Are you desiring to invest but cannot avoid the required capital? Maybe you have lost lucrative deals and opportunities to own prime properties due to the inability to finance them. Your credit scores are not attractive. This issue is limiting you from accessing mainstream credit lines.
If this is your situation, hard money can be your best alternative. Whether you want to buy, flip, or build a new property, this option will serve your purpose. Hard money lenders in Florida offer timely financing to ensure you do not miss a good deal. Their processing time is short.
However, you need to understand several aspects when considering this credit option. Here are some of them:
1. Know their Loan-to-value (LTV) Rate
The loan-to-value ratio is the basic determinant of the amount you will get and the interest rates to be changed. The ratio is the percentage of the current property value and expected selling price. Hard money lenders use this ratio to ensure they will recover their amount in case you default.
Different hard money lenders in Florida offer varying LTV. However, it ranges between 60% and 85%. As a borrower, it is essential to consider this ratio as it can make a difference in the amount you will get. So, always shop around to know the LTV ratio of various lenders before considering one.
2. Upfront Payments Requirements
Like other property loans, hard money lenders require you to make some down payment. You cannot get the loan if you bring nothing to the table. Most hard money lenders in Florida will request a 10% to 20% down payment. Others can require you to have a 30% or 40%, depending on the LTV ratio.
Before you approach Florida hard money lenders, it is important to know their down payment requirements. Always consider offering an option within your reach. This way, you will have few challenges in accessing hard money credit.
3. The Lender’s Reputation
With the demand for hard money surging daily, people are seizing the opportunity. Different lenders and financial brokers are available in the market. Each of these companies is posing as the best option for anyone seeking hard money loans. However, not all lenders are genuine. Some are fraudsters that will lure you to their net and rob your money.
You can avoid becoming a victim of such schemes by doing due diligence before engaging a hard money lender. Assess their reputation and reviews of the current clients. Understand how they treat them as it is the same way they handle you. Remember, any reliable lender will have a website with a review option.
By assessing the lender’s reputation and reviews, you can determine whether they are a good option. Also, you can consider seeking referrals from your friends and colleagues. This way, you can separate the wheat from the weed and pick the right lender.
4. The Target Property Markets
Hard money lenders in Florida do not finance every real estate project. The loans are designed for specific purposes. Also, different lenders will concentrate on various sectors. For instance, some offer loans for flip and fix deals only.
Some target specific regions and markets. Considering the type of property you are seeking credit for is essential. This way, you can choose a hard money lender with a credit option for your target property market.
5. Interest Rates and Repayment Conditions
Like other loans, every real estate investor needs to assess the interest rate a hard money lender is offering. Different lenders will have varying interest offerings. If you are not careful, you will likely pay massive amounts in interest.
Also, better rates will mean more profits from your property sales. Good to note is that the variation between the rates of lenders in Florida is negligible since it is market driven. However, a 1% difference can considerably change your profit. So, it is vital to know the rates offered.
As well you need to know the repayment conditions. The hard money lenders will offer you several payment options. The first option is interest-only repayment, where you pay monthly interest amounts and pay back the principal at the end of the loan term. The next option is the balloon payment, where all the interest accrued and the principal is paid at once.
The last option is the hybrid combining both options. Depending on your needs, you should assess the best option to fit your financial condition and pick a lender offering it.
In a word, you need to consider these aspects when choosing a hard money lender in Florida to fund your real estate investments.