Hard money loans, commonly referred to as “bridge loans,” are widely used by real estate investors. Banks are less common complicated money lenders than private individuals or companies.
With an asset-based loan, the property itself serves as collateral. Generally speaking, this form of funding is quicker and simpler for borrowers than other financing choices. However, it may cost more in terms of interest and fees.
Are you looking for a hard money lender? If yes, then here’s a review of it.
You’ll learn whether hard money loans are the right for you.
Towards the end of this article, you’ll find answers to some of the most frequently asked questions about hard money lenders and other online alternatives.
Best Hard Money Lenders is a course that teaches you about real estate investing.
If you’ve read my other articles on real estate investing, you’ll know there are 3 primary ways to invest:
Wholesaling, buy-and-hold, and flipping.
While they each have their pros and cons, there is a ton of potential for success in investing in real estate.
Real estate has created some of the largest fortunes in world history.
That being said, you should take some time to seriously think about something:
Is now the best time for YOU to get into real estate investing?
Because despite the potential upside, investing in properties or land takes a lot of capital, and is very labor intensive.
That means if you:
- Have less than 3 hours per day, OR
- Aren’t sitting on $20K+ in disposable income
This may not be the best time for you to start investing in physical real estate.
Don’t get me wrong, real estate investing can be an amazing way to protect your assets while generating cash – but there’s a time and a place for it.
But there’s good news!
All you need is a system to generate the cash (& free time) you need to be ready for real estate investing.
My preferred method of getting there is by becoming a Digital Landlord
It takes the benefits of real estate investing, but removes many of the barriers (& annoyances), like:
- Small cash flow on properties
- Having to take out debt
- Dealing with repairs and upkeep
- Dealing with tenants
The cool part is that the income is mostly recurring (AKA semi-passive).
You could make anywhere from $2,000-$10,000+ per month doing it.
You can build it as big (or small) as you feel like, without the annoyances I listed above.
If that sounds interesting, you might want to think about using the Digital Rental Method.
Then, you can take the profits and start investing in physical real estate a year or two from now.
If you wanna see what Best Hard Money Lenders looks like on the inside, keep reading.
The Best Hard Money Lenders
Finding a suitable lender can be challenging if you feel you need hard money financing now.
Here are a few solutions that, in my opinion, are appropriate for businesses that offer national service. You should research your alternatives in your area because some smaller lenders only work with local investors, like North Coast Financial in California.
Most Customer-Focused Hard Money Lender
RCN Capital offers “fix and flip” financing in 44 states. Single-family homes and multi-unit buildings are two types of residential and mixed-use property developments that the lender finances. RCN only assesses interest on the unpaid portion of your loan; interest is not assessed on the full loan amount. In addition, there are no early repayment penalties on the loans provided by this company, so you can save money if you quickly sell your investment property and pay off the loan.
The Best Hard Money Lender For Experienced Flippers
Finance of America offers incredibly competitive interest rates for residential and commercial real estate. Additionally, it will give credible investors access to a line of credit with a cap of $10 million, enabling them to work on major projects or several properties together compared to using alternative solutions like a cash-out refinance or business loan.
Finance of America considers your real estate investing track record rather than your personal credit history, so if you’re a new investor, this might not be your best choice.
Best Hard Money Lender For Rental Properties
All of the long-term loan options and bridge loans provided by Visio Lending are specifically designed to meet the requirements of landlords. These low-interest loans are available to borrowers who want to purchase multi-unit properties or vacation homes. In addition, poor credit isn’t a barrier to starting a real estate investment firm because the company doesn’t qualify borrowers by income or credit score.
Alternatives To Hard Money Lender
They may be a perfect lending partner if you are fortunate enough to have relatives or friends with some spare cash. For many small and large businesses, borrowing money from friends and family is still common. For example, you may go to your personal contacts and propose an interest rate higher than what they now get from a savings account.
This is a win-win situation because there is a significant difference in interest rates between a savings account and the rates demanded by seasoned hard money lenders. Furthermore, friends and family are unlikely to charge any fees. They may be a little more lenient if an emergency arises and you need to make a late mortgage payment or request additional funding.
However, adding a potential source of tension to their personal relationship may not be worth it for some people. However, a close relative or friend can be a suitable lender for others.
Real estate crowdfunding is another option to consider. Patch of Land is a website that connects borrowers and lenders in the real estate crowdfunding industry. Interest rates are low, and the application to the funding process is swift. In addition, Patch of Land has a dedicated customer service team that assists applicants and responds quickly to their concerns and questions.
Who Is The Best Hard Money Lender?
There are several important qualities to consider when determining which lending partner is a good fit for you.
