Commercial Hard Money Loans 101

Commercial real estate investors compete to buy a wide variety of high-value properties on a daily basis. For some investors, financing properties is a matter of tapping into a bank account. For others, buying investment properties requires securing private financing. However, not all commercial buyers qualify for financing through traditional lending institutions. These borrowers are often served by private lenders who offer hard private financing for the purchase of commercial properties.

Sometimes known as private money or equity-based loans, these loans provide financing when traditional lending institutions simply can’t or won’t. Buyers might not meet the strict requirements of banks or might want to purchase properties that are difficult to appraise. Other investors focus on buying commercial properties that need to be rehabbed, but banks are often reluctant to finance these types of purchases. In these situations, hard money loans can be used to finance properties.

Why Use Commercial Hard Money Loans?

For commercial borrowers, hard money loans make a great deal of sense. After all, making the most of your buying power means not only finding great properties, but knowing when to buy them. They are often used by investors who need to make timely offers on properties and can’t wait on approvals from traditional lending institutions. They can also be used to:
• Purchase distressed properties.
• Finance non-conventional properties.
• Finance ground-up construction projects.
• Bridge gaps between business operating expenses and available funds.

Who Uses Commercial Hard Money Loans?

While they may not receive much attention on TV or in your local newspaper’s real estate section, that doesn’t mean that they aren’t widely used by investors. In fact, commercial private money loans are used by many different types of buyers:

• Seasoned investors who want to leverage the value of their real estate portfolios.
• New investors who want to get a stake in the game.
• Buyers who prefer to fix and flip commercial properties.
• Business owners who want to refinance or cash out their properties.

Investing with Commercial Hard Money Loans

If you’re considering investing in property using a commercial hard money loan, it’s important to remember that good planning is key to realizing a high return on investment (ROI). It’s essential to plan for the property’s use before making a purchase. It’s also a good idea for investors to sit down with their financial advisors and review their equity and holdings so that they can make the right real estate investment purchases with the right type of financing.

Commercial Hard Money Loans – Debunking The Myths

While commercial hard money loans might sound as if they come out of a Mafia movie, there is nothing dangerous or especially risky about being granted one of the many commercial loans that are on offer by the different independent financial institutions.

What are Commercial Hard Money Loans?

The word ‘hard’ can be misleading for many people who are applying for this sort of financing. All that it means is that the loan is guaranteed by an asset or a piece of immovable property. The loan will be granted on the strength of the value of the asset in question. Many developers use these type of loans when they are attempting to develop a piece of land into a commercial property that has investment potential as well as the potential of future earnings that will more than cover the loan amount.

The value of these loans is that they are usually funded by private investors. It is worthwhile finding a company who is able to match up potential investors to loan applicants. They will ensure that the loan is completely legal as well as being secured by the property itself and not the personal assets of the owner. Most of the private investors in America today are likely to be private firms who consider that issuing commercial hard money loans is a way of doing business that guarantees them a substantial return on investment. These loans are not usually granted over an extended loan term.

This type of loan is not like a conventional mortgage that is repaid over 30 years. The term is usually between 1 and 5 years and the interest rates are much higher than a conventional loan. While the top end of the scale of interest rates can reach up to 15 % it is still a way of obtaining finance for an investment without having to wait for months or go through an extensive process of paperwork and credit checks.

It is always wise to remember that commercial hard money loans will not cover the full value of the property and it is unusual to find any commercial hard money lender that will over about 60% of the value of the property. If you are buying property then you will have to fund the difference from another source or be prepared to fund it yourself. Commercial hard money loans are granted based on a logical and achievable plan to pay the money back on time and most commercial hard money lenders will need to see a considerable amount of property related experience.

They will not be inclined to lend money to first time investors, unless the risk is very low. Commercial hard money loans are a solution to investment opportunities that many banks have refused due to the economy.

Financing a Garage Door With a Hard Money Loan

An automatic garage door is a must for any modern home. If you don’t have a door that automatically opens, the only alternative is manually opening your garage door every time you want to store your car. Or else you have to park you car on the street, thus leaving it vulnerable to the elements and possibly even theft. But if you want to install a new garage door, or even simply replace the system that you already have, it can sometimes be difficult to get the money you need, particularly if there are a few negative marks on your credit. But so long as you own your home, you probably won’t have much trouble getting financing if you seek out a hard money loan.

A private money loan functions a lot differently from a lot of bank loans, mostly because they are asset based. This means that they are based upon your current assets, and therefore rely less heavily on your credit report. Private party lenders are able to do this because they are not obligated to adhere to the kind of underwriting guidelines that can make the approval process for a bank loan more frustrating.

If you are considering purchasing a garage door with the help of hard money loans, keep these tips in mind.

Choose Your Style – The two main kinds of garage doors that you can purchase with a hard money loan are tilt up and sectional. Tilt up garage doors are composed of a single, large door that tilts up and down to open. These models can be seen on a lot of older homes, and are generally one of the cheaper options. Sectional garage doors work by rolling up vertically, and being stored near the ceiling when the door is open. This option is a bit costlier, but it might be more attractive if you want to limit the amount of space that your garage door takes up.

Choose Your Material – The two most popular materials for a garage door are aluminum and wood. Aluminum is a popular choice because it is lightweight, very resistant to rust, and relatively inexpensive, so it allows you save a lot of your hard money loan. If you want something that might be a little more aesthetically pleasing, you might go for a wood garage door instead. When purchasing a wood garage door, make sure that it comes with a good finish so that it can stand up to harsh weather.

Focus on Safety – In 1993, the Consumer Product Safety Commission Mandated that all automatic garage doors come equipped with what is called an “external entrapment protection system.” This is simply a motion sensor device at the bottom of the garage door that prevents anything or anyone getting trapped underneath the door. These vary in quality, so make sure that you spend a little more of your hard money loan to ensure that you don’t have to deal with a constantly malfunction entrapment system.

Maintain Your Investment – After installing your garage door with the help of a private money loan, you should make sure to maintain it properly so that it will maintain its usefulness for years to come. One of the most common issues with an automatic garage door is falling out of adjustment. This might cause the door to rise very slowly, or even lock up completely. To prevent this, it’s best to inspect the hinges occasionally. If they appear loose, tighten them up. Once a year you should also re-lubricate the joints. By keeping the moving parts well oiled, you cut down on friction and help ensure proper operation of your garage door.