October 8, 2020

Many real estate investors are turning to ground up construction as an option to diversify their portfolios and maximize profits on their rental and fix and flip projects.  While ground up construction loans are often a necessity, they come with their own unique requirements which investors need to know how to navigate in order to achieve a profitable outcome.  Below are a few of the most important areas to focus on before investing in a ground-up construction project.

Ground-up construction loans differ from owner occupied loans

It is important to understand that ground-up construction loans are short term loans used to cover the costs of construction only as opposed to a long term 30-year mortgage like an FHA loan for owner occupied properties. If you decide to hold the property as a rental, you may need to refinance the loan into a permanent mortgage in order to extend the loan terms to a more manageable time frame. Additionally, the amount you are allowed to borrow on a ground up construction loan may vary widely depending on what financial institution you obtain funding from so it is important to do your research and make sure you are getting the best deal possible before signing any agreement.

Understanding Construction Draws

Before borrowing money, make sure you fully understand what documents you’ll need to provide in order to receive each draw of funds during the construction process.  Different agreements may have specific fees you are required to pay at each draw and understanding the structure of the loan clearly will help guarantee your success in having enough cash on hand to keep your project running while the draw process occurs. Make sure to inquire about “commitment funding” as this will allow you to avoid interest payments on construction loans until you need to utilize them.

Expect the Unexpected

It is crucial to understand what will happen if any number of worst-case scenarios drag out your project time line. Weather delays, contractor issues, and market changes are just some of the ways your project timeline can be extended unexpectedly. Often, hard money lenders will hide payment requirements in the fine print of the agreements.  From prepayment to loan extension penalties, these hidden requirements can make the difference on whether or not your construction project turns into a win or loss for your investment portfolio.

Ground-up construction can be a valuable option for real estate investment as long as you understand what obligations will come with any funding you obtain. A successful construction project can provide an investor with a bigger payout down the line than a typical commercial or residential investment and can also offer instant equity depending on the deal. Once completed, new construction projects can be just the opportunity an investor needs to expand their portfolio and level up on their competition. Having a clear understanding of the obstacles you will likely face before undertaking a ground-up construction project will help maximize your return on investment and limit the amount of stress created during the construction of any new investment.

September 16, 2020

Investing in real estate can be quite profitable, but like any investment it requires capital in advance in order to enjoy the benefits it offers. This capital is essential to keep your real estate business moving in the right direction. From purchasing your first duplex to paying for the upgrades on your previous fix-and-flip, without the proper funding, you cannot call yourself a real estate investor. Luckily, there are many options for investors to raise the capital they need to fund their real estate projects. Below are three smart ways for raising the funds you need in order to be successful.

1. Secure funds from a private lender

Know someone who is interested in investing money and wants to receive a higher return than simply having their money sit in a standard bank saving account? Getting a loan from a family member, colleague, or friend is one smart option before going to a bank to fund your latest real estate project. While you will need to pay the loan back with interest and guarantee a certain return on their investment most of the time; you can typically get the funds you need much faster, and with less red tape than going through a financial institution.

2. Find a highly rated hard money lender

There are many hard money lenders nationwide who are happy to fund a loan if the terms are right. It is important that you do your research ahead of time on any hard money lender you go with and select a reputable company to do business with prior to signing on any dotted line. Directories such as hardmoneyhome.com are great resources because consumers are able to leave reviews of their experiences with different lenders, making it much easier for you to research and find the best company to meet your needs. While higher interest rates are usually standard with most hard money loans, there is less red tape and it is easier to qualify for these loans. Hard money loans are best suited for quick projects such as fix and flips or bridge loans to float you in-between real estate projects.

3. Partner up with someone you can trust

Partnering with someone you can trust is a great way to share the responsibilities and workload of investing in real estate. It is important that each partner is clear on the expectations of each deal and any potential profit or loss on an investment prior to moving forward with a partnership. While partnering with someone is not without its own obstacles, it can be a great way to share the risk and reward on investments. Dividing and conquering your responsibilities is also a great way to gain a competitive edge on your competition.

