Hard money lenders will generally take a much more comprehensive approach to evaluating potential loans than a conventional lender. Since hard money lenders have a greater freedom from regulation and federal mortgage rates, they can rely more heavily on the actual investment potential of the property and the borrower’s experience with real estate development.
Before applying for a hard money loan, have a well-defined financial plan for the development with a detailed budget. Your budget should take into account every step of the project from the down payment on the loan, to your contractor bid sheets for each phase of construction or renovation, and a promising resale or refinancing plan for the property. If you don’t have the cash for a down payment, your lender may be willing to work with you and place a lien on a different property instead.
Some factors that a lender may look at when examining your property include:
- collateral value of the property
- personal development history
- real estate trends in the area of your property
- growth projections
- architectural plans
- construction budget
- contractor bid sheets for repair and renovation
- thoroughly developed financial plan and effective budget
- cash for down payment or additional property for the lender to place a lien on
Upon applying for the loan, have as much detailed documentation of the property’s value, your construction or renovation budget, and your projected future appraisal value, to give the lender a comprehensive look at the project.
A seasoned lender likely works with the same hard money lender for each of their projects. Developing a strong working relationship with your hard money lender can make the approval process even easier, and build a foundation of mutual confidence.
If you’re ready to set your project in motion with a hard money loan, contact a Socotra representative to begin evaluating your project. Socotra Capital is California’s premier hard money lender for your real estate investment needs. Contact us today to get started on your quick approval!