What is hard money?

Hard money is a catch all term for asset based loans issued by private groups or individuals. This article discusses some of the advantages and potential drawbacks involved with this type of lending.

Most commercial lending requires a tedious approval process. A borrower’s credit history is carefully reviewed, their income is verified and in many cases a substantial down payment is needed to qualify for a regular commercial loan.

Hard money is different. Hard money is a general term for loans that are secured by the collateral i.e. the property being borrowed against. These types of loans are issued by private groups or lenders, who consider the value of a subject property as being of greater importance than a borrower’s financial situation. Should a borrower default, the hard money lender simply resells the property at a profit to make up for the outstanding loan. As a rule, hard money loans are short term and often come with double digit interest rates.

While hard money may seem expensive it is still a sensible option in certain cases. Hard money is an excellent option for immediate investment opportunities that need to be taken advantage of quickly and which cannot be deferred by the traditional loan approval process. Fix and Flip real estate investors will find hard money particularly useful. This type of borrower can use hard money to purchase a property, quickly improve its value, sell the property for a profit and then quickly pay off outstanding loan. Hard money can also serve as a bridge loan to other types of more conventional financing. Borrowers can purchase a property with a hard money loan and then refinance once their credit situation improves.

Considering its expense what are the main benefits to hard money?

Hard money is above all a much faster method of financing than traditional lending. A hard money lender won’t spend many hours combing through potential borrowers financial records. Instead they will look mainly at the potential value of the subject property. This greatly speeds up the approval process. Borrowers with an outstanding relationship with a hard money lender can see the process move even faster. Hard money lenders are private groups or individuals and can offer more flexible terms when compared to traditional banks.
Traditional banks have a strict, highly formalized underwriting process which restricts their ability to offer better terms to borrowers. Hard money lenders can look at each deal on a case by case basis. If an investment opportunity is particularly attractive, a hard money lender can potentially offer lower interest rates and better repayment schedules to borrowers which would be impossible to get at a regular bank.

Hard money is easier to qualify for, but there are some drawbacks.

Because the value of the subject property is more important to hard money lenders than a borrower’s credit history, unqualified borrowers can still be approved for a hard money loan. However because of this risk hard money lenders often limit the amount of the loans that they issue. Hard money loans are usually offered at between 50 to 70 percent of the value of the subject property. Borrowers should therefore have substantial assets on hand to make up the difference. Borrowers can also be expecting to pay several percentage points of the total loan amount in origination fees.

The first step to finding a hard money lender is to connect with the local real estate investment community or to look for collateral based lenders in your area. Borrowers should strive to develop a good relationship with any hard money lender they approach in order to secure the best terms on their loan.

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

Commercial real estate loan rates what borrowers need to know

Investors need to be aware of how their commercial real estate loan rates can change over time and how their loans are structured. However the type of lender will have the biggest impact on the loan rate.

Something every borrower should consider is how loan rates can change over time. A real estate loan can come at a fixed or a variable rate. A fixed rate loan remains at the initial interest rate over the entire course of the loan. Borrowers will make the same payment every month over a given period. Few borrowers can qualify for a fixed rate commercial loan.

Variable rate loans are more common when it comes to commercial real estate. The interest payments on variable rate loans can change over the course of the loan. Any increase or decrease in interest is usually tied to the prime (or market) rate. Prime rates generally change every 1 to 5 years and many variable rate loans are offered as the prime rate plus a certain percentage of interest. For example, if the current prime rate is 4 percent, a bank could offer a loan as prime plus 3.5 percent so the initial interest on the loan will be 7.5 percent. However the interest on this loan will fluctuate and will rise or fall according to the prime rate.

Interest rates are not the only thing borrowers should be aware of, as the structure of a commercial loan is equally important. Some loans are fully amortizing which means that the interest payments and the principle of the loan are fully paid off once the loan expires. Some loans are also structured with variable rates that reset after a given period. Like any variable rate loan you pay a given interest rate for an initial period. After this initial period the interest rate will reset and the borrower will pay at the new rate until the next reset period or until the loan matures. However balloon payment type loans account for the majority of commercial mortgages. In technical terms balloon loans have longer terms than their amortization periods. This means a certain amount of interest and principle will need to be paid off once the loan expires. Borrowers with this type of loan will need to plan ahead and calculate what the balloon payment will be when the loan matures, or make plans to refinance ahead of time. With a balloon loan an unprepared borrower could easily default.

The biggest factor in when it comes to commercial real estate loan rates is the type of commercial loan a borrower takes out.