Regardless of which method best fits your needs when securing funds for real estate investment, few investors have all of the capital needed to fund their investment projects. Researching all financing options and picking which option is best for you is critical to you being successful within the real estate industry. Hopefully, using one or all three of the above options will benefit you in all of your future investment endeavors and help you to grow a diverse and profitable portfolio.

A good investment portfolio can be the key to a more financially secure future and a better sense of security. While there are many different beliefs and approaches when it comes to investment options—there is no denying that investing in the stock market is one of the most common solutions for those looking to make some serious money.

However, if you have been thinking about investing in stocks—we are encouraging you to stop and take a step back and consider investing in real estate instead. This is why we have listed a few of the many reasons why you should invest in real estate instead of stocks.

• Most people are more familiar with real estate. The average person isn’t as familiar with the complexities of stocks or the different companies that they will be investing in. However, it is much easier for the average person to understand real estate. After all, most of us live in, own or have purchased a home before.
• Real estate doesn’t fluctuate as much as stocks. While real estate can fluctuate a great deal over the long-run, it does not fluctuate very much over the short term. This is something you need to worry about with stock investments and something that can be difficult for inexperienced investors as stock prices can fluctuate on the daily.
• A real estate investment is tangible. If you are an investor who wants to be able to see and touch your investment—then real estate is for you.
• You can make a great deal in a short period of time. Most stocks (unless you get the real, rare unicorn) take a long time in order to earn interest. However, if you are able to invest in the right fix and flip property, you can make a lot of money in a matter of months.
• You have more control. When you make any investment, you are investing your hard-earned money. When you invest in real estate, you have much more control over the decisions regarding your investment. When you invest in stocks you are part of a very, very small percentage of the controlling state of that investment. This is a great way to make sure you know how your money is working for you.

This doesn’t mean that stocks are a bad investment—we are just encouraging you to take a look at real estate instead if you are looking for an investment that can lead to better gains. If you are looking to make a smart investment with your money, consider investing in real estate to start making more for your future.

When it comes to investing in real estate, one of the first and biggest questions that people tend to have is how they are going to finance this endeavor. However, after the dollars and cents get all worked out, it is time to figure out where they are going to be putting that money.

There is some dispute among real estate investors on whether or not they should invest in real estate in smaller towns or in big cities. So, what is the right answer? Well, it may be more complicated than you think.

We are going to take a look at the difference between buying in big cities or small towns, so you can make the most of your real estate investment.

There are many people who think about investing in real estate in bigger cities, and ultimately this is usually the best answer, and for a simple reason. There is more opportunity for growth in larger markets. You want to invest in a property that has a high growth potential. You can’t invest a small amount and fix and flip a property for big gains in an area that doesn’t have a big growth potential.

However, that doesn’t mean that there aren’t smaller towns that have big growth potential. Smaller towns that are located in close proximity to large cities or those that have seen bigger businesses open locations within this community. Many times, large companies will open warehouses or factories in small towns—and if you can get in before these bigger businesses make their way to small towns, you can end up making a smart investment that will really pay off.

Another thing to keep in mind is that while big-city growth can be great for real estate investing—investing in big cities with big growth potential also means big competition. You are going to have to compete for affordable properties in up-and-coming neighborhoods, you may have to out-bid other investors and work to get the property, and you are likely going to pay more for contractors work as well.

So, while in most situations, you are better off investing in big cities, there are caveats to both big city and small-town investing. You need to be able to run the numbers, be patient and find the right property in the right location for you.

Now that you have a little more insight on the difference between investing in properties in big cities or small towns—you have the information that you need in order to make the best investment possible for you and your future.

So, you need some money for a quick fix and flip? Many people looking to break into this business do and often struggle to determine what place is the right place to secure the financing that they need. The good news is, hard money lenders can help.

However, there are some people who have trepidation’s regarding hard money lenders. Perhaps they have heard a horror story in the past, perhaps it is the name “hard money” or perhaps it is the fact that they just don’t really understand what a hard money lender is.

The good news is, hard money lenders aren’t as scary as you think. In fact, they, in general, tend to make getting loans quite easy. Here’s what you need to know about hard money lenders and what they offer.

