You hear it all the time—commercial hard money lenders are here to help when traditional funding lenders can’t. In many ways they do help, but generally, it’s the seasoned real estate investors that benefit most.
Commercial hard money lenders are a great option when looking for short-term financing and when you do not have the picture perfect requirements (stellar business credit scores, excellent financial conditions and so on) for traditional lending institutions such as banks or credit unions. But, what nobody tells you is that commercial hard money lenders are not for the timid or for the unseasoned real estate investors that are new to the commercial investment game. Of course, this fact doesn’t mean hard money itself is any more complicated than private money or traditional funding (soft money); rather it just means that those who have been in the business for a minute know the tricks that commercial lenders like to play.
For instance, commercial lenders are still in the business of making the most on their investment. Thus, with hard money, these particular lenders aren’t afraid to charge a higher interest rate. For those individuals that know hard money is for moving quickly on a lucrative investment, these higher rates are not really an issue. In other words, they see a great investment, they find a reputable commercial investor and in less than a few business days the deal is done. With unseasoned real estate investors, you need time to get your feet wet as well as time to weigh all the pros and cons—this is, of course, perfectly okay and generally just the nature of the beast. But, nevertheless, if you need extra time to make your move that’s still extra time you are essentially sitting on a lucrative investment, which in the long run generally means more costs and higher fees.
Similarly, if this is your first or second time utilizing a commercial lender for a hard money loan, you need to make sure that you have enough capital to pay back the loan and that you are working with a reputable lender i.e. check their credentials. These are generally things that a seasoned real estate investor can do seamlessly. So, remember if you are new to the game, that’s okay, just make sure you find the right lender, the best rate and move quickly on your investment.
At this point, you may be wondering, well how does someone know if they are a seasoned real estate investor? The obviously answer is you are not new to game i.e. this not your first acquisition or even your second. Moreover, you can recognize a bad investment from a mile away, red flags and all. Other signs that indicate that you are truly seasoned include having several commercial real estate seminars underneath your belt, having a clear understanding of the fickleness of the market as whole, having extensive experience in dealing with tenants as well as knowing the difference between private money and hard money—just to name a few.
Ultimately, if you are wary of using hard money for your next commercial investment or you want to do a little more research before you make your next move that—that’s fine, and it definitely doesn’t mean you aren’t on your way to becoming an expert.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.