Reputation
Inquiring about any lender is one of the best ways to obtain real-world feedback. You can find reviews and rankings by conducting a simple online search. You can share your experiences with private money lenders by joining a local National Real Estate Investor Association chapter. Other real estate investor forum sites, such as BiggerPockets, provide a virtual setting for networking and exchanging ideas with like-minded investors. Real estate agents, title organizations, and mortgage lenders in your area may be able to refer you to a reliable hard money lender because they deal with them frequently.
When necessary, check with your lender to see if they have any licensing. The best hard money mortgage loan companies will be registered with national organizations, which can be found through the Nationwide Multistate Licensing System & Registry. Individual lenders may be licensed by their state’s real estate commission or hold a real estate broker’s license. You can check complaints and confirm membership by contacting licensing boards.
Speed And Simplicity
The primary advantage of this type of real estate loan is that it’s quick. Borrowers don’t have to worry about the lengthy application and underwriting processes associated with traditional mortgage loans. Short-term loans with immediate funding and a simple application process are ideal for real estate investors such as house flippers.
Because they only plan to keep the investment property for a short time, these borrowers cannot afford to wait for a conventional loan to be approved. Hard money financing allows for a faster turnaround because there is less red tape and less scrutiny of the borrower’s finances, such as their debt-to-income ratio and FICO score. Because the property serves as collateral on a loan, the creditor bears less risk. These loans can be secured in a matter of days.
If your lender requires you to jump through hoops or wait an extended period of time to access loan funding, it’s most likely not the best option. By definition, a hard money mortgage is brief and to the point. The best hard loan lenders will not complicate the process or keep you waiting for your funds.
Affordability
Because of the increased risk, hard money lending can be a more expensive mortgage option. When it comes to the overall cost of the loan, there can be a lot of variation. It’s critical to compare interest rates and ensure you understand your loan’s structure and any fees involved.
The interest rates on hard money loans typically range from 8% to 15%. Traditional loan interest rates, such as a mortgage, range between 3 and 6%. Because hard money lending is considered riskier, lenders charge a higher interest rate to hedge their bets. Rates will differ depending on the creditor and the buyer’s individual circumstances. Interest rates vary regionally as well, depending on the local competition.
Many hard money loans have origination points in addition to interest rates. Origination points are a type of fee that borrowers must pay to cover the costs of loan processing, closing costs, and other expenses incurred by the lender. One point is typically equal to 1% of the loan amount. On a hard money loan, some lenders may charge up to ten points. It’s critical to understand whether your lender charges an origination fee so you can determine if the cost fits within your budget and plan accordingly.
The loan-to-value ratio determines most of the costs associated with a hard money loan (LTV). You can figure this out by taking the loan amount and dividing it by the house’s value. In general, a higher ratio indicates a greater risk to lenders. As the lender’s risk rises, so do the fees and interest rates accompanying it.
The loan-to-value ratio is calculated by some traditional lenders using the property’s current appraisal as a base. In contrast, others use the after-repair value (ARV). Using the ARV raises the loan-to-value ratio, indicating a riskier loan with higher costs. Inquire whether your lender uses the current property value or the ARV.
Before signing a hard money loan contract, keep an eye out for predatory practices, high costs, and lender fees. If you’re worried you’ll be in over your head financially and unable to repay the loan, don’t agree to work with the lender.
Underwriting processes associated with traditional mortgage loans. Short-term loans with immediate funding and a simple application process are ideal for real estate investors such as house flippers.
Because they only plan to keep the investment property for a short time, these borrowers cannot afford to wait for a traditional loan to be approved. Hard money financing allows for a faster turnaround because there is less red tape and less scrutiny of the borrower’s finances, such as their debt-to-income ratio and FICO score. Because the property serves as collateral on a loan, the creditor bears less risk. These loans can be secured in a matter of days.
If your lender requires you to jump through hoops or wait an extended period of time to access loan funding, it’s most likely not the best option. By definition, a hard money mortgage is brief and to the point. The best hard loan lenders will not complicate the process or keep you waiting for your funds.
Renovation Costs
Whether a single-family house or a multifamily building, rehabbing an investment property is almost always part of a real estate investor’s project.
The amount of your loan may have to cover the purchase price of the property and the costs of renovation or new construction, depending on your personal situation. While increasing the loan amount raises the risk level and may cost you more in fees and interest, it may still be necessary to complete your project successfully.
Many hard loan lenders distribute funds in a series of draws to ensure that the portion of your loan designated for rehabilitation is used responsibly. Good lenders will sit down with you after your hard money loan is approved to create a draw schedule that considers the repairs you need to make to the property. When the work for one draw is finished, you will be reimbursed and can start working on the next draw.