Why You Should Turn to Hard Money Lenders

Hard money lenders are private investors that are dedicated to helping people get short-term loans secured by real estate. These lenders specialize in short-term real estate investment opportunities such as fix and flips.

They typically give out loans for about 12 months, but they may lend longer, and they will ask you to provide monthly payments of interest or interest and some principal and at the end of the loan (when you sell your fix and flip) you will make a balloon payment for the remainder of the loan.

These lenders are going to work with you one-on-one and base their decisions on the deal they are presented with. They aren’t going to comb through your financial records. Instead, they are going to look at the potential for your fix and flip to earn money and base their loan terms on that.

What are the Pros of Hard Money Loans?

There are many pros of the hard money loans you can get from these lenders, this includes:

• Speed of Approval—you can typically get these loans secured very quickly compared to other mortgages, typically because the lender is mostly focused on collateral not all of the other financial documents that mortgage companies need from you.
• Flexibility—one of the biggest benefits of working with hard money lenders is that they can be more flexible than traditional loan officers. These lenders will evaluate each deal individually and are often more flexible with individuals than large companies are.
• More Approval Rates-with hard money loans, you can avoid issues with getting your loan approved. Credit issues, or bankruptcies aren’t going to prevent you from getting a loan approved in the way they would with other mortgages—hard money lenders are more focused on the deal.

So, if you have been apprehensive about hard money lenders in the past—now you know about just how helpful they can be when you need cash for your upcoming fix and flip. Keep this information in mind before you find the right financing for your investment property, as a hard money lender may be just the ticket to you getting the money you need to make your fix and flip dreams a reality.

As every real estate investor knows, nothing is more important than location when looking for any property. The old term “location, location, location” has been around for a long time and it continues to be one of the golden rules of real estate. After all, you can change everything except location.

Of course, when you are buying a home for yourself, it is worth putting in the extra money to get the location you want. However, when you are investing in a property, you want to find a location that is up and coming—so that you can keep your overhead low put still benefit from being in a great neighborhood.

This is why you want to find investment properties in up and coming neighborhoods and look for neighborhoods that are about to be hot. This can be difficult to determine, but here are a few signs that you are in a soon-to-be-hot neighborhood.

1. There are Other “Flipped” Properties for Sale in the Market—Check your comps. If you see other flipped properties for sale in a neighborhood, then it is a good sign. You don’t want to be the first person to come in and start flipping, but you also don’t want to choose a neighborhood that has already turned and has an over-saturated number of flipped properties for sale.
2. Trendy Businesses Are Moving In—If you see a Trader Joe’s, Starbucks, Whole Foods or other big, on-trend business moving into the neighborhood, then this is always a good sign. Big businesses often look to emerging areas when they want to find a new location.
3. You See Lots of Popular Ride Share Programs—Do you see lots of scooters and bike rentals out and about in the neighborhood? This is a good sign that people not only like living in the area, but they also like staying in the area and feel safe biking or scooting around.
4. Properties Aren’t Staying on the Market for Long—Even if there are a lot of flipped properties for sale in the market, that doesn’t mean the property is necessarily “up and coming.” Look at how long those properties are spending on the market. If a property is staying on the market for 90 days or longer, this isn’t a good sign. Look for neighborhoods where properties are moving quickly.
5. There Are Hot Adjacent Neighborhoods—The best sign that a neighborhood is about to be hot and is about to be hot, is to look at the neighborhoods around it. A neighborhood can be up and coming, but if it is surrounded by dangerous or undeveloped neighborhoods, it is going to be really hard to sell properties in this area. You want to find an up-and-coming neighborhood that is surrounded by other hot neighborhoods to make a sound investment.

Keep these tell-tale signs in mind as you start looking for your next fix and flip property, so you can make sure that you are buying the right property for you and your financial future.

Buying an investment property is a great way to make some serious money.  After all, we’ve all seen and heard of stories about people finding great deals on homes and making some serious cash with them.  However, the first and most important step is to find the right investment property. Without the right property, there is no hope for making money.

So, how exactly do you find these great deal investment properties? There are a few different resources you can turn to. We’ve detailed a few of the best sources for finding great investment leads.

