|
Hard Money loans are loans that do not fit within the conventional lending system for any number of reasons including:
- Need money fast, often two weeks or less
- Can not document income, need stated loan program
- Property may be experiencing high vacancy or have significant amount of deferred maintenance
- Need for subordinate financing
- Need bridge loan or mezzanine loan
- Poor or non-existent credit rating
Hard Money loans can be placed on virtually any investment or owner occupied property, including:
- Multifamily/Apartments
- General Commercial
- Entitled, Vacant, or Undeveloped Land
Hard Money Loans can also be used for construction of any of the above-mentioned properties. Generally, the hard money lender will also include an interest reserve in the loan to cover payments that would be made during the construction period.
Most hard money loans are meant to be used as short term loans for acquisition or development. Upon stabilization of the property or upon completion of construction, you will refinance or take-out the hard money loan with a more conventional loan product.
Loan Guidelines
Hard Money loans will have the following terms and conditions:
|
Loan to Value (LTV)
|
- 60% Max for cash flowing multifamily
- 50% Max for all other property types
|
|
Amortization
|
- 30 years (360 months) with 1-3 year balloon
|
|
Interest Rate
|
- 9.0% - 12.0% for cash flowing multifamily
- 12.0% - 15% for all other property types
|
|
Point and Fees
|
- 3% - 7% Total Fees to lender
- May require borrower to pay lender's attorney fees for preparing loan documentation
|
|
Third Party Reports
|
- Appraisal (by lender representative and/or third party)
- Usually appraised to account for a sale to an all cash buyer with a marketing time of 6 months or less
- Environmental questionnaire for residential property Environmental Report for commercial property
- Title Commitment and Insurance
- Other documents as required by lender
|
Documentation
Hard money loans typically require less documents than conventional loans, and the process is usually quicker.
The following is a list of items required to process your hard money loan.
The more of the following information you can provide, the faster we can respond to your loan request:
|
Executive Summary
|
|
Brief description of the loan request, including:
- Desired loan amount
- Estimated current as-is value of property
If Construction:
- Estimated as-completed value
- Sources and uses of funds
- Construction Budget
|
Exit strategy
|
|
Rent Roll and Income Statement
|
Current Rent Roll required. YTD and Historical rent rolls are also helpful.
Things to include in rent roll:
- Unit #s with square footage of unit
- Bedroom/bathroom count
- Tenant / Company names(for commercial property)
- Base rent and description of any pass-through expenses absorbed by tenant (utilities, gas, cable, etc.)
- Itemized base rent increases and NNN payments
- Itemize regulated units (Rent controlled, stabilized, Section 8, etc)
- Other income (laundry, storage, parking, etc.)
|
|
Expense Statement
|
Current monthly expense statement required. YTD and historical expense statements are helpful.
If available supply property operating statements for the past two (2) years.
Things to include in expense statement:
- Annual property taxes
- Insurance
- Water/sewer taxes
- Fuel and electricity
- Maintenance/repairs
- Management Costs
- Advertising/Marketing
- Salaries
|
|
Property Description
|
Description of the subject property, including:
- Color photos of subject property
- Location details and area amenities
- Floor plans (if applicable)
|
|
Borrower Information
|
The following personal documents will be required by most lenders:
- Personal Financial Statement for each Borrower/Principal.
- Resume / Background of the Borrower(s) including:
- Current properties owned
- Past projects completed.
|
|
