FAQs: Loans, Investing, and More

A hard money loan is an equity-based loan used as a bridge to fund the borrower’s immediate financial needs. Generally, it is a short-term solution (six months to two years) for clients who need fast money. Most hard money loans are used for projects lasting from a few months to a few years. It is used for all types of real-estate secured financing such as commercial, retail, industrial, raw land, construction, rehab, single-family residence, and multi-family homes.

Generally, an appraisal is part of Socotra Capital’s underwriting and due diligence process and may be necessary depending on the loan-to-value (LTV) ratio and the uniqueness of the property. If an appraisal has already been completed, providing a copy for our review may fulfill the need and save time.

Traditional bank loans are dependent on many factors including the borrower’s income, credit, net worth, and more. They require minimum credit scores and can take months to close.

A hard money loan relies on real estate equity. There are no credit score requirements, and loan decisions happen quickly. Although higher risk means a higher interest rate, hard money loans can be beneficial and are often the only way to take advantage of investment opportunities.

Residential rehab presents unique financing challenges for investors. You need a lot of capital upfront and enough on the back-end to make sure your project doesn’t flounder. A loan is usually required to jumpstart your rehab and get work done. But conventional loans require a lengthy approval process, strict adherence to approval criteria, and significant down payments that leave the investor strapped for cash once they have acquired the property and renovations begin. Hard money loans were developed to fill this gap in the lending market ... [Continue Reading]

In a word, yes. A hard money loan is just right for a new investor in residential rehab as it is for an old hand. It’s the right option for anyone who has a promising investment lined up and needs a short-term loan. Several common loan types include... [Continue Reading]

Hard money lenders have the freedom to set their own criteria for loan approval. Banks are under stricter regulatory constraints and have to follow Federal Housing Administration (FHA) guidelines. Because many distressed properties do not meet FHA guidelines, it can be virtually impossible for residential rehab developers to acquire a traditional bank loan written through Fannie Mae or Freddy Mac ... [Continue Reading]

One can never forecast with absolute accuracy the Fed’s next strategic move with our fiscal policy, but keeping a close eye on their public statements can provide clues that economists and financial analysts decrypt for the public. As of March 2024, experts at Time Money have predicted a rate hike as early as June this year, following a statement by Janet Yellen and her colleagues at the Federal Reserve ... [Continue Reading]

Socotra Capital provides loans throughout many regions of the United States, and we also consider Small Business Administration (SBA) loan scenarios in all 50 states.

Socotra Capital has the flexibility to lend on any type of California real estate deal. We typically finance commercial, industrial, or residential deals, but we'll entertain all proposals.

Socotra Capital provides hard money loans throughout the United States.

A good lender is willing to instigate development and build positive relationships with real estate developers. Often, developers work with the same lender over the years on residential rehab projects, developing a trusting, mutually beneficial working relationship. However, before committing to a lender, it’s vital to make sure you’re working with a competent lender, as well as to consider whether or not hard money is the right option for your development ... [Continue Reading]

Socotra Capital has the flexibility to lend on any type of California real estate deal. We typically finance commercial, industrial, or residential deals, we're open to hearing any proposal.

Like any conventional lender, hard money lenders do charge a loan fee prior to funding. This fee is measured in “points”—one point is equivalent to 1 percent of the loan value. The number of points could depend on the complexity of your loan and the agreement you reach with your lender ... [Continue Reading]

Hard money lenders will generally take a much more comprehensive approach to evaluating potential loans than a conventional lender. Because hard money lenders have greater freedom from regulation and federal mortgage rates, they rely more heavily on the actual investment potential of the property and the borrower’s experience with real estate development ... [Continue Reading]

The lender’s interest rate for a hard money loan is likely going to be between 8-18 percent of the loan’s value. For a conventional 30-year fixed-rate mortgage, a borrower in today’s market is looking at an interest rate of around 4.125 percent.

However, a 30-year mortgage is not really comparable to a hard money loan, and the two types of loans offer different advantages to the borrower. The hard money loan offers many pragmatic advantages for investors who need quick approval to finance a residential rehab or fix-and-flip development, or to begin ground-up construction ... [Continue Reading]