• The Connected Investor’s Marketplace- Also known as the CI Marketplace, this is a great resource for wholesaling, rentals and fix and flips.  You will find properties that are listed by asset managers who sell these homes on behalf of banks and hedge funds.
• Bandit Signs- Sure, they may seem too good to be true, the ones that say “We Buy Houses” or offer great deals with signs on the side of the road.  Never underestimate these. They don’t always work out, but sometimes they can be a great resource. These individuals often buy too many houses and don’t have enough time to fix and flip them themselves, meaning you can swoop in and take the property off their hands.
• Online Auctions- Online auctions can sometimes be difficult to keep track of, but they are also a great place to get a great deal. You of course need to know the market first before you get started. While it can be time consuming to keep track of these online auctions, there are actually websites, such as Deal Dog, that deliver a complete rundown of all of the online auction homes, across a variety of sites, on one easy-to-navigate platform.
• Driving the Neighborhood- If you have a neighborhood that you really think you could make some money in with the right investment property, there is nothing wrong with driving around and knocking on doors. It is time consuming, but you never know what properties you will see with a “For Sale By Owner” sign in the front, or who may be willing to sell their fixer-upper, just to get it off their hands.

You can find a great investment property and get your foot in the door for the right price if you are just willing to be patient.  Keep these tips in mind and start looking through these avenues to find an investment property that works for you.

Armed with this information, you are now ready to go out and find the perfect investment property to meet your needs. Whether you plan on holding on to a property in an up-and-coming area or if you are doing a quick fix and flip, these are some of the best options for finding a great property to get you started.

If you have been thinking about buying a home, whether it is an investment property, a fix and flip or even your primary residence, the main goal is always the same—you want to figure out how to get that property under contract.  Now, every house is different and every property is going to be listed by a different type of seller, so there may be some differences in getting your foot in the door.

However, the biggest thing that you are going to have to do when it comes to getting any property under contract is to make sure that you execute the documents correctly. After all, so much of buying a house all comes down to paperwork.  Here is what you need to know about turning your offer into a “SOLD” sign.

• Always make sure that the legal address and description are accurate—this will save you a lot of headache down the line.
• If you plan on whole-sailing the property, pay close attention to the line items: “Purchaser” and “Deed is Made out to” so that they also include the “and assigns.” This will let you sell the contract to your end buyer.
• Think about the Earnest Money Deposit, or Good Faith Deposit. It is always negotiable, you just have to think about who you are buying from.  Basically, this deposit shows you are serious and prevents you from backing out without a reason. Sometimes, this doesn’t matter as much to a homeowner, as other factors, like how quickly you will be able to close.
• Know who will be holding the earnest money deposit before closing. This is typically a closing attorney.  The title office may also hold it. A neutral party should hold the deposit, so that if the deal falls apart, it goes back to the buyer (or the seller) depending on what happens.
• Be smart with your due diligence period. Even if both parties want to get this deal wrapped up quickly, there needs to be some sort of due diligence period that gives you time for property inspections, surveys, insurance quotes and a title search, among other things.

As you can see, there is a lot that goes into buying a home.  You’ll want to be prepared for all of these things if you are serious about turning a home that you are interested in, into one you have under contract.

February 5, 2025

The real estate investment landscape has seen a surge in the use of hard money loans over the past decade. Once considered a last resort financing option, these loans have now become a preferred choice for many investors looking to capitalize on time-sensitive opportunities. Whether you are a seasoned real estate investor or just entering the industry, understanding the nuances of hard money lending can provide a strategic advantage in a competitive market.

What Are Hard Money Loans?

Hard money loans are short-term, asset-based loans typically secured by real estate. Unlike traditional bank loans, which rely heavily on credit scores and borrower financial history, hard money lenders focus on the value of the property being used as collateral. These loans are often issued by private lenders or investment groups rather than traditional financial institutions.

Why Are Hard Money Loans Gaining Popularity?

