The real estate world can be a lucrative one, if you know what you are doing. Whether you are developer who has worked on variety of projects throughout the years or are just getting into the “fix and flip” world as an independent contractor, Abbey Mortgage & Investments represents a great private lending option for many.
First thing is first, though. Let’s talk about the areas we serve. Communities within our coverage area include Boulder, Aurora, Centennial, Fort Collins, Loveland, Lakewood, Windsor, Berthoud, Wheat Ridge, Thornton, and more. We are housed in Berthoud, but have a wealth of experience working with partners up and down the Front Range of Colorado.
Let’s move on to today’s topic, Aurora hard money loan tips. We threw that “Aurora” on the beginning there to show some love to our Aurora partners and prospective clients, but just know that we aren’t exclusively Aurora private money lenders, despite what the title might imply.
Asset Based Loan Tips
If done correctly, utilizing opportunities afforded to you in the world of private hard money lending can be a lucrative venture for many investors. It isn’t as easy as showing up with the deed to a property to use as collateral, however. These tips will help guide you in some of the initial steps.
Yield Expectations And Risk Tolerance
Find a private money lender who meets your standards for risk tolerance and yield expectations, or anticipated ROI on the hard money loan. If your lender is worth their salt in the field, they will explain to you how their success is contingent upon yours. Find a long-term partner, like Abbey Mortgage & Investments, that has a basis for their livelihood in finding quality loan opportunities which can help you capitalize on. That means finding a bridge loan lender who has experience in your field, be it construction, “fix and flip”, or otherwise. Doing research on your prospective private money lender is vital. The good news for you is that you are already here doing exactly that. Nice work!
When To Consider A Hard Money Loan
That “otherwise” we mentioned above is a bit vague, we admit. So let’s talk about what kind of deals are appropriate to consider for hard money financing. While we are in the business of making successful hard money loans, we will tell you upfront that not all deals are appropriate for a private money loan. For example, when you are buying your first home, going with a short-term loan (hard money) is most likely not a great idea. This is because the core concept behind hard money loans is that you utilize a property’s equity as collateral for capital. Obviously, if you don’t have any property, that would be tough to do.
More appropriate uses for a asset-based loan are listed below.
- Fix and flips
- Construction loans
- If a borrower has a poor credit score
- Land loans
- When there is a real estate opportunity that is time-sensitive. Banks usually take months to approve you, as opposed to 1-2 weeks with a hard money real estate loan.
Get Together Required Documentation So You Can Act Quickly
If your investment opportunity’s window is temporary, it’s important to do everything in your power so you can take advantage of it. The best way you can do that is to have your ducks in a row when it comes to the monotonous paperwork that is necessary to get the ball rolling. While it might seem tedious (because it is), remember that it’s a walk in the park when compared with most bank loan requirements.
Below are a few tips to point you in the right direction.
- List what kind of property you are using as collateral, be it commercial, industrial, or residential.
- List the requested loan amount. That one isn’t too tough.
- Explain your exit strategy in terms of a payment plan for the loan to be paid back.
- Detail the down payment and equity associated with the deal.
- List the estimated value of the property, and if it has been professionally appraised recently. Note: some properties don’t require an appraisal because there are comparable properties which can be used to set the valuation.
Once you are in contact with us, we’ll be able to give you specific requirements based on your loan type.
If Money Talks, Upfront Cash Screams
Use your hard money loan to get a discount on your purchase price. With the estate or property you are planning to buy with the help of the capital raised from the bridge loan, you are likely going to be able to get that purchase price dramatically reduced. Why? If money talks, upfront cash screams. It’s typically a wise move to bid below the asking price when you have a hunk of cash to tempt sellers with. In the same way, you’ll be at an advantage by being able to have access to funds far more quickly than anyone else bidding on the property, assuming they have gone the traditional bank-route.
What If Things Don’t Go As Planned?
In a perfect world, every single private money loan would go swimmingly, without hiccup. But hiccups can happen seemingly without cause. Hard money loans can act the same way. And while we do our best at Abbey Mortgage & Investments to take the controllable steps to ensure that doesn’t happen, there is an inherent amount of risk associated with any investment.
The best remedy to make sure that small problems don’t turn into huge problems is fostering a dedication to communication. Having a relational focus from the beginning of the term to the end is wildly important to the success of the investment. This is a 2-way street; transparency is key on both sides of the agreement. This way, other options besides defaulting, foreclosure, and lawsuits can be brought to the table and considered by both parties. We at Abbey Mortgage & Investments are not interested in owning your property. We are interested in making money while you make money. That’s a huge reason we’ve been a staple in Northern Colorado and beyond for nearly a quarter century.
This isn’t the traditional avenue for all loans, but it can be extremely advantageous if you know what you are doing and you are willing to be flexible when unexpected situations arise. This might look like being willing to partner with someone who has additional assets, even if that isn’t an ideal outcome for you personally. Another area that might require flexibility is to understand the precepts of hard money loans in Denver, or wherever you are based out of. One of those precepts is that higher interest rates usually come with the territory with transitional loans. An industry standard is right in the range of 10 to 14 percent. But as we’ve noted before, no 2 loans are alike, and we aren’t your average asset based lender, either. We will work with you to find mutually beneficial solutions.
Consider Abbey Mortgage
It’s always wise to do your due-diligence and research when making a significant financial investment. That due-diligence can look like being prepared with your documentation before your first meeting, as well as looking into a few different investment companies before you make your decision. We ask that you consider us among those options, for our experience, knowledge, and proven track record in a range of hard money real estate and commercial mortgage loans. Reach out to us today to see if we can help you meet your financial goals in an efficient and affordable way!