For example, suppose a new roof is required. In that case, once it’s completed and the lender has inspected and confirmed that it had been completed satisfactorily, the lender will reimburse you for that work. You can move on to the next project, perhaps updated plumbing.
Most hard money lenders will only fund rehab work performed by reputable licensed contractors. DIY house flippers may be out of luck when it comes to hard money loans because they cannot use the money to fund renovations.
Hard money or bridge loans have numerous advantages and disadvantages for real estate investments. Before entering into a transaction, thoroughly vet your lender and read the fine print on any contracts. Investors and best hard money lenders can benefit significantly from these loans even though they carry some risk.
FAQs
Let me now address your concerns about hard money loans.
What Is Hard Money Loans?
A hard money loan, or hard money, is short-term commercial financing secured by the purchased or renovated property. Private lenders or traditional lenders make hard money loans.
How Does Hard Money Loan Work?
Hard money loans are a kind of loan in which the collateral is a property that is being purchased. Because traditional lenders are concerned with your credit score, financial history, and overall ability to repay them, the lending application and the approval process can be lengthy and time-consuming.
On the other hand, this does not apply to a hard money loan. Borrowers can get money quickly because hard money lenders are less concerned with your personal finances and credit scores and more concerned with the property’s value. Lenders will seize and sell the collateral if a borrower defaults on the loan.
Hard money loans are quick to get approved for and funded. It’s possible to get a loan for a short period of time or for a long time. The high-interest rates associated with hard money loans, on the other hand, make holding one for that long a wrong financial decision.
Cash is scarce. Hard money Borrowers make monthly payments that include interest and any fees. Loan partners may occasionally reimburse borrowers for specific property rehabilitation projects if that is part of the agreement.
Upon sale of the property, the borrower is responsible for repaying the lender for the remaining balance, covering the closing costs, and keeping any profits.
Is It Necessary To Make A Down Payment On A Hard Money Loan?
Some hard money lenders do require a down payment, but not all. Most house flippers and other real estate investors require a 20-30% down payment to mortgage a property with hard money financing.
Borrowers can use a hard money loan to finance the entire cost of a property in some cases. Affluent individuals with excellent personal credit scores and an established record of success in real estate investing are typically the only ones who qualify for such financing.
Some predatory lenders advertise hard money loans with no down payment, so do your homework before signing an agreement with a company that makes such claims. Unfortunately, if something appears to be too good to be true, it most likely is. Excessive fees, balloon payment terms, unrealistic payment schedules, or other deceptive practices may be involved.
How Much Do Hard Money Lenders Charge?
Loans from hard money lenders are subject to monthly interest charges. Hard money loan rates can range between 8% and 15% of the total loan amount. The borrower must make monthly interest payments until the investment property is sold and the loan is paid in full. As a result, the number of months you’ll need to pay interest is determined by the time it takes to complete renovations, lists the property, and close a sale. As a result, it’s in the borrower’s best interest to complete these tasks as soon as possible.
In addition, hard money lenders typically charge an origination fee, ranging between 1 and 10% of the loan amount. This fee covers the administrative costs of the loan.
Hard money lenders often require a down payment on a property. An average of 20% to 30% of the total cost is devoted to this. Putting this money down upfront reduces the lender’s risk. It may allow for lower interest rates and better terms for the duration of the loan.
Do Banks Offer Hard Money Loans?
No. Traditional financial institutions such as banks and credit unions don’t provide hard money lending. Private lenders and private investors make hard money loans.
When Would A Hard Money Loan Be Beneficial?
Other options are available even if your credit scores aren’t high enough or your business experience isn’t long enough to qualify you for a traditional commercial real estate loan. A hard money loan may be a good option if you plan to renovate and resell the property quickly.
Other small business loans are available if a hard money loan isn’t the best option. In addition, Nav offers a free evaluation of your company’s credit scores before you apply for financing.
The Bottom Line: Hard Money Loans
Hard money loans can be a good tool for real estate investors to acquire properties in certain situations. When available, you should use traditional financing instead. If you decide to use hard money to finance a transaction, make sure you can afford the interest and fees and repay the loan when it’s due. If you believe a hard money loan is right for you, research the companies on my list of the best hard money lenders.
Are There Alternatives To Hard Money Lenders?
Yes, there are plenty of other business models to choose from if you want to pursue this making money online. Here are just a few:
Is Hard Money Lenders A Scam?
So, time for the $1,000,000 question – is Hard Money Lenders a scam?
No, not technically. You can 100% make money with this program, though it’s not nearly as simple as they make it seem.