Several factors contribute to the increasing demand for hard money loans in real estate investing:

1. Speed of Funding – Traditional mortgage approvals can take weeks or even months, whereas hard money loans can be processed and funded in as little as a few days. This is crucial for investors competing for high-value properties in fast-moving markets.
2. Flexible Approval Criteria – Since hard money lenders primarily evaluate the property’s value rather than the borrower’s credit history, these loans are accessible to individuals who may not qualify for traditional financing.
3. Short-Term Investment Strategy – Many investors use hard money loans for fix-and-flip projects, where properties are renovated and sold quickly. The short loan term, typically 6-24 months, aligns well with these investment strategies.
4. Competitive Advantage – In a seller’s market, cash offers or fast financing solutions like hard money loans can give buyers an edge over those relying on conventional financing.
5. Financing for Non-Traditional Properties – Some properties, such as distressed homes or those requiring significant repairs, may not qualify for traditional bank loans. Hard money lenders are often more willing to fund these types of investments.

Key Considerations Before Choosing a Hard Money Loan

While hard money loans offer distinct advantages, they also come with certain risks and costs that investors should evaluate:

• Higher Interest Rates – Compared to conventional loans, hard money loans carry higher interest rates, typically ranging from 8% to 15%.
• Shorter Loan Terms – Borrowers need a clear exit strategy, whether it’s selling the property or refinancing, before the loan term expires.
• Loan-to-Value (LTV) Ratio – Most hard money lenders offer LTV ratios of 60-75%, meaning borrowers need to provide a significant down payment.
• Lender Reputation – It’s crucial to work with reputable lenders who have transparent terms and a track record of successful transactions.

Who Benefits Most from Hard Money Loans?

• Fix-and-Flip Investors – Those who purchase distressed properties, renovate them, and sell them for profit within a short time frame.
• Real Estate Developers – Investors looking to finance new construction projects or land acquisitions.
• Buy-and-Hold Investors – Those who need short-term financing while waiting for long-term refinancing options.
• Individuals with Credit Challenges – Borrowers who may not qualify for traditional loans but have valuable properties to secure funding.

Final Thoughts

Hard money loans have carved out an essential role in the real estate investment industry, offering quick, flexible, and reliable financing solutions. While they are not the right fit for every situation, understanding how they work can help investors make informed decisions that maximize their profitability. If you’re considering a hard money loan for your next real estate project, research different lenders, compare terms, and have a solid repayment strategy in place.

At HardMoneyHome.com, we provide access to a nationwide directory of trusted hard money lenders, helping investors find the right financing solutions tailored to their needs. Explore your options today and take your real estate investments to the next level!

September 27, 2024

In a move that has garnered attention across the financial industry, interest rates have been lowered by 0.5 percentage points. This adjustment, while small in numbers, could have a significant impact on various sectors of the economy, including real estate and the hard money lending market.

Hard money lenders, who typically operate in niche areas of real estate financing, often step in where traditional lenders can’t, providing quick, short-term financing to investors. These lenders fill a crucial gap, especially in high-demand markets. With this recent interest rate cut, it’s important to understand how the hard money lending space may shift and what borrowers and investors should expect in the months to come.

Understanding the Interest Rate Cut

The Federal Reserve’s decision to lower interest rates is part of a broader strategy to stimulate economic growth. When the cost of borrowing decreases, it encourages consumers and businesses to spend, invest, and borrow more. Lower rates typically lead to cheaper loans, which can spur activity in markets such as real estate, where financing is essential.

While traditional lenders like banks and credit unions are directly impacted by interest rate adjustments, the hard money lending sector operates a bit differently. Hard money lenders base their rates more on risk, asset value, and market conditions rather than on Federal Reserve decisions. However, interest rate movements in the broader economy often have a ripple effect on the hard money lending market.

How the Hard Money Lending Market Will Adjust

1. Increased Demand for Hard Money Loans

The immediate impact of lower interest rates is likely to be an increase in demand for real estate investment opportunities. Lower borrowing costs will make investments more attractive to both seasoned and first-time investors. Since hard money lenders are known for providing quick access to capital, they will likely see an uptick in borrowers looking to take advantage of favorable market conditions.

Investors looking to purchase, renovate, and sell properties (commonly referred to as fix-and-flip projects) may turn to hard money lenders for short-term financing. With lower overall rates in the lending market, even though hard money rates will remain higher than traditional loans, investors will view these loans as a viable tool for gaining rapid entry into real estate deals.

