Hard Money Loans: A Solid, Short-Term Strategy
Terrydale Capital
Feb 12, 2024 9 Min read
In the world of commercial real estate, savvy investors are always on the lookout for creative financing solutions to capitalize on lucrative opportunities. Hard money loans have emerged as a versatile and valuable resource for these investors, and have even been helpful for investors trying to close deals quickly in 2024. These loans provide a flexible financing option that can be the key to unlocking potential in the commercial real estate market. In this blog, we'll delve into the concept of hard money loans, how they are used, and their benefits to commercial real estate investors.
Understanding Hard Money Loans
Hard money is a short-term loan typically used to finance the purchase or renovation of real estate properties. Unlike traditional loans based on many factors including the borrower’s creditworthiness and the current performance of the property, hard money loans are generally secured by the property itself. This makes them a great option when you need funding quickly to invest in commercial real estate. They differ from traditional bank loans in a few different ways:
- Source of Capital: Hard money loans are typically offered by private individuals or organizations, including private lenders, individual investors, or even investment groups. This is in contrast to traditional bank loans that come from financial institutions.
- Speed and Flexibility: One of the most notable aspects of hard money loans is their speed of approval and funding. These loans can be secured in a matter of days or weeks, making them ideal for seizing time-sensitive real estate opportunities.
- Asset-Based Lending: Unlike conventional loans, hard money loans are primarily asset-based. The approval of the loan is heavily reliant on the value of the property being used as collateral, rather than the borrower's creditworthiness.
How Are Hard Money Loans Used in Commercial Real Estate?
Hard money loans can serve various purposes within the commercial real estate sector:
- Acquisition and Purchase: Commercial real estate investors often use hard money loans to quickly acquire properties, especially in competitive markets. The speed of approval and funding can make a significant difference in securing prime real estate.
- Renovation and Rehabilitation: Investors can use hard money loans to finance the renovation or rehabilitation of a commercial property, increasing its value before refinancing with a conventional lender.
- Bridge Financing: These loans are particularly useful as bridge financing to close the gap between a short-term need and a future, longer-term financing solution. For example, investors can use hard money loans to cover the gap while waiting for traditional bank financing approval.
- Property Development: Hard money loans can support the development of commercial properties, providing the necessary capital to break ground and get construction projects underway.
Benefits to Commercial Real Estate Investors
Commercial real estate investors can reap several key benefits from utilizing hard money loans:
- Speed: In the fast-paced world of commercial real estate, speed is often critical. Hard money loans offer rapid approval and funding, allowing investors to seize opportunities that might slip away if they had to wait for conventional financing.
- Flexibility: These loans provide flexibility in terms of repayment structures and property types. Investors can customize the terms to suit their specific needs.
- Asset-Based Lending: Investors with less-than-ideal credit scores can still access financing because hard money loans are primarily secured by the property itself. This can be a lifeline for those who may be overlooked by traditional lenders.
- Enhanced Property Value: Investors can use hard money loans to improve or develop properties, enhancing their overall value and increasing the potential for profitability.
- Access to Unique Opportunities: With hard money loans, investors can explore unique and potentially high-reward commercial real estate opportunities that they might not have been able to access through traditional financing channels.
In addition to these benefits, we have seen hard money loans emerge as a great alternative financing vehicle for investors seeking to close in the current market - especially as traditional financing routes have proven more difficult.
Access Better Opportunities than What Traditional Lenders Can Offer
Traditional financing options offer a one-size-fits-all approach that doesn’t always meet the needs of real estate investors. You need a financing option that can provide tailored solutions to help you take advantage of your investment opportunities in commercial real estate.
At Terrydale Capital, we offer a wide range of hard money loan products and industry resources that can be customized to your specific investment needs. Our team of finance experts has extensive knowledge of the industry and can assess your needs quickly and explicitly, so you can get the funding you need without any unnecessary delays.
Our hard money loans are friendly to any type of commercial property. Basics include:
- LTV Max: 75%
- Loan Amount: $750,000 +
- Starting Rates in 2024: 10% +
- Prepayment Penalty: 6-Months
In Conclusion
At Terrydale Capital, we understand that each real estate investment is unique, which is why we offer customized financing solutions to meet your specific needs. We’ll work with you to develop a financing package that meets your investment goals and helps you maximize your profits.
We offer a variety of flexible loan terms, including interest-only non-recourse loans, bridge loans, and LTC up to 90% with CAPEX. Our team of experienced real estate financiers will work closely with you to ensure that the terms of your loan are perfect for your investment strategy.
If you're ready to close your commercial real estate deal quickly in 2024, contact us today.
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Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
