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Hard Money Financing For Residential 1 to 4 Properties
By G. David Lapin On June 14 2023
Hard money financing provides much needed capital to real estate investors and small business owners using real estate as collateral.
When it comes to residential properties (1 to 4 units), hard money financing can be an option for investors looking for funds faster and more efficiently than a bank or conventional lender. Shorter term loans: Hard money loans are usually short-term loans with a duration ranging from a few months to a few years. They are designed to be repaid quickly, often within 1 to 3 years.
- Higher interest rates: Hard money loans typically come with higher interest rates compared to traditional bank loans. The rates can vary widely, but they are usually in the range of 8% to 12%.1st and 2nd mortgages are considered.
- Quicker approvals and funding times: Hard money lending can often provide faster approval and funding times compared to traditional lenders. This is because they focus more on the value of the property and experience of the borrower.
- Flexible qualification criteria: Hard money lending is primarily wants a well planned out exit strategy and overall plan for the real estate being used as collateral. Lighter documentation is required.
- Loan-to-value (LTV) ratio: Priavte money looks at the loan to value of the property. CLTV of 65% and 70% LTV percent is typically the max considered although there can be some exceptions.
- Use for property acquisition or renovation: Hard money financing for 1 to 4 residential loans are primarily now only considered for business purposes. Some examples are: cash out to add a home office, purchase money to acquire a fix and flip or working capital secured by a rental property.
When considering hard money financing, it's essential to have well thought out plan of action and exit.
For more information on our Hard Money Loans or Trust Deed Investments, call our office at 714.838.1474 ext. 102 or visit our:www.hanovermc.com