What is Hard Money?

Hard money is, simply put, money that is backed by a “hard” asset. Individuals and companies often turn to hard money lenders when capital is required to bridge assets or rapid funding is required.

At one time, hard money was thought to be synonymous with back-alley dealings with less-than-stellar individuals offering loans in exchange for 50 percent of your business, or your first born, whichever was worth more. Fortunately, that misconception is long gone. The truth is that many contractors, developers, businesses and even home owners turn to these types of loans for various purposes and in a wide variety of circumstances. These are some of the most common reasons people turn to hard money loans.

· The time to funding for a traditional lender can be painfully slow, taking up to several months in some instances. For real estate investors, contractors and developers, this time lapse could lead to missing out on that one-of-a-kind property that just hit the markets and is perfect for a build-out, rent and hold or their next fix and flip. Time is of the essence in some real estate dealings. This type of loan also allows real estate investors to move on to their next project while waiting for traditional funding or to obtain a traditional loan after the rehab has taken place.

· Home owners often find the home of their dreams before their previous home sells. In today’s market, a contingent offer based on a sale often takes a backseat to an offer without any contingencies. A hard money bridge loan can provide these individuals the capital they need to purchase their new home instead of waiting for their previous home to sell. This type of loan acts as a bridge from one asset to another, is backed by collateral, and often funds in less than a week.

· If you have negative items on our credit report or are self-employed, making it sometimes difficult to prove your income, this type of loan can be easier to obtain than a traditional loan. These lenders are more concerned with the collateral or hard asset that you will be using to back your loan. They will also want to know your exit strategy, or how you plan on repaying them once the project is completed.

A Few More Facts about Hard Money Loans

Hard money loans are usually short-term loans, anywhere from 3 months to 5 years. Because these types of loans are often funded by private individuals, they do not have to adhere to the same restrictions and regulations that banks do, making these lenders more flexible and often easier to work with. The loan-to-value ratio varies widely among lenders and is usually somewhere in the range of 50 to 70 percent.

At Level 4 Funding, we work with hundreds of private hard money lenders who choose to invest in varied projects based on their interests.

Because of our rolodex of investors, we can often find the right investor for your project with the best rate possible. Call us today to discuss your needs and for a no-obligation quote.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Who Are Hard Money Lenders and What Do They Do?

A hard money lender is an individual or group of people that invest in various projects based on the collateral or hard asset. These lenders often specialize in a specific type of property and, as private investors, they are not bound by the same regulations that traditional banks face.

A hard money lender provides capital for various types of projects. These include residential, multifamily, businesses, warehouses, industrial, office space and even the growing-in-popularity multi-use projects. Many will not, however, lend on owner-occupied residential properties in part due to the Dodd-Frank Act. Because these investors tend to prefer specific projects, a lender will often develop a working relationship with one lender and turn to them repeatedly for their funding needs.

Hard money lenders tend to provide short-term loans, though these can often be extended for up to five years. They offer the perfect funding scenario for those in the fix and flip business that are looking for quick capital to jump on a promising property when it hits the market, instead of having to wait for a traditional loan to come through—a difference in not just days, but weeks. They can get into the project, complete the rehab, find buyers, and then pay back the loan that usually does not have an early prepayment penalty.

Hard money lenders are also fairly popular among developers. These types of lenders can provide loans with monthly draw programs, perfect for the construction industry. They offer interest only payments for a set period of time while the construction process is proceeding. They will want to see your plan, budget, permits and exit strategy. Not all projects go as planned, sometimes leaving developer’s credit reports with some marks against them. A hard money lender will not place as much emphasis on this aspect of lending as a traditional lender. For those that have some credit issues, they may be the best, and only, option available.

Hard Money Loans offer Quick Financing and Approval

A loan approval is possible the same day that you apply, whereas a traditional bank can take at least a week or more. From that point forward, the underwriting process if fairly straightforward. They will want to know your asset and will place more importance on this collateral than on your credit score or creditworthiness. Because of this, funding can occur in less than a week whereas your bank or credit union can take more than a month.

