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Hard Money Loans Maryland
Best Maryland Hard Money Lenders
Delancey Street is a premier, and top rated, Maryland hard money. We provide creative financing to real estate investors who need funding for their next residential, or commercial, property. When looking to get involved in real estate, many would-be investors believe the traditional path is the best (or only) option. They pack up their financial documents, head down to a local bank, sit with the loan officer for hours on end, wait 2-3 months for a letter, and then finally receive their money if they are approved.
Ask anyone who’s been there: that wait can be horrific.
Not only are you saddled by the crushing weight of wondering whether or not the bank will decide to take a risk on you, but that perfect investment opportunity that you saw weeks ago has already been snatched up by someone else, leaving you with a massive loan and nothing to spend it on.
A terrible thought indeed.
Many savvy investors investigate alternative means of securing funding for their properties, one of those being a private, or hard money, loan. For those unfamiliar with the term, hard money loans are simply privatized loans that are secured using real estate as capital. While the rates are generally higher than traditional loans, they offer numerous advantages.
The Ability to Secure Funding Quickly: As mentioned above, traditional loans can take ages to secure, leaving you helpless to take advantage of any opportunities you may encounter. Conversely, hard money loans can be secured quickly, usually within one to two days, and sometimes even on the same day. By law, hard money loans can sometimes take 2-3 weeks to clear, but that’s still lightyears of traditional loans.
The process for hard money loans is much more streamlined than traditional loans. The lender will examine the value of the investment property, determine the value of the property put up for collateral, investigate the borrower’s ability to complete the project, and then ask about the borrower’s ability to make payments. If all of these are satisfactory, the loan can be completed and the borrower is on their way. No fuss, no hassle, just money changing hands from lender to borrower.
The Ability to Secure Funding Easily: Banks are known for two things: having a long list of requirements that a potential borrower must meet to secure a loan and saying “no” a lot more than they say “yes.” Not only can the process of securing a traditional loan be frustrating, but it can also be a gigantic waste of time if they end up denying your application.
Hard money lenders aren’t concerned with any of the paperwork that goes along with traditional loans, making them perfect for people that have foreclosures or unpaid debts to their name. Moreover, people who are non-citizens but want to start their own investment property business may be denied because of their lack of a credit history at all.
Other groups that are denied a traditional loan are people that are self-employed, or people with less than two years of employment history at their current job. Banks tend to deem those people as “unlikely” to have the resources to pay back the loan and are flagged for being high-risk. Even investors that have a perfect track record of making payments, but have too many mortgages on their record are usually denied as well. The criteria that banks use to flag people for loan denials are strict and usually arbitrary.
The Ability to Secure Funding At All: Banks are notoriously risk-adverse and anything that is wrong with the borrower or the property itself is usually cause for a loan denial. If the bank feels like the investment property is uninhabitable or dilapidated, they might reject the loan no matter how skilled or experienced the borrower is.
The life of a loan can also give the bank pause: Financial institutions love to make long-term loans that accrue smaller interest over time rather than short-term loans that have high-interest rates and are risky investments. For a real estate investor who needs a short-term loan to fix and flip a property, a long-term loan doesn’t make any sense. Also, in the event of problems during the renovation that may cause the project to get held back, the borrower may only need a short-term solution – akin to bridge loans – that can help the borrower for a few months.
Delancey Street’s team of Maryland hard money lenders, many of whom are real estate investors themselves, are more open to unorthodox investment properties and are also more empathetic to various opportunities. We investigate each project individually and approve or deny based on a variety of factors, not all of them having to do with making money off the interest of a loan. Banks don’t have the flexibility that Maryland hard money lenders do, nor do they have the vision required by many lenders to see the full vision for a project, making them perfect for people working in real estate.
What Information Do Hard Money Lenders Require?
Just because it is easier to secure funding for hard money loans because you are dealing with private investors, doesn’t mean the money is available without any strings. In order to secure the short-term funding, these investors are going to be looking for some information to convince them they should invest in your endeavor. Once your ducks are in a row, the entire loan process can take weeks compared to the several months you would have been waiting at the local financial institution.
The Reason for the Hard Money Loan
When you apply for a traditional loan at the local bank, the main thing the bank cares about is whether you can repay it or not. With hard money loans, private investors have one real concern, the reason you need their money. Perhaps you are a house flipper and you already have a buyer lined up but you need to spend a considerable amount of money in order to bring the house to compliance. Whether you are flipping, or you’re a real estate developer who has a short deadline approaching, it is important to be very open with the hard money lender how you’re going to use the money.
Preparing documentation that shows you already have buyers lined up for the property and the wheels are already in motion can go a long way in allowing the investors the piece of mind they need.
The Value of the Property in Question
It really doesn’t matter if you are renovating a single family home, or you have a small strip mall under development, hard money lenders are simply concerned with the value of the property. If you are looking to a secure a $500,000 loan on property worth $400,000, it will be a tough go convincing anyone to take that risk. If you need $900,000 and already have a buyer lined up to sell the property for $2,000,000 after renovation, the hard money lender will want to see proof.
Take the time and provide the hard money lender this due diligence information so that they can have peace of mind and be more inclined to cut the check.
Documentation on Completion of Restoration
When it comes to providing hard money lenders with information, nothing will be more important that the ARV, after repair value. If the property is worth $300,000 today, but will be worth $900,000 after the repairs are done, then the lender can determine if it is worth the risk. Loaning a quarter million on a property that will be worth more than triple than that after repairs is a sound investment, but you have to be able to prove this by showing comparables in the area. Take the time to gather documents that show the value of the property as is today, what the costs will be to make the repairs, and the appraisal of the property when work is completed.
Ability to Provide Additional Collateral
Even after providing the investors with the ARV, they may still be a little apprehensive to float the hard money loan. After doing their due diligence, perhaps they are close to making the deal but need more collateral. Perhaps after reviewing the numbers, they feel the value of the property might be a little too high, but to compensate for the overage, they will consider modifying the terms of the agreement. In order to secure the loan, you may be asked to provide other forms of collateral to securitize the loan.
Although the benefits to securing hard money loans are numerous, there is some due diligence necessary.
Take the time to secure all the necessary documents before you approach a hard money lender.
A Guide to New Construction Loans in Maryland
Business owners who are looking to expand should consider a commercial construction loan. A commercial construction loan is for business owners who want to renovate an existing commercial space or construct a new building. Unfortunately, many business owners don’t have the money to fund a construction project. Commercial construction projects can take thousands of millions of dollars to complete. A solution to this problem could be a commercial construction loan.
What is a Maryland New Construction Loans?
A commercial construction loan is used to pay for a commercial construction project or renovation project. It is not for business owners who want to purchase an existing commercial property. They would need to apply for a commercial mortgage.
A Maryland commercial construction loan allows you to pay for property, materials, labor, and other costs. It is different than a regular loan. Many loans give the borrower a large sum at once, but a commercial construction loan pays at certain periods during the construction or renovation project. Most traditional loans, such as commercial mortgages, have a monthly repayment plan that lasts at least 10 years.
Commercial construction loans issue a series of payments that are disbursed throughout the construction/renovation project. When a borrower takes out a commercial construction loan, he or she will meet with the lender to create a draw schedule.
What is a draw schedule? A draw schedule sets milestones in the construction/renovation project. When a milestone is completed, the lender will issue a partial payment of the loan to the borrower. An inspector will probably visit the site to ensure that the work has been completed. The draw payments will continue until the project is finished.
With a commercial construction loan in Maryland, borrowers only have to pay interest on the amount that has been issued. Say that you took out a commercial construction loan in the amount of $500,000. If $200,000 of the total amount has been disbursed, then you are responsible for paying interest on $200,000.
When the borrower has completed his or her project, the remaining interest, principle, and other fees can be payed in one payment. Borrowers who do not want to make one payment can apply for a commercial mortgage. The funds from a commercial mortgage are used to pay the balance of the commercial loan. With commercial mortgages, the property that was constructed or renovated will be used as collateral.
Interest Rates, Fees, and Down Payments
While it will vary based on the lender, most lenders offer interest rates that are between 4% to 12%. There are also fees associated with commercial construction loans. These fees may include:
- Guarantee fees;
- Fund control fees;
- Processing fees;
- Documentation fees;
- Project review fees.
Most lenders want a down payment that is between 10% to 30% of the entire cost of the project. Lenders will look for borrowers that have good credit scores. Those who have high credit scores are low risk and may also be offered lower interest rates.
How to Prepare
When you are applying for a commercial credit loan in Maryland, you should have a project plan that outlines each step of the construction or renovation. Most lenders will also want to see the cost estimates for materials, labor, property, and other associated expenses.
Would you like further details about new construction loans in Maryland? If so, we invite you to contact us at Delancey Street. Our team is standing by to provide you with more information about new construction loans.