This blog will cover hard money lending Chicago guidelines for real estate investors. Investors have a preference for where they like to invest their money. This includes lenders of hard money lending Chicago. Gustan Cho Associates are mortgage lenders licensed in 48 states, including Washington, DC, Puerto Rico, and the U.S. Virgin Islands (Not Yet Licensed in MA and NY). We have a national reputation for being a one-stop mortgage lending shop. Gustan Cho Associates offers commercial lending through its sister company, Lending Network, LLC.
Lending Network is ahead of the competition because we offer 100% LTV hard money loans, 100% LTV equipment financing, and countless commercial and business loan options for business owners and commercial real estate investors.
There are no SAFE ACT/Dodd-Frank mortgage regulations on commercial loans. There are all types of hard money lenders. You can have a mom-and-pop hard money lender or a large financial institution like a giant hedge fund or insurance giant lender hard money loans. Small one-person investors can become lenders of hard money lending Chicago. Investors of stocks, bonds, or real estate, and investors can also diversify and become a hard money lenders and take one or two projects and see how the returns are. Smart investors diversify and place their money to work. The return varies on risk factors that investors are willing to take as an investor.
Hard Money Lenders
Hard money lenders normally like to fund the deals within a few weeks from the borrower signing the letter of intent to proceed.
- Most sophisticated hard money lenders will fund a hard money finance deal in less than 30 days
- Hard money lending rates are vary depending on the loan to value and credit scores of the borrower
- The higher the credit risk the borrower is, the higher the upfront points
- Hard money lending rates will be
- Smaller loan sizes require the same amount of work as larger size loans so mortgage interest rates can be higher
- Hard Money Lending Rates can run you into the double digits and it will cost you 4 points or more in fees if the borrower is putting a smaller down payment
- Hard Money Loans are not for everyone
- Hard money loans are for real estate investors, property flippers, property rehab professionals
- These loans benefit investors with the mentality that it takes money to make money
- Hard money lenders are a Godsend for them
- Hard Money Loans can be a win-win situation for certain types of borrowers
We will use case scenarios examples to see whether hard money loans are the right mortgage loan program for you.
Benefits Of Hard Money Loans
Here are some benefits to Hard Money Loans:
- One of the main advantages of hard money loans is that most hard money lenders do offer fast closings
- Lenders are very hungry to fund loans due to the hard money lending rates and fees being so lucrative
- Most Hard Money Loan situations are for those seeking financing opportunities that require fast closings
- These hard money borrowers are typically borrowers with credit and financial problems who have equity in their properties but need a quick fast solution in getting cash
- Borrowers prefer to pay higher rates without the countless documentations required by traditional commercial mortgage lenders
Hard Money Loans are for both individual borrowers for personal reasons and business professionals who are in a cash crunch for unexpected business expenses for their businesses.
Types Of Financing And Hard Money Lending Rates
Hard money loans are generally real estate backed loans.
- Real estate is used for collateral in most cases or some other type of liquid assets where a large equity position is required in order for the hard money lender to fund the transaction
- Hard money lending is normally for short term loans
- But during that short term financing term, the hard money lending rates will be very high
- So are the fees
Real Estate Properties Ideal For Hard Money Funding
Below are the types of projects that are funded via hard money lending programs by hard money and private money lenders:
- Owner and Non-Owner Occupant Single Family Residential Properties that are between one to four units.
- Real Estate Properties that are cross-collateralized
- Multi-Family properties
- Home Purchases And Cash-Out Refinances
- Fix Flip Rehab Property Loans for Rehabbers and Real Estate Investors
- Short Sale Properties needing to close quickly
- Investment Properties Mortgages
- Properties That Are In Foreclosure Or About To Go Into Foreclosure
- Blanket Lines Of Credit
Rental Home Financing And No Doc Portfolio Investment Property Loans.
Terms Of Hard Money Lending Rates
Hard Money Loans is normally for short term financing and most hard money borrowers will not hold a hard money loan for more than two years.