At Level 4 Funding, we work with a variety of private hard money investors that provide capital for all different types of projects. Our loan-to-value ratios are some of the highest in the industry and we pride ourselves on speed of service. Many investors turn to us when they are looking for capital in order to purchase a foreclosed, bank-owned or short-sale property and time is of the essence. Call us today for a no-obligation quote. Our approval process and funding can occur in as little as 24 hours!

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Different Types of Hard Money Commercial Loans

Hard money commercial loans are a common go-to among developers and contractors for a variety of projects. These types of loans are often quick to both approval and funding, making them the perfect loan when capital is required in less than a week.

Developers and contractors use these types of loans to fund numerous projects including multifamily, industrial, office space, fix and flip, or buy and hold properties. In the present lending environment, underwriting standards are tightening and, when loans are approved, they are often for less than the total capital required to complete the project in its entirety. When developers opt to accept this type of funding, they are often left scrambling for additional capital part-way through the development. Not a good scenario.

Hard money commercial loans are different from traditional loans in that they are based on the hard-asset of the project, or other collateral, and can offer less stringent underwriting standards as well as increased loan-to-value ratios. Some hard money lenders will provide loans based on the after-repair-value, though these are more difficult to come by as the lender assumes greater risks. Some hard money lenders will even provide financing for the rehab costs, a practice that portends an even greater risk and therefore is also associated with a higher interest rate.

In order to obtain a hard money commercial loan, you need to have a plan, an exit strategy which shows how you intend to pay back the loan, and a bit of skin in the game. This ensures that you, as the developer, have something to lose as well and will, therefore, do all that you can to ensure the plans, building or renovation, go accordingly and to budget. There are always those surprises that almost every development faces, but even those are considered among experienced contractors.

How Quick Can I Obtain Capital with a Hard Money Loan?

Because most hard money commercial loans are funded by private investors or small groups, the time to funding varies dramatically. In most instances, funding is fairly rapid. Be sure to come equipped with your plans, budget and permits. If you are looking for funding for a fix and flip, demonstrate your knowledge in the market you’re choosing as well as construction and real estate protocol. If you have a weak spot in this area, it’s important that you show a lender that you have a team of experts to make up for any areas that you lack in experience. For instance, if you are not remodeling savvy, what construction company are you partnering with? If you are weak in defining markets and comps as well as marketing to potential buyers, who is the real estate agent that you are working with?

At Level 4 Funding, we work with hundreds of private hard money lenders that provide commercial loans for all types of projects.

We offer interest-only payments and short term loans anywhere from 3 months to 5 years. We do not put as much emphasis on your credit report and can often say “Yes!” when banks have said “No.”

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Breaking Down Commercial Real Estate Loan Terms

For those entering into the world of commercial real estate, understanding the many loans and commercial real estate loan terms that various entities provide can be confusing. From traditional banks to hard money lenders, institutions and private lenders offer varying terms that can range to as little as 3 months to 20 years or more.

There are several different options a company or individual has when trying to secure funds for a commercial project. Some investors lend on specific types of projects, such as only multifamily units, while others will lend on any and all types of businesses and developments from retail to hospitality to office space to industrial. Commercial real estate loan terms on the various lenders vary dramatically. A SBA loan, for instance, usually offers terms in the 10 to 20-year range. They are hard to obtain and time to funding can take several months. With a traditional commercial mortgage, you will typically find terms that range from 5 to 20 years. Time to funding is usually over one month and they require a high credit score. A bridge loan is a short-term asset-to-asset based loan that usually tops out at about 12 months, though terms can often be extended. Commercial mortgage-backed security (CMBS) loans fall in the 10-year range at which point the debt matures and refinancing is required.

If this is your first foray into commercial real estate, it’s important to note that commercial real estate loan terms are dramatically different from residential loans. A residential mortgage typically is an amortized loan with a debt repaid in regular installments. These fall in the range of 15 to 30- year mortgages. At the end of the period, the loan is paid off.

