Hard Money Loans

Hard money lending became a big deal as a result of the Great Recession and it continues to play a major role in commercial and investment property financing.

The recession caused a multitude of issues in the world of commercial real estate including a significant tightening of traditional credit which led to numerous foreclosures and short sales and coincidentally more opportunities for real estate investors with cash to scoop up properties at low prices.

Having cash was (and still is) key, but getting access to credit is also crucial and one way that investors are making things happen is with hard and private money.

For a complete rundown of current hard and private money loan guidelines and terms, click here.

As recently as a few years ago hard money was pretty vanilla.  If you needed a loan that a bank or traditional lender could not provide then you had to resort to paying a high (sometimes very high) rate and points.

So What Has Changed?

Hard money is no longer just a straight up equity vs. value play and there are now many more deals that are no longer bankable.

As a result, a new breed of hard money lender has emerged who has adapted to this broader market and is flexible with regard to what they are willing to do.  This is in part due to the more competitive environment and in part due to the high volume of deals that fall just outside of traditional lending guidelines.

The Good News

There a few dynamics in play here including the ultimate source of funds for these loans (investors) and the returns they demand relative to other investments, but like most things in a capitalistic society, as the market for something grows, the more competition you see and the more benefit there is to the end user/buyer.

Bottom Line

If you are in need of a hard money loan and your project isn’t quite “bankable” at the moment, you might be able to get it financed without getting hammered on the rate and points. You might also avoid paying a significant price to refinance it in the not too distant future because the new breed of reasonable hard money lenders do not have severe or long term prepayment penalties.

Please get in touch if you need assistance with hard or private money financing: jking (at) green commercial capital (dot) com