2. Potential for Slightly Lower Hard Money Lending Rates

While hard money loans typically have higher interest rates than traditional financing due to the higher risk they carry, the overall lending environment may push hard money lenders to adjust their rates slightly downward. As banks and other financial institutions lower their loan rates in response to the interest rate cut, hard money lenders could feel competitive pressure to offer slightly better terms, particularly for lower-risk projects or highly creditworthy borrowers.

While a dramatic drop in hard money rates is unlikely, some marginal adjustments could make these loans more attractive, particularly for investors looking for fast capital to seize real estate opportunities.

3. Lending Criteria May Tighten

Despite the lower interest rate environment, some hard money lenders may react cautiously by tightening their lending criteria. Since hard money lenders are typically more risk-tolerant than traditional banks, they often provide loans based on the value of the collateral (typically the real estate property itself). However, in times of economic adjustment, lenders may be more selective in approving loans.

For example, while the rate cut encourages borrowing, lenders may increase their scrutiny on property valuations and borrower experience. Investors with proven track records and high-quality projects will continue to find favorable terms, while those with riskier or untested ventures may face more stringent requirements.

4. Shorter Loan Terms Could Become More Common

In response to the rate cut, we could see a shift toward shorter loan terms in the hard money lending space. As interest rates decrease, real estate investors may be more willing to take on short-term financing to complete projects quickly, anticipating that market conditions will remain favorable.

Hard money lenders often prefer shorter terms, as it allows them to recycle capital more rapidly. With investors keen on taking advantage of the lower cost of capital, lenders may cater to this demand by offering attractive short-term options that benefit both parties.

5. Rise in Real Estate Prices and Market Activity

Historically, lower interest rates lead to increased market activity in real estate. With financing costs reduced, more buyers and investors will enter the market, increasing demand for properties. This, in turn, could drive up real estate prices, particularly in high-growth areas.

For hard money lenders, rising property values can present opportunities for more loans with higher property values as collateral. However, it can also introduce risks if the market overheats or if economic conditions shift again.

Experienced investors may view this as the right time to capitalize on growth markets, while cautious investors may wait to see how the market evolves. Either way, hard money lenders will need to adapt to a more competitive and active market.

What This Means for Real Estate Investors

For real estate investors, the 0.5% interest rate cut opens up several strategic opportunities. With traditional financing now more accessible and affordable, some may opt to pursue conventional loans for long-term projects. However, hard money loans will continue to serve as a valuable tool for investors who need quick capital for short-term deals, particularly in markets with high demand or fast-moving projects.

Why Hard Money Lenders Remain Essential in a Lower Rate Environment

Despite lower interest rates across the broader economy, hard money lenders will continue to play a vital role in the real estate investment ecosystem. Here’s why:

1. Speed and Flexibility
   Traditional financing, even in a lower-rate environment, often comes with lengthy approval processes and stringent borrower requirements. Hard money lenders, on the other hand, provide rapid funding, which is critical for investors looking to close deals quickly or seize time-sensitive opportunities. This speed and flexibility remain a key advantage for hard money borrowers.
2. Collateral-Based Lending
   Hard money loans are based on the value of the property rather than the borrower’s credit score or financial history. This makes them particularly attractive to investors who might not qualify for traditional loans or who prefer to leverage the value of the property they are purchasing or renovating.
3. Short-Term Solutions for Flipping and Bridging
   For real estate investors engaging in fix-and-flip projects or needing bridge loans between transactions, hard money lenders remain the preferred option. The short-term nature of these loans, combined with their speed, allows investors to quickly move from purchase to renovation to sale, without being tied to long-term debt.

Conclusion: Seize the Opportunity

The recent 0.5% interest rate cut is likely to invigorate the real estate market and boost demand for hard money loans. Investors looking for quick, flexible capital will continue to turn to hard money lenders for short-term financing, while hard money lenders may make slight adjustments to their rates or terms to stay competitive. The key for both lenders and borrowers will be to stay adaptable and aware of the broader market conditions.

Hard Money Lending remains a powerful tool for real estate investors, offering unique advantages in a changing economic environment. By understanding how these rate adjustments will influence the market, investors and lenders alike can position themselves for success in this new landscape.