Hard money loans are short term real estate secured loans with six month to one year terms and often with extension options. These type of loans are made for business purposes only.
There is somewhat of a close relationship between hard money loans and short term/ bridge loans, however there are some differences. Hard money loans generally will have higher interest rates and origination fees and the LTV ratios will be much lower. They offer the advantage of a fast closing – usually within two to four weeks or less. The closing time frame can realistically be cut down to a few days if there are no unusual issues present and most of the paper work, legal work and title work is in order and any required and ordered third party reports for any given transaction are not delayed. Existing third party reports may be acceptable and in most cases appraisals are not required.
The typical LTV ratio for hard money usually does not exceed 65% of the quick sale value or fire sale value of a property and 30%-40% LTV of the quick sale/ fire sale value of raw land.
The property types considered are apartments, retail, office, industrial, residential condominiums, raw land, multifamily, mixed use, commercial condominiums, warehouses, motel, hotel, self storage, single tenant, gas stations, assisted living facilities, automotive facilities and nursing homes.
The loan proceeds can be used for purchases or acquisition, construction (improvement and renovation construction, gut rehab construction, ground up construction and infrastructure construction) or for refinancing with or without cash out.