Government backed loans and conventional bank loans usually offer the lowest interest rates. SBA 504 and 7a loans offer the lowest interest rates overall. The government guarantees a certain percentage of these loans and the risk for the mortgage provider is alleviated, which results in lower interest rates. 7a loans are easier to qualify for and are usually for smaller amounts than 504 loans. The interest on a 7a loan can be variable, but usually ranges from 6.5 to 9 percent. SBA 504 loans are intended for loans over one million dollars and are usually issued in “stacks.” 50 percent of the loan comes from the bank, 40 percent from an SBA provider and 10 percent of the loan is the borrowers down payment. The bank issued portion on a 504 loan is usually variable while the SBA backed portion being offered at a fixed rate. The average rate on a 504 loan currently ranges between 3.96-4.43 percent, making 504 loans the cheapest type of commercial loan. Banks also offer conventional loans that are not backed by the government. Borrowers seeking a commercial loan from a conventional bank should have a good credit profile, expect to pay a higher variable rate over an SBA loan and have at least a 20 percent down payment on hand. However some borrowers may not qualify for a low rate SBA or a conventional bank loan

Many borrowers won’t meet SBA or conventional bank requirements. Hard money lenders may be a reasonable option.

Hard money lenders usually charge the highest interest rate when compared to other commercial mortgage providers. The average interest on a hard money loan is usually 10 to 18 percent. These high rates reflect the additional risk involved with hard money lending. Hard money lenders consider the value of the asset being borrowed against over a borrower’s credit profile. Hard money loans are generally short term, with repayment schedules averaging between 6 and 12 months. In spite of their expense a hard money loan may be a good option for commercial real estate investors without a good credit profile and who need a “bridge loan” to more conventional financing.

Borrowers should know whether their loan is fixed rate or variable and whether their loan is fully amortized. A borrower’s credit score will determine whether they qualify for a lower rate SBA or conventional bank loan, or whether they should seek out a hard money lender.

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

Commercial Lender Barclays struggles to assure investors

The commercial lenders share price has tumbled this year. Barclay’s stock has performed worse than the notably troubled Deutsche Bank. The group is clearly struggling to assure its investors.

While the majority of Barclays European peers have seen their share prices rise by an average of 11 percent, the groups own share price is down by some 13 percentage points. Clearly Barclays has missed the mark for potential investors so far this year. The group is highly concentrated in the volatile UK retail banking sector, and has also expanded credit card loans in the US. Above all Barclays has been focused on expanding its investment banking activities this year. Investment banking has struggled to achieve greater profits in recently and many speculate whether Barclays should reduce lending in this area.

Barclays as a UK based bank has deep ties to that countries retail banking sector. Many investors are considerably wary. UK retail banking has been expanding at rates that many consider unsustainable. Unsecured consumer credit in the UK has grown by 10 percent every year, 5 times faster than borrower incomes. In the UK, many people are finding it difficult to secure more hours at work. Borrower incomes could therefore decline without borrowers becoming officially unemployed. These conditions in the labor market have left many investors uncertain about the stability of consumer lending in the UK. While consumer loans do not account for a massive share of the countries household debt, these loans default at a rate 10 times greater than other loans whenever the country faces a downturn. Bre-exit will only compound investor uncertainty about the UKs economy and Barclay’s exposure to consumer credit.

Here in the US Barclays has been rapidly expanding credit card lending, another sector where the rate of lending is apparently outpacing borrower incomes. Barclays has been expanding its credit card lending efforts in the US by 25 percent since 2013. Many major credit card providers have seen a spike in delinquencies this year. Capital One saw credit card loans that were delinquent for more than 30 days rise by half a percentage point between April and August of this year. This has surprised analysts in view of the strong labor market in the US. Capitol One CEO Richard Fairbank points out that these delinquencies are again the result of lending out pacing growth in borrowers incomes. The rise in credit card defaults may not be dramatic, but it will only add to uncertainty on the part of Barclays shareholders.

Commercial lenders have been struggling to increase investment banking profits, Barclays is no exception.

Historically low interest rates over the past few years have made investment banking far less profitable than it once was. As a result, aggressive lending to less than qualified borrowers has become the norm in this sector. As interest rates rise in the near future cheap investment loans with loose terms will become far too risky to issue. Making it harder for Barclays to achieve a profit from investment banking in the near term.

Still the commercial lender seems to be committed to recapturing investment banking profits.

