Commercial Hard Money

Hard Money Loans are a great and creative way that has made its way in the Money Lending industry over the past few years because of the economy and banks being a lot more careful about their loans, these changes have made Hard Money Loans a great asset to your portfolio, and will certainly help your clients. As loan originators, we have to know all the options the market has to offer and Hard Money Loans can come in handy when there are significant changes in our clients lives. However, Hard Money Lenders like ourselves know beforehand that Hard Money Lending in New York and New Jerseys an investor’s world therefore they are not your typical lenders, there are requirements your client must meet in order to close a Commercial Hard Money Loan.

These investors are private individuals, or partnerships; Who are willing to lend money but they will do it as long as the ROI is higher than traditional lenders since their own capital is the one at risk.

Commercial Hard Money Loans are a much more complex process than Residential Hard Money Loans.

Investors will analyze the borrower like on any other Residential Hard Money Loan but they will pay much more attention to the commercial property, and by that we mean they will look at every detail since there is often situations where there is something unusual about the property or the borrower, That process could bring the transaction to a complex but not impossible Commercial Hard Money Loan.

Most borrowers in need of residential hard money loans have the following reasons :

Lack of employment, low credit scores, personal emergencies, health issues and so on; all of these scenarios sometimes go hand in hand with commercial hard money, plus you have to keep in mind the fact that the income of any commercial property can change or that there may have been a change in the use of the property.

Also your client cloud have pending judgments, liens and bank rejections these may be why he’s opting for a Commercial Hard Money Loan.

Our best advise on any kind of Commercial Hard Money Loan transaction is that you must know and understand ALL the reasons and variables that can come into play as why does your client, the borrower need that Commercial Hard Money Loan.

Once you understand your client’s situation you can start to look at all the other factors.

First : The property must have equity.

The industry standards are 70% LTV on residences, 65% on apartment complexes, and 50% LTV on land.
Very rarely you will see an investor doing Commercial Hard Money Loans over owner occupied, industrial or special use properties.

Equity is what makes a Commercial Hard Money Loan possible, therefore the appraisal will be the main factor to obtain a Commercial Hard Money Loan for your client and he must know that the LTV will determine the risk to the investor, your job is to obtain the must accurate appraisal for the sake of both parties and your reputation as a Commercial Hard Money Loan Originator.

Now that the equity and the LTV has been determined comes the exit strategy or how the borrower will repay the loan, this is of great concern for a commercial hard money lender. They will make sure that the borrower has a realistic plan for repaying the loan, otherwise you've wasted everybody’s time.

This all should be explain on a very detail presentation and be submitted to the private investor, partnership or corporation.

These private parties will demand of you to be diligent in providing precise information and paperwork on behalf of your client. Most of them have a list of documents you must provide along with credit check, income garnered from the property, current title, expenses of the property. This step is key, a well presented Commercial Hard Money Loan package will help you earn a good reputation and get the loan for your client.

Go the extra mile, offer investors to inspect the property personally, give them the demographics of the location, traffic, access and information about similar businesses in the area, and always get environmental reports.

Each investor has its own guidelines but you must go into every loan with the mentality that this must be a win - win situation for everybody otherwise, move on to the next Commercial Hard Money Loan.

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150
info@gfcommerciallending.com
www.gfcommerciallending.com 

HARD TO GET FINANCING?

Mortgage & Housing Market News from HSH.com

HARD TO GET FINANCING?

WALK SOFTLY INTO HARD MONEY LENDING BY GINA POGOL

Hard money, or private lending, is gaining popularity as financing remains tight. But borrowers need to know exactly how it works before they sign for a loan.

Hard money lenders are often the only alternative when banks and brokers are unwilling to lend. In today's economy, they are understandably in high demand. Exactly what is a hard money lender? It is a lender that does not use conventional standards to extend credit to borrowers. While banks and brokers evaluate credit history, income and debt to determine credit worthiness, private hard money lenders will often provide a short-term loan based on the underlying value of the property. Though they sometimes are difficult to find and their terms can be steep, hard money lenders are often a good option when traditional financing is out of the question or when cash is needed quick.

