When seeking out funding for commercial real estate investments, many investors often find themselves in a situation where they need fast financing from a lender who can close quickly. In this scenario, a traditional bank loan wouldn’t work, as banks or conventional real estate loans take anywhere from 45 to 90 days, said Brian Hwang, former Director of Lender Relationships at Lev.
When seeking quick lending options, investors can take the route of hard money loans instead.
What Is a Hard Money Loan?
Hard money loans are real estate loans issued by a private money lender, and they are usually approved based on the value of the real estate, rather than the creditworthiness of the borrower, Hwang explained. Banks, on the other hand, will heavily weigh the borrower’s credit and track record before approving a loan.
Real estate hard money loans are usually short-term, lasting between six and 36 months, with higher interest rates than traditional bank loans. Hard money loans also close much more quickly than bank loans.
“When we’re talking about hard money and lenders that can close quickly, the timeline is two to three weeks,” Hwang added.
One reason for that speed is that real estate hard money lenders don’t have to go through the same steps as banks when issuing a loan. These lenders, Hwang said, “don’t have to jump through as many hoops as the banks do, because they’re not regulated in the same way. So they can move much faster, and they don’t have as many cumbersome requirements in the process.”
Hard money lenders are usually looking for situations with a quick exit strategy, in which they know they will get paid by the end of the loan terms. Some examples include properties that the buyer intends to fix and flip, rentals or multifamily properties in which the borrower needs to close quickly, and commercial real estate in which the buyers need cash to make improvements to the property.
Why Choose a Hard Money Loan?
Many investors seek out hard money loans over bank loans when they want to close more quickly, or if their credit isn’t high enough to get a bank loan.
“The interest rates are really high,” Hwang noted, but “the idea is that you would only have hard money loans for a short period of time until your property or you qualify for a cheaper source of debt, and you can refinance it out for a conventional commercial real estate loan.”
Finding Hard Money Lenders Who Can Close Quickly
When it comes to finding the best hard money lender who can close quickly, borrowers have a few different options, one of which is to find a brokerage company that can match you with the right lender based on your needs. Lev is one such company, with mortgage brokers that can help you find the best hard money lender for your specific situation.
Hard Money Lenders That Can Close Quickly
Some hard money lenders Lev works with that can close quickly, according to Hwang, include:
Other fast-closing hard money lenders, according to Millionacres, include:
Researching hard money lenders for rental properties is a good place to start when looking for a lender that can close quickly. However, depending on your needs, the best and fastest solution may be to find a mortgage broker — like one at Lev Capital — who can assess your financial situation and find a specific lender suited to you.