HARD MONEY LOANS

1: THE BANK

The bank is usually the best place to start your search for a loan. Ask yourself the following questions:

DO YOU HAVE:

• A month or two to wait to close?
• A long-term project (over a year)?
• A great financial history?
• A solid credit score (650+)?
• At least 25% to put down on your project?
• A property/project that is straightforward with no major/unique issues?

If you can say “yes” to ALL the above, then the bank is going to give you the best rate, so give it a go. And now, for the rest of us…

2: HARD MONEY/ALTERNATIVE LENDERS

2: HARD MONEY/ALTERNATIVE LENDERS
If you and your project do not fit all the above criteria, then move onto Hard Money/Alternative Lenders and ask the following questions:

Do you have:

• At least 7 days until closing?
• A credit score of at least 600?
• At least 10-20% to put down on your project?
• The ability to provide bank statements and tax returns?
• Have you done at least one real estate deal (or have other ample real estate experience)?

Compared to the bank, a Hard Money/Alternative Lender is going to get you a faster close, with better leverage (more money in your pocket) and a simpler underwriting process. For example, at i Fund Cities, we will ask for background and credit checks, an appraisal, and bank statements and tax returns.

Our rate will be slightly higher than the bank, but we are able to move more quickly, and we have tons of flexibility with our funding options, so we are often going to be able to work with you when the bank cannot.

If you can work within the 1–4-week timeframe, handle the underwriting, and the leverage works for you, this Hard Money/Alternative Lender will likely be your best overall option.

If not, look at the next option: Hard Money/Individual-Small Groups

3: HARD MONEY/INDIVIDUAL-SMALL GROUPS:

If you are in a big rush to close, which happens often in competitive markets, you are going to want to consider this type of lender.

Ask yourself these questions:

• Do I need to close sooner than 7 days?
• Do I need minimal underwriting?
• Do I have 25% to put down on the project?
• Is my project short duration (under a year)?

If your answer is “yes” to these questions, then this type of Hard Money/Individual-Small Group Lender may be the best option for you.

4: ADDITIONAL OPTIONS

If none of the above options looks like the right fit for you and your project, you may want to look at some other funding possibilities.

• Do you have family members or friends who want to invest in your project?
• Do you have other investors who want to partner with you who can bring a higher credit score, or more liquidity to the table?
• Can you find a co-signer or a guarantor for your loan?
• Do you have other personal liquidity you can access like investment or retirement accounts?
  Do you have other investments with equity that you can cross-collateralize to get funds for your new project?

Most investors will use a variety of lender types during their real estate career. Understanding the differences between all types of lenders will save you time and money when it comes time to secure your funding.