- Some hard money borrowers will use hard money loans to purchase a fixer-upper property that is well under market value
- The borrower will then either resell it the way it is or do some repairs and window dress it and resell it for a handsome profit
- Profit is lucrative so the hard money lending rates and the upfront points and fees are immaterial for the investor
Here are the basic terms for most hard money lending programs offered in today’s market:
- 6‐12 month terms –
- Some situations terms can be up to a maximum term of 60 months or less
- Hard money lenders will often offer interest-only payments with the principal payment due when the hard money loan matures or when it is paid off
- There are no prepayment penalties allowed in most states
- Hard Money Lending Rates are generally higher than traditional commercial financing mortgage rates
- Collateral is the most important when it comes to hard money financing
- Credit Scores and borrowers income has very little to do with hard money lenders
- Hard money lenders will charge fees and points upfront besides the high hard money lending rates
- The upfront fees and costs of the origination of hard money loans are what the investors of the hard money funding and commercial hard money loan brokers get paid with
- Strong collateral and low loan to value are the key factors on the strength of the hard money borrower.
Hard Money Lending Rates On Fix And Flip Loans
Gustan Cho Associates has fix and flip loan programs which include the rehab financing.
Here is how our fix and flip rehab loans work:
- 15% down payment on property purchase
- 90% of the construction costs will be financed
- After value needs to be at 75% Loan To Value
- 9 months interest-only term
- The term can be extended
- No income verification and tax returns required
- Available nationwide
What Is Private Money Investing in Real Estate?
Private money investors who invest in real estate investors need to be comfortable about which property to lend in. Finding a niche to lend in is a great start to start thinking about. Anyone can become a private money investor. Experienced real estate investor who knows the ins and outs of commercial real estate investing can make a nice return on their money on hard money and private money investing. Hard money lending Chicago is a great field where you can get a lot of return on your money. This article will discuss and cover using hard money loans for real estate.
Niche Private Money Lending
As a Private Hard Money Investor, Investors have the ability to control a bit more of what they wish to participate in within that realm. There are numerous scenarios for hard money lending Chicago investors to review and determine the return on investment. This can be from simple single-family residences to complex commercial deals. There are even opportunities to play around the construction arena. I want to start going through them so investors understand what each can offer. There are factors you can consider when reviewing that kind of opportunity and finding a niche to lend in.
Finding a Niche To Lend In on Single Family Homes
Let’s start with the easiest of them all; the Single Family Residence. This one-family use home can produce a return over time of about 6-10% per year. Of course, there are factors investors need to consider before becoming a lender on an opportunity like this. Some of these are fairly obvious such as the property’s value versus the loan amount requested (LTV). Alex Carlucci, a senior loan officer at Gustan Cho Associates, explains the following about hard money lending Chicago:
This is a great place to start lending when looking into becoming a private lender. It is a single borrower, one unit, so there is not much to review. It is easier to see your way to profit in short to medium-term time. It’s work, no doubt (Unless it’s your brother or cousin. It’s up to you and how you deal with your blood relatives).
The current condition of the property, tenants, if any, their role in the property and what considerations they may or may not have, lease agreements (how long are the tenants there?). Tenant condition (Are they on time with payments, taking care of the property, etc.). Are there any existing liens or loans on the property? Is the Borrower borrowing money, or do they have other obligations on the property, such as taxes or mechanics liens on the title? All are relevant factors you should know while reviewing an opportunity.
Investing In Single Family Homes Versus Multi-Unit Properties
On single-family residences or SFRs, you can control factors more easily than a multi-unit or commercial opportunity. The ease of determining whether the title is clear is easier to acquire. The property value is easily established via the Broker’s Price Opinion (BPO) or appraisal. The loan terms are easier to set as it’s one title to deal with, with no leases per se to renegotiate. An assignment of leases and rents handles that…simple doc. Lastly, you can see profit immediately via prepaid interest or getting your payments starting the 1st of the next month.
Best Mortgage Lenders For Investment Property Mortgage Loans
You do not need an experienced, savvy real estate investor to invest in multi-family investment homes. Single-family residences are not without their pitfalls, but if investors are experienced enough and savvy, hard money lenders can avoid the horror stories we’ve heard.
