Most commercial real estate agents don't consider the need to have a source for hard money. Owners and investors in commercial real estate are often well capitalized and have a bank relationship that allows them to finance commercial property with ease. Because of this,commercial REALTORS® do not have a consistent need to provide there client with a referral. For experienced commercial agents this is rarely something they need.

Use of Commercial Hard Money Lenders

Where do hard money lenders, like Owens Financial Group - California hard money lender, come into play?

Speed

A commercial hard money lender is best used when time is of the essence. Most institutional lenders take 60 days or longer to underwrite and finance a deal. A good hard money lender can do it in 10 business days or less. A deal that needs to close by the end of the month can still be done. The borrower will pay for this convenience, but they still have a deal and they may have saved their deposit. The rates charged by hard money lenders are often higher than banks and their fees are generally steep.

Value Added Properties

Commercial hard money is also useful when an under-performing asset is purchased to be repositioned. A sample deal could be a 60% occupied office building, that is being purchased by an experienced owner to be leased up and then refinanced or sold at a profit. A hard money lender may evaluate the project differently and provide more capital to complete the project than an institutional lender.

Bridge Loans

Commercial hard money lenders are best utilized as a bridge loan. Shorter term loans used until more permanent financing can be arranged are often called bridge loans. Due to the higher interest rate, it is often in the best interests of the borrower to refinance and takeout the hard money lender.

Types of Hard Money Lenders - Brokers & Direct Lenders

There are various types of hard money lenders. Direct lenders invest their own funds in mortgages and deeds of trust. Hard money brokers have a list of investors that would like to invest in deeds of trust or mortgages. These individuals act as a private lender and supply the necessary funds on deals. Sometimes a hard money broker will have difficulty arranging the funding from a private investor.

Hard Money Standards

The underwriting standards of hard money lenders vary from company to company. Most will lend a maximum of 75% of value on improved commercial property. Some hard money lenders during the upswing of the market in the past few year have loosened their standards and have lent at a higher loan-to-value ratio. Unfortunately, some of those lenders are falling on harder times as delinquencies increase and inflated property values deflate.

A quality hard money lender can be a valuable tool in the kit of the smart commercial real estate agent or commercial lender. Hard money lenders appreciate knowledgeable professionals that understand what they do and how they do it.