Hard Money for Real Estate Deals

Why an investor bridge loan?

• For situations where a quick review and close, helps make the deal
• For properties or situations that don’t conform to the rules of conventional or other lenders
• Where offers “looking like cash” helps WIN - as opposed to presenting a financing contingency
• Partner approach to make sure the investor/borrower is successful

Two most important factors to hard money lenders

• Value of property, present value and ARV, in relation to loan size, size of sub-market
• Defined Exit Strategy
• Flip
• Refinance
• Payoff from an indefinable source

What supporting documentation can be requested by the lender

• Deposit Statement showing down payment and some months to carry loan (seasoning of dollars not required)
• Credit Bureaus are used by some lenders
• Purchase and Sale Agreement
• CMA’s are used by lenders, appraisals if available and at times ordered based on loan size or type of property
• Construction Budget if Rehabilitation funds are requested

Pre-Approval for Offers

• A Pre-Approval letter can be obtained for offers
• Cascara Capital (or other lenders) would want to feel comfortable with values and exit strategy •
• A CMA may be ordered by lender
• Bank statements may be requested
• FICO may be requested at this stage
• CAUTION on loans with an existing PSA with a pre-approval from another lender
• The initial pre-approval letter will be requested and lender contacted to make sure it was not submitted as an owner-occupied or second home. If it was, we can’t proceed as an investor loan 

Types of Hard Money Uses

• Fix and Flip, SFR/Multi/Apartment/Commercial
• Acquire, Fix or not, Refinance to hold
• Acquire property for fix existing house and infill. Use hard money to acquire quickly, conventional refi on investment property as potentially lengthy permit process is completed prior to construction loan
• Land (Utilities in is very helpful)
• Pre-entitlement or prior to when construction finance companies want to participate
• Acquire off -market properties for quick flip with no fix 

Is Hard Money Expensive?

• Compared to what? Yes and No
• Moot if property or project can’t be acquired or advanced without it
• Less expensive than another equity partner to share return
• Yes, you want to pay off a hard -money bridge loan with lower rate debt when the timing and condition allows

Broad Range of Pricing Guides for Cascara Capital - But all projects carry specific risk and pricing

• Loan Terms of 1-12 months. Landing on correct term is important!
• Interest rates of 12% or 1% interest only payments per month, unless preferred/low risk
• Points/Fees up front, 2-5%
• tend to go up with term length
• No pre-payment penalties
• LTC, ARV required ratios are project specific, Land would require around a 50% equity contribution, some projects could result in only a 10-15% equity contribution
• Extension fees after original term normally apply
• Rehab funds at 5% points and same 12% annual interest rate

Why