Investors looking for foreclosure bargains and homeowners looking to buy some time are two groups increasingly pitching hard money lenders.

Hard money for foreclosure investing :

Recent studies reveal that more people are buying foreclosures investing than ever before, and many are using hard money lenders to complete their purchases.

Jason Parker, Shortsale Expert said "Our clients oftentimes use short-term hard money to lock up hot deals that are too good to pass up. Then, they either partner up with another investor to refinance the deal or sell it to an end buyer, leaving plenty of profit on the table for everyone involved."

Parker says many of his buying strategies don't even require hard money, but knowing where to find it quickly is an added layer of security for investors.

Hard money to avoid foreclosure :

Homeowners trying to avoid foreclosure may take on hard money financing to gain time to sell the property. If you have significant home equity, your goal is to sell your home in a way that pays off the lender and maximizes your proceeds. A foreclosure sale on the courthouse steps does not accomplish those goals. So you refinance with a hard-money lender (some offer very short terms and require no payments), market the property, and hopefully sell it before re-defaulting on the home loan

Finding hard money lenders :

Hard money lenders can be found in multiple sources including local real estate investment clubs, mortgage broker contacts, newspapers or online.

Peer-to-peer lending sites connect private investors who have money to lend with home buyers who need special consideration--folks with plenty of assets and good credit but unverifiable income, ex. Other firms operate in a similar way, getting money from investors who decide which borrowers and projects they are comfortable with and what interest rate they will accept.

These days, though, even hard money is harder to get. Mike Sigala of Z Loan Investment in South Lake Tahoe, CA explains, "Things have become tighter all around. The loan-to-values are lower because you have to be able to attract investor money. what's fallen completely off the table is hard money construction lending. It's perceived as riskier by investors as well as some lenders."

Pitfalls Customers who can find a hard money lender shouldn't expect to be offered grade-A terms even if

their credit is good--that's just not the private-lending business model. Private-money mortgages typically have rates in the double-digits and often come with several up-front points.
Those who don't have at least 30 percent to 40 percent home equity or down payments probably won't even be able to get a loan. That's because hard money lenders limit borrowers' loan-to-value ratios so they can still make money from the properties if they have to foreclose.

Consumers need to watch out for "loan-to-own" predators, too. They structure hard money loans in such ways that borrowers inevitably fail, the lenders can take possession of the collateral properties and then profit from their sale. Carefully go through the terms of your loan and engage a real estate attorney if you don't understand them.

Costs

What does a typical hard money loan cost? That's difficult to say because there really is no "typical" transaction. But someone trying to avoid foreclosure might run into the following terms:

• Interest rates: 10 percent to 18 percent;
• Balloon payment: typical, usually due after one or two years;
• Maximum loan-to-value ratio: anywhere from 50 percent up to 70 percent;
• Points: might be beetween four to eight.

Protection

Hard money lending can be wild and woolly, but for those purchasing one-to-four unit properties that they intend to occupy, there is another lending option. Fractional lending, in which groups of investors provide the money on these homes, is regulated by the federal government and, in many cases, state governments. Borrowers still get the protections afforded by Regulation-Z, the federal code which covers mortgage lending, and other laws in two significant ways.

First there are added restrictions, such as limitations on prepayment penalties, negative amortization, default rates, and balloon payments. If the loan contains any prohibited terms, it is a violation and subject to an extended rescission, meaning you can cancel the loan.

Second there are additional disclosures that must be provided to the borrower that are triggered by loan terms considered especially burdensome. These disclosures must be provided three days prior to signing, and if they are not, the loan is also subject to the extended right of rescission.
There are also additional statutory penalties and, in some states, California included, the lender may be subject to punitive damages.
Note: These restrictions don't apply if you borrow the entire amount from a private person or finance investor property.

HSH NEWS 2011.
Commercial and Hard Money Lending Magzine.

For Hard Money Loans contact us:

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150
info@gfcommerciallending.com
www.gfcommerciallending.com