As with most businesses, there is A LOT of work to be done upfront & no guarantee of you being successful.
Not to mention the profit margins are typically pretty small.
Don’t get me wrong, I’m a big proponent of front-loading work now, so that you can reap the rewards later.
But if I’m gonna do that, I want the rewards to be HIGH and virtually guaranteed.
I’d rather put in that same 3 months of work (in my spare time) & build a handful of Digital Rental Properties that each produce $500-$2,000 checks every single month afterward (AKA recurring income).
And the cool part is that you can do it in a lot less time than 3-months (I personally did it in my first 2 weeks of using the Digital Rental Method).
Unlike physical real estate, you can do it from anywhere in the world, so it’s a genuine “laptop-lifestyle” business.
All you need is an internet connection.
Some of my friends are Digital Rental Method that run their 6-figure businesses from:
- Camping trips at national parks
- Beachfront in Hawaii
- On the road in a camper van (with a pet pig!)
They focus on living an enjoyable life first, and focus on income second. All thanks to this program.
They can take weeks or months off, and money keeps rolling in.
Living happily is the top priority.
If the thought of living perpetually at your dream vacation spot interests you, using the Digital Rental Method might be for you!
Read Our In Depth Breakdown Of The Top 5 OppReal Estate Courses For 2024
What Is My Top Recommendation For Making Money Online In 2022?
I’ve personally tried all of the major online business models:
- I’ve sold fidget spinners through Amazon FBA
- I’ve drop-shipped a toilet bowl putting green on Shopify
- I’ve sold women’s health supplements via Clickbank affiliate marketing
And I made money with all of them, so trust me when I say: there is no “perfect” business model.
It’s worth noting that I FULLY endorse real estate investing as a way to grow wealth, and that’s why I invest my own money in commercial and residential real estate.
That being said, my #1 recommendation for making real money online as a beginner is, hands-down: being a Digital Landlord.
Whether you’re a complete newbie, or you’ve been around the block before but have never had that “big win” to propel you forward, using the Digital Rental Method is for you.
Why?
Time: If you’ve got a spare hour or two each day, you can do this. If you want to drop everything and go all in, you can do this. More time obviously means faster results, but even putting in a few hours per day is enough to see real success.
And because of that flexibility, you don’t need to trade your time for money. Once the income starts, it’s recurring.
That means you can take a month off, travel the country, pursue a passion project, chill on the beach, or charter a boat across the world.
But you can only do that once you’ve created an income stream that doesn’t require YOU to be there all day, every day.
Real estate investing is a FULL-TIME JOB. If you stop finding deals, your money dries up.
Ownership & Control: Unless you’re buying your properties in cash, you don’t technically own the properties – the lender does.
If you miss a single payment, the property can be taken from you.
Why pour your soul into a business that could be taken away from you at the drop of a dime?
With the Digital Rental Method, you literally own all of the assets, which means you have ultimate control.
Ongoing costs: With real estate, profit margins are actually pretty slim. Real wealth is made in owning the assets, and owning A LOT of them.
using the Digital Rental Method, your profit margin is nearly 100%. Watch here to learn how.
Just a reminder: these Digital Rental Properties are worth (at a minimum) $500/mo in semi-passive income. And each time you create another one, your income increases, and the effort put into creating the next property decreases.
Best-case scenario, you have properties bringing in over $3,000+/mo on auto-pilot.
It’s Effectively Copy-Paste: Here’s my favorite part: once you have your first Digital Rental Property up, you can literally copy-paste another version of it and find another willing “renter” in a few days. DOUBLING your income doesn’t get much easier than that…
If you wanted to double your income with real estate investing, you would need twice as many properties, or double your profit margins on each property. And I can guarantee you, that’s a lot harder than a few clicks & a phone call.
Make Money Helping Real People: With the Digital Rental Method, you’re helping solve REAL problems that people are ASKING for help with:
Small local businesses around the world need one thing: customers. Without them, their business would fall apart. If you can provide those customers, they’re going to be really happy – and they’re going to pay you for it.
You’re helping a struggling mother or father put food on the table for their families, put their kids through college, or simply live life a little bit more comfortably.
Having this type of impact on the world is what will help you sleep soundly at night.
So, the rest is up to you. You could keep looking at other opportunities like Hard Money Lenders, which might make you money.
You could keep researching and researching for the next few months (or few years), never making a concrete decision.
OR, you can look deep inside, think about those dreams, hopes, & desires, and make the decision to ACTUALLY make it happen, just like it has for thousands of other students before you.
Making a fortune while actually helping real people that need it.
If this sounds like you, click here to see how it all works.
