The process to obtain a hard money loan is relatively simple. Still, though, we receive countless questions every day from people wondering how they can secure quick financing for their property purchase or remodel. The process looks different depending on your lender, but here at The Hard Money Co., we like to get you your money fast and get you started on your path to real estate investing.
7 Steps to Obtain a Hard Money Loan
Identify your Investment Property
There are a number of resources that we recommend for identifying your potential investment property. Whether it be an opportunity from a Multiple Listing Site (MLS), Court Records, or a wholesaler, there are many ways to find the right property for you. Perform your up front due diligence to ensure that the building meets your expectations, but move quick because the right opportunity won't last long.
Put your plan on paper
Hard money is one of many lending products, and it's most effective for a specific type of business-minded investor. Before you get your hard money loan, you need to have a plan in place for how you're going to leverage the loan and maximize your return. Are you going to fix and flip, or refinance and hold? Do you intend to have renters within the initial loan term? What renovations do you need to make, how long will they take, and how much will they cost? These are all considerations that need to be thoroughly worked through before moving forward with a loan.
Put together your budget
There are a few components that are essential in a hard money loan application, and maybe the most important is a clear, specific outline of your financial situation. At a minimum, The Hard Money Co. expects the following budgetary items included in your application:
- Scope of Work
- Create a clear, itemized report of the work that needs to be done and how much it will cost. We offer incremental draws on completed repairs as well as a $3,000 advance at close to get you started.
- After Repair Value (ARV)
- This is what you expect the property to sell for after your work has been completed. The Hard Money Co. uses this figure to determine how much we are willing to lend. We are able to offer up to 65% of the ARV.
- Cash on Hand
- You need to have a clear idea of how much of your own money you are willing to put into the property at the outset. There are moderate costs associated with processing the loan including a 5% origination fee and closing costs.
- What you are willing to pay for the property
- This may seem obvious, but investors need to have a specific price that they are going to offer for the property so that The Hard Money Co. can help determine exactly how much can be financed. Consider the purchasing climate when determining this number, and make sure that you'll be able to realize a return when your work is done.
Create an LLC
This is not a requirement for every lender, but The Hard Money Co. exclusively lends to business entities. The good news is, the process to create your LLC is incredibly straightforward. The process differs from state to state, but luckily there are resources available to get you started.
Submit your hard money application
Visit our application page on the website and fill out the requisite form. Most of the information required has already been addressed in this guide, so simply complete the questions line item by line item and submit them to one of your representatives. From there, you should receive a call to explain the next steps to finalize financing for your project.
Organize your filing paperwork
You should request and review your filing paperwork before your closing appointment. This ensures that you have a comprehensive understanding of the contract you are agreeing to, and it gives you the opportunity to ask questions from The Hard Money Co. prior to signing. While we're sure that you definitely want to avoid surprises, we do as well. Our goal is to get your loan processed quickly so that you can put the financing to work.
Close your loan and get to work
Closing your loan through The Hard Money Co. is not the end of the line, it's just the beginning. After you've reviewed your documents, be prepared to sign them at a scheduled time at the title company's office. This is a crucial step in the process and should be taken seriously. Arrive ahead of schedule with a complete understanding of your contracts. If you have questions beforehand, please reach out to your representative to have them answered.
Just because this isn't a conventional financing route does not mean that this isn't a real loan. Take the necessary steps to protect yourself contractually. Be professional and diligent and the process will go smoothly.
If this is a simplification of the process to obtain a hard money loan, it's not by much. People choose hard money options because its quick, easy, and effective at securing your investment property.