Tim Throsby, Barclay’s head of investment banking claims that even a moderate rise in revenues in this area would provide a significant boost to the banks’ profits. The bank has since been targeting only investors who can offer substantial business to the bank in the long term. Other financial institutions have adopted a similar strategy and few have found it useful to boost investment banking profits. Still Barclays seems committed to this course of action. The group recently reduced dividends to shareholders in order to expand available credit for investment banking. Considering its tepid share price, the bank may want to consider scaling back these efforts and returning this capitol to its investors.

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

Commercial loan financing: Methods for becoming a commercial real estate investor

Investors with deep pockets could always buy a piece of commercial property outright, but commercial loan financing can help investors diversify. This article will illuminate some common methods of commercial financing.

Most investors will readily understand conventional mortgages. Even if an investor has enough money up front to purchase a property, a mortgage is usually a better option. An investor can take advantage of multiple investment opportunities and achieve greater returns by spreading their savings between multiple down payments. Some mortgage providers resell their loans to a government entity like Fannie Mae or Freddie Mac. This resale to a government entity restricts the mortgage terms these lenders can offer. Portfolio lenders can offer borrowers more flexible terms on a conventional mortgage. Portfolio lenders finance loans directly from their own funds. Without the involvement of a government group, portfolio lenders can offer better terms to borrowers in some cases.

Any mortgage for an investment property usually requires a down payment of 25 to 30 percent. First time real estate investors may not have the savings to afford such a substantial down payment .These investors could borrow against the value of their home in order to raise the money needed for a down payment. Home equity lending offers both tax benefits and considerably lower interest rates than other types of financing. The lender will consider the borrowers home rather than the property being invested in, which can smooth out the approval process. The purchase of the investment property will also be easier, as sellers prefer buyers who can offer money up front.

Still some borrowers won’t qualify for a conventional mortgage. Hard money or private investment may be the only commercial loan financing method available.

Hard money is offered by professional lenders and private money usually comes from individual investors. Hard money providers do not closely scrutinize a borrowers credit references and instead consider the value of the property being borrowed against. While hard money is expensive it may be only option in some cases. This is especially true for particularly distressed properties that an ordinary bank won’t finance. Unlike hard money lenders, private lenders do not regularly issue loans. Private lenders are individuals with savings on hand and an established relationship with a borrower. Private lenders give borrower cash in exchange for repayment at a specific interest rate. There are no hard and fast rules when it comes to private lenders and the terms on private loans will vary on a case by case basis. The personal relationships of an individual investor will most often determine the terms of any private loan.

One type of commercial loan financing isn't actually a loan at all, these are equity partnerships. Partners get a fixed amount of profit from the investment rather than earning a specific interest rate.

A lender is referred to as an equity partner when they buy a share of ownership in a property. These partners can finance the entire purchase price or the down payment on an investment property. The terms of a partnership are usually defined in an operating agreement or in a promissory note. Like private loans the terms of partnership can vary on a case by case basis. The main difference between a partner and private lender is that a partner receives a specific share of the income generated by the property rather than regular interest payments.

Conventional mortgages, hard or private money lenders and equity partners are the most common way to finance the purchase of a commercial property. Crowd funding is another option. Any first time real estate investor should consider their personal contacts and their credit profile. A private loan or an equity partnership may be a better option than a conventional mortgage or a hard money loan.

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

How to Find Commercial Loan Financing From the Online Marketplace

You shop for your essential items online, your Christmas gifts and even your groceries. So it makes perfect sense that when you are in need of commercial loan financing you look to the online marketplace to start your loan search – read on for tips to get your best loan online.

As with any industry, there are progressions with technology and commercial loan financing is no different. No longer do you just go to your local bank and ask for a loan. There are so many alternative options that borrowers have access to… as long as they have access to the internet! So get comfy, grab your laptop and get ready to find the loan you need!

To get commercial loan financing via an online marketplace lender, it helps to start out by learning exactly what an online marketplace lender is! Online marketplace lenders help borrowers obtain funding in an online format. You don’t eve have to leave the house! Online marketplace lenders are great options to traditional bank lenders, and are great for people that have less than stellar credit history a low credit score or need cash fast.

Most online marketplace lenders specialize in short-term loans, but there are some that do offer longer-term loans. These lenders are perfect for the borrower who has attempted to obtain a loan via other avenues but have been unsuccessful because lenders on the online marketplace have the ability to be a little more lenient.

There are some things you should know about online marketplace lenders.

