimize their risk.

Fortunately, savvy investors and developers have options outside of the traditional lending sphere for their commercial projects. Bridge and hard money loans have been a staple for new construction projects throughout West Palm Beach. Bridge and hard money loans are structured around the overall value of the property involved in the new construction project, which eliminates arbitrary loan board decisions and red tape. What’s more, bridge and hard money loans can be arranged quickly, so local entrepreneurs can get a jump start on construction projects in West Palm Beach and keep things moving without delays.

Hard Money Loans for New Construction in West Palm Beach

HML Solutions specializes in bridge and hard money loans for projects in West Palm Beach, FL. If you need capital for new construction in West Palm Beach, contact the team at HML Solutions today.

What Hard Money Loans Are and How They Work

Are you an entrepreneur or a business owner? Do you want to get involved in buying and developing properties? If so, a hard money business loan could be the perfect solution for your needs.

A hard money loan is also known as a short-term bridge loan. These loans are ideal for entrepreneurs without demonstrated experience, borrowers without perfect credit, and other individuals who are interested in purchasing property for business purposes. This article will delve into what a hard money loan is all about, how the loans work, and other important factors that will help you make the right lending decision.

The Definition of a Hard Money Loan

A hard money loan is a loan backed by collateral that is secured using real estate assets. A borrower who has an adequate amount of collateral can quality for a hard money loan even if they have spent little time in business or have poor credit. As mentioned above, most hard money loans fall under the category of a bridge loan.

It might sound a little strange, but hard money lenders don’t have to count on you paying the loan back. This is precisely why the state of your credit isn’t going to matter as much as it would for most other loans. Instead, your loan is largely based on how much your collateral is valued. If you do not pay the loan, the lender will take over possession of whatever real estate was used to secure the loan.

Situations Where You May Want a Hard Money Loan

When you’re learning more about what a hard money loan is, you can think of it as a loan that is by investors and to investors. What do we mean by that? Someone choosing to take a hard money loan wants to take ownership of a piece of property quickly. In most cases, this person also wants to relieve themselves of ownership just as quickly or find other ways to monetize its existence.

The quintessential hard money borrower is someone who makes a living by flipping houses or businesses. They use the property they purchase as collateral for the loan. The person who takes out this loan doesn’t plan to keep the property long enough to end up underwater on their hard money loan.

The basic idea is to make repairs to the property to increase its value before selling it for more than it cost, to begin with. If that doesn’t work out, the buyer will search for a way to refinance before they end up paying more in interest than the property is worth or losing the property completely.

However, this isn’t the only situation where someone might want to utilize a hard money loan. It’s also common to seek out this form of lending to rent out a property to other individuals.

Advantages of a Hard Money Loan

Hard money loans come with all sorts of advantages for those who want to buy a property and then sell it or otherwise make money using it. A few of the most important advantages to be aware of include the following:

  • Quick Approval – Avoiding the long and frustrating process of being approved by a bank can save you a ton of time. The hard money loan lets you do exactly that. This can be a huge advantage if you are in a location with a competitive real estate market. Hard money loans let you get your offer in fast, which may be all you need to get the property you want.
  • Excellent Flexibility – If you’re someone who works with real estate investments, a hard money lender can be the perfect choice for loans. These lenders are often more sympathetic to flipping houses to make money than any of the local banks will be.
  • Negotiation Possibilities – There are only a certain number of ways that banks can negotiate if they choose to do so in the first place. A hard money lender often allows more negotiation so you can keep your options open. You may be able to get better terms when you choose a hard money loan.
  • Less Emphasis on Credit – Poor credit isn’t an immediate dealbreaker when applying for a hard money loan, while it might be with traditional loans. If you can show that you have equity, a good plan, and real estate experience, bad credit isn’t going to be the single thing that precludes you from being approved.

How a Hard Money Loan Works

A hard money loan will often resemble other types of short or medium-term, high-interest loans you see available. Most of these loans have a term of less than a year, although they can sometimes last up to five years. In most cases, the interest rates on this type of loan will fall between about nine and 21%. With a hard money loan, no underwriting process is used by all lenders. Because of that, the process can often vary to a large degree between two lenders.

Since all hard money loans are different, the terms of yours are going to differ based on the deal you worked out with your lender. The loan-to-value ratio and the region where you’re buying property will also play a part in things. When it comes to the ratio, the higher it is, the more risk your lender is taking on. This often means that your interest rate will be higher than it otherwise would be.

There also may be other costs in the form of closing costs of points. Points are a variety of different fees that may be associated with a hard money loan. In a general way, one point charged onto your hard money loan will translate to approximately 1% of the total amount of the loan.

Beyond that, this kind of loan is like many other traditional loans. It is going to create interest over time and you’ll typically make monthly payments until the loan is paid off. However many people pay off this sort of loan early to avoid the high rates that can add up over time. Since this is expected behavior, there typically are no penalties for paying ahead of schedule.

The Process to Qualify for a Hard Money Loan

The first thing to be aware of when trying to qualify for a hard money loan is how much money you can expect to be loaned. Keep in mind that the value of the property that is being used as collateral will play a large part in how much the loan can be for. However, other factors come into play that you should be aware of.

You’ll find that many hard money lenders focus on a specific kind of property such as commercial or residential. That’s why you need to do a bit of research to find a lender who works with the same kind of property that you plan to secure. Also, you may need to show that you have enough capital to invest in the property and that you have a plan in place for paying off the loan.

Hard money lenders will also look into whether you have experience with real estate transactions to gauge whether you qualify for a loan. While you will likely have your credit rating looked at as a part of the process, it typically will not play a part in the decision about whether you can have a loan from a specific lender or not.

Where to Get Hard Money Loans

Most hard money lenders are private investors or investment companies that are interested in the real estate world. Since real estate is tied to specific locations, most hard money lenders are going to operate on a local or regional basis. This can make it difficult to find since every location is a bit different.

Since you’re trading based on real estate, areas that have a hot real estate market are also likely to have many hard money lenders. On the other hand, if the real estate market in your area isn’t seeing a lot of action, hard money lenders may not be around. However, local real estate associations and brokers can often point you toward the hard money lenders in your neighborhood.

Taking a look online for resources about hard money lenders can help you find options in your location. This will get you the names and contact information for the largest lenders in your area. If you are searching for someone a bit smaller, the real estate community in your area might be the best way to find them.

Hard Money Loans in West Palm Beach, Florida

If you’re looking for an experienced hard money lender in West Palm Beach, HML Solutions offers hard money and bridge loans for commercial projects in the area. We tailor our loans to meet the needs of property investors for fix and flip projects or more unique arrangements. You can learn more and contact us for questions by visiting our website.