Hard money lender specialize in short-term bridge loans, sometimes called swing loans and are based primarily on the value of the subject property or collateral offered. Some properties types considered by some of the leading hard money lenders in today’s tough economic environment would include: Multifamily apartments, Retail Centers, Self Storage Facilities, Raw Land Loans, and Mobile Home Parks.
Short term bridge loans are usually written to accommodate a gap in financing or used until more traditional bank financing can be obtained or sale of the property occurs. Typical terms last no longer than 3 years. Because you are dealing with private individuals or groups of high net worth individuals and not a traditional bank, bridge loans are expensive. However, you will be trading a higher cost of the money for the speed and flexibility of a non-traditional lender.
The terms offered can vary from lender to lender but, usually the more comfortable a particular lender can be with the applicant and the collateral the better the terms will be. Generally lenders will loan up to 60 to sometimes as high as 75 percent of the property’s value.
Bridge lenders get you money FAST. It is typical to close within a few days or weeks as opposed to months with the banks. However, fast money can sometimes make the difference of taking advantage of a business opportunity or losing your property to foreclosure.
The application process for a bridge loan varies from lender to lender however, it’s safe to assume the more information available from both the property and the individual the better your chance are of being approved for a bridge loan. Some items on a lenders checklist may include purchase agreements, personal and business tax returns, bank statements, profit and loss statements, credit reports, financial statements, rent rolls of the property, existing leases or intent letters from potential tenants, and most importantly a detailed and believable exit strategy.
Where do you find reputable hard money bridge lenders? Best advice, if you have not had a personal experience with a hard money lender or knew someone that can personally refer you would be searching the web for “Direct Money Lenders” and are sure to include the property type you are seeking financing on in the search box.