If you are in need of commercial loan financing and you are seeking funding via online marketplace lenders, you should be knowledgeable about some things. First, it’s important to know that because these lenders are taking a high risk on your loan, the interest rates you pay will likely be fairly high to make it “worth the risk.” However, your loan, which will likely be a short-term loan, will likely be approved fairly quickly, meaning you will have cash in hand quickly.

When you are ready to seek a loan via the online marketplace, simply turn on your computer!

It can be a fun and interesting process to search for the right loan for your needs via the internet. There are many online tools that can help you determine your monthly payment and length of the loan term based on your needs. When you are searching online it’s still very important to ensure the institution is reputable and licensed to be able to get you the loan you need. It’s a nice element if the online company has a live chat aspect so you can talk to a real person if you have any questions throughout the process.

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

What You Can Expect from Commercial Lenders

When it’s time to get a loan, your commercial lenders can make the process might easier. But you want to make sure you find the right lender and know what they can do for you.

If you need a loan, going it alone is not the best option. Especially when it’s professional commercial lenders job to help their clients get the best loan for their business ventures. As you are starting out with your lender search, there are some things you should know about what you can expect from your lender and what you will be expected to do during the loan application process to create a win-win solution.

Experience is one of the first and most important things you should look for when shopping for a lender. Experience is knowledge, and knowledge is power. When you are looking for the right lender, experience goes a long way so make sure the person you chose to work for knows his stuff forwards and backwards.

You can certainly expect your lender to have experience – not only in his or her industry, but yours. What we mean by that is that the lender should have experience in loans with similar projects and ventures as your own. Each industry and business venture has its own unique elements and sometimes that means it requires specialty circumstances. If the lender you are looking to work with has a portfolio of similar projects, this is a good sign. You can also expect that your lender be appropriately licensed.

Experienced lenders will go the extra mile for you.

Commercial lenders that have been through this scenario a hundred times know what is going to work and won’t work – and they can either help you get to the place you need to be or won’t waste your time taking you down a road he know isn’t the right path. They also have the partnerships and connections that can further help you in your business venture. These experienced lenders also go the extra mile to close the deal so you know you can trust them.

Here’s what a lender is going to expect from you.

Be prepared with a business plan, know your up to date credit score and bring any documentation that would prove helpful toward the success of your loan approval. Be sure to ask questions about what your lender is going to need. You should also be prepared to put down some collateral. While there is a lot you should expect from your lender, your lender will expect these things so he can help you improve your chances of getting the best loan negotiated for you. If you’re not sure what your lender will expect from you upon your first meeting, don’t be afraid to ask what is expected of you so you and your lender can start your business relationship off on the right foot!

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

How to Find the Right Commercial Real Estate Lenders for Your Loan

When you are looking at commercial real estate lenders to fund your loan, there are certain things you should look for and certain things you should know. Here’s what to look for when you need a loan.

“Shopping” for commercial real estate lenders can be a little daunting, and sometimes even challenging. But there are steps you can take to narrow down your search and make sure you find the right lender to fund your business or investment. Traditional lending institutions like banks are very difficult to obtain loans from, even in the best of circumstances and greatest economic climate. But don’t hesitate to look to other alternative lending institutions to fund your loan.

It’s important to find a lender that believes in your dream and truly wants to invest in you and making your dreams come true. If you already have a bank with which you have a close relationship, you may be surprised that this is the best place to start to see if these commercial real estate lenders will fund your loan. They will usually be able to negotiate a very fair deal, and it’s already an institution that you work with so you already have a trustworthy relationship.

If your loan is not accepted via your bank, you still have many options for commercial real estate lenders that will be willing to take on your loan and still work with you to get a fair and loan that works for your needs.

Start with a local search in your area.

Whether you look to another local bank, a credit union or a private lender, you still have plenty of options right in your own backyard. Do some research online for local lenders to see what information you can find. Try to learn as much as you can about the lender prior to meeting, and see what their requirements are to so you can be prepared for your first meeting. Alternative lenders may offer other loan options besides a traditional long-term long. There are many other loan options and sometimes these alternative loans are much easier to get approved for – so it’s a win-win solution.

Once you’ve found the lender you trust and who believes in you and your business venture, it’s time to get going!

Gather all your documents such as financial statements, credit report, business plan, collateral proof and anything else your lender needs to up the chances of your eligibility for a successful loan application process. Once you have all your ducks in a row, the process can go forth much more smoothly and easily. There is some preparation that you will need to do but you will be so much happier knowing you have everything ready when you need it.

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