Commercial loans, on the other hand, can offer terms that are anywhere from 3 months to 20 years. The amortization period is usually longer than the term of the loan resulting in a balloon payment at the end of the term. For example, a borrower may obtain a commercial loan for a term of five years with an amortization period of 20 years. They would then make payments for five years in a monthly amount that would actually pay it off in 20 years. At the end of the five-year term a balloon payment would be due which would pay off the loan in full. The terms and amortization period will usually affect the rate that the borrower receives.

Typical Terms for Hard Money Lenders

Because hard money lenders usually fall in the private sector, these lenders can offer more flexibility. Commercial real estate loan terms usually fall somewhere between 1 to 3-years and are considered short-term loans. Because they can fund in as little as a week, they are often used when capital is needed in a short time, such as when a prime piece of property comes on the market and investors are trying to beat out their competitors by getting a bid in quickly and with no contingencies.

Terms for commercial hard money loans usually range anywhere from one to three years.

At Level 4 Funding, we offer a wide variety of loan programs from bridge loans with terms that start at 3 months to construction loans with monthly draws and terms of two years. Other loan options provide terms as high as five years. Approval occurs in as little as 24 hours with funding provided in less than a week. Call us today for a no-obligation quote.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Factors That Are Considered for Commercial Real Estate Loan Rates

Commercial real estate loan rates vary dramatically depending on the lender. Other factors that may come into consideration is your creditworthiness, size and term of loan, and the market.

Commercial real estate loans are on the rise thanks to a slightly sluggish but still upwardly mobile economic trend. Multifamily has been particularly active in recent years. Fortunately for borrowers, there are several institutions and individuals that are willing to offer commercial loans in this present environment. Let’s run through a few and share the commercial real estate loan rates as of October, 2017:

· Conventional Bank Loan: 5 to 7 percent with 5 to 10 year balloon payment.

· Credit Unions: Their mortgage rates are, on average, approximately 0.3 percent higher than banks.

· SBA: They have several types of commercial real estate loans that range from 3.5 to 6.75 percent. They offer longer terms than other commercial lenders, but they are also difficult to qualify for.

· Online Lenders: They have an extremely wide range—anywhere from 10 to 40 percent depending to a large degree on the project and terms.

· Private Hard Money Lenders: These individuals and small groups also have a wide range though they tend to fall in the 10 to 20 percent bracket.

In addition to your project, terms, and collateral, there are other lending factors that will help determine your commercial real estate loan rate. One of these factors is your credit score. Almost all lenders require you to have a credit score often in the 680 to 700 plus range. The one exception is private hard money lenders who place more emphasis on the hard-asset or collateral that you are bringing to the table. Another factor is the amount and length of the loan. Generally, the more the loan and the longer that you are going to pay it off, the higher the interest rate. The type of loan and the current market trends will also affect your rate.

Whether you qualify or not will often boil down to these factors: your asset, debt-to-income ratio which ensures the lender that you’re are not toppling over with debt; debt service coverage which is a ratio that ensures the property is making enough money to cover the loan payment; and loan-to-value ratio which ensures that the collateral you are using is more than enough to cover the loan. Most lenders will not go over an 80 percent LTV, meaning you will have to come up with 20 percent of the required funds.

Time to Funding

Conventional banks, credit unions, and The Small Business Administration can take a month or more to fund your project. In today’s market, that can mean a missed chance at a prime piece of property.

Of all lenders, private hard money lenders offer the fastest approval to funding time.

If you’re in need of capital now, give us a call at Level 4 Funding. We offer some of the fastest approval and funding times for private hard money loans. You will get your approval in as little as 24 hours and receive your capital in as little as two days.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Different Types of Commercial Real Estate Lenders

There are several different types of commercial real estate lenders that are providing capital for all of those multifamily units, office buildings, warehouses, distribution centers and multi-use shopping centers that are sprouting up across the nation. Here are a few that borrowers in the commercial real estate industry are turning to.

Commercial banks are, by far, the most commonly used commercial real estate lender. Their commercial loans usually range anywhere from $150,000 to over $50 million, and they acquire borrowers to have very good credit scores along with a low debt-to-income ratio and enough money in the bank to cover expenses for a definitive length of time. Various banks may have preferences in commercial lending projects such as construction, multifamily units or large-scale developers.

Life Insurance Companies like to invest all the money coming in from all those policy payments in real estate; however, they only invest in low-risk projects with a loan-to-value ratio right around 50 percent and with borrowers that have both high credit scores, low debt-to-income ratio and have a stockpile of money in the bank. Basically, if you don’t have 50 percent to put down on the proposed project or your credit score has taken a hit, look to another commercial real estate lender.

Commercial mortgage-backed security (CMBS) lenders prefer large commercial loans on properties such as multifamily, office, industrial and retail. These lenders package loans together into a security which is then sold to investors in the form of bonds, and they are the second-largest source of commercial real estate debt. They tend to have a 10-year lifespan, at which point the debt matures and refinancing is required. Real Estate Investment Trusts (REITs) are for experienced borrowers with big projects needing large loan amounts. According to National Real Estate Investor, Crowdfunded REITs are gaining momentum with Fundrise, the first firm to launch a crowdfunded REIT, raising $90 million in less than a year.

Private Hard Money Lenders

This type of commercial real estate lender provides short-term quick capital. There are investors that specialize in various projects such as multifamily, industrial, office space, multi-use and even hospitality. Rates can be higher than a traditional bank loan, but they are not bound to the same stringent underwriting standards. These lenders supply funds based on the collateral or hard-asset of the project. In some instances, you can also use collateral from another source such as your personal home or another business. They do not place as much emphasis on credit scores and debt-to-income ratios. Their funding is fairly rapid and many offer an average loan-to-value ratio in the 75 percent area.

At Level 4 Funding, we specialize in private hard money loans for commercial projects.

We fund private hard money loans for all types of commercial endeavors. As hard money loan mortgage brokers, we work with both banks and private investors and can often find the capital you require when you’ve been turned down by other institutions. Call us to enquire about our many options and to see if we can provide the capital you need. We are upfront and honest and, if lending is a problem, we can share with you the steps you need to take in order to get your project funded.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Typical Commercial Real Estate Interest Rates

Commercial real estate interest rates among lenders can vary dramatically. Let’s take a look at the various lenders and the typical rates you may expect.

The first caveat is this: there really are no typical rates. This is because the commercial real estate interest rate you obtain will be dependent, to a large degree, on your creditworthiness, your debt-to-income ratio, the amount of money you have in the bank, your credit score, the length of time you’ve been in business and your collateral. All commercial loans usually carry higher interest rates than residential loans. This is often due to a limited credit history as well as an increased risk to the lender. Other considerations include the fact that the larger, longer-term loans generally have higher rates. There are also some fixed-rate loans out there without end-of-term balloon payments, but those are few and far between and even fewer qualify.

The following are typical commercial real estate interest rates based on the type of lender. As noted, these will vary depending on the many variables we previously listed. Because we are currently in a period of extremely low rates, these will fluctuate and tend to rise as the economy stabilizes or continues to mend, creating rising interest rates. Life insurance companies usually carry one of the lowest interest rates often starting in the mid-3 range. They prefer to make loans to established borrowers and ones with high credit scores and creditworthiness. You will also need a fair amount down. Traditional banks are currently in the 5 to 7 percent range. They too are difficult to qualify for and require good credit and a low debt-to-income ratio.

The Small Business Administration offers loans with rates that currently fall in between 4 and 9 percent. You will need to have been in business for at least two years, have a credit score above 680 and show some profit.

Hard Money Lender Rates

Hard money loans are typically funded by private individuals or small groups. Interest rates vary widely depending on the type of loan, the project and the particular investor. On average, they are usually in the 10 to 18 percent interest rates. They are often short-term loans with borrowers using their businesses or property’s collateral in order to obtain the loan. Their credit score and credit worthiness is less important to these types of lenders. On average, their terms range from 1 to 3 years.

As you can see, commercial real estate interest rates vary widely, starting in the 3.5 percent range and going all the way up to 20 percent and above. In order to get the best rate, know your project, come with a budget and permits in hand, know the value of your hard-asset, and save up until you can have some “skin in the game” which leaves vulnerable investors feeling a little better about their investment. Call us at Level 4 Funding for a no-obligation quote.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com 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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage