There are three basic types of properties: residential, commercial and land. We can lend on all three of these property types but there are different ways of doing each one.
Residential property can either be a home you live in or it could be an investment property. Investment property is broken down into regular rentals, vacation rentals and rehab properties. Hard money loans can be done on all three of these property types.
When getting a loan on your owner occupied home, it can either be for business purposes (meaning the majority of the loan is for business use) or it can be for consumer purposes (meaning the majority of the loan is for personal use).
Owner occupied hard money loans are not done by many lenders because there are specific laws that dictate the rules of what must be done. And most lenders don’t want to deal with those rules, either because they don’t want to go through the trouble or because they don’t know them.
We have taken the time to learn those laws and, as a result, we will do owner occupied hard money loans. Yes, there are a few rules to follow but they really aren’t that hard in most cases.
Commercial property includes many different types of property, including office buildings, warehouses, strip malls, retail, multi-family and others. The main thing to understand about lending on commercial properties is that the property must have potential to produce enough income to cover the loan payments.
Another important thing to know is that there are many different types of commercial mortgages. Hard money is only one of them and, in some cases, it is the best fit.
However, there are other alternative lending options for those times when you can’t just walk into your bank and get a loan.
SBA loans are one of those options and can be a great solution, especially for the so-called small commercial loans. The most common SBA loan program goes up to $5 Million. In fact, SBA loans can go as high as $20 Million.
SBA rates are much lower than hard money and are often the least expensive option for business owners to finance commercial property.
Land loans can be used to buy or refinance property you already own and can be used for small properties or for properties that have large acreage.
Because the income potential on bare land isn’t as good as it is on properties that have buildings on them, lenders won’t lend as much on them as they do on other property types.
Land loans also have the limitation that 2nd mortgages are not available on them.
Even though they have more restrictions, if you have a large down payment or a lot of equity in a property you already own, hard money can be useful for financing this type of property.