A hard money loan can be of great benefit to those investing in real estate or in need of a quick business or residential loan. Find out what these commercial lenders look for in potential borrowers.

A private hard money loan is asset-based, but commercial lenders look at more than just the property and collateral. These often private investors are more interested in the project than a traditional bank is and, in addition, they take into account your planning and preparation. Here are just a few of the qualities they look for in a lender and in the property they will be developing or using as collateral.

Hard money lenders do not want to have to take over your property or project due to non-payment. For this reason, they will want to know your exit strategy. How do you plan on paying them after the project is complete? Is it an income producing property or do you plan to sell it? If so, what do you expect the after repair value (ARV) to be? A private hard money lender will want to know your plan and your budget. If you are working with contractors, include their bids in your budget. They will take a look at your numbers to make sure you understand remodel and repair work and have budgeted correctly. Many of these lenders have been investing in real estate for some time and know their figures astoundingly well.

Hard money commercial lenders usually offer loans on various types of properties including office, warehouse, multifamily, foreclosures, bank owned and short sale. They look for real estate that is marketable and has a strong loan-to-value ratio. They will want to know that you, as the borrower, have the experience that this type of property demands. If you are looking for funding for a fix and flip, do you have the experience and the necessary skills? To this end, they will also want to know that you have some “skin in the game.” They want to know that you too have something to lose should the property go into default.

The Commercial Property

A hard money commercial lender will take a close look at the property involved. If you are in hopes of purchasing a distressed property, it’s important that you show and describe the vision you have for it. Use drawings and be specific. The more you can pull them in and help them see the remarkable transformation that is just waiting for the right Michael Angelo to chisel out its potential. As he so eloquently stated, “I saw the angel in the marble and carved until I set him free.” Be aware, however, that funds are often based on the current value, not the future value after repairs.

Private investors will often want to inspect the real estate that they are lending money on.

At Level 4 Funding we invest in solid properties and solid people. This doesn’t mean that you need a credit score in the 700s. It does mean that you need a solid plan and the experience to back it up. Call us to see if we are the right private hard money lending company to help your project and you succeed.

not try to rush things along. And feel free to ask questions ahead of time. Lenders are not secretive about what they require in applications and what sort of documentation you will need to provide for them. Anything that you can do ahead of time to get ready for this process will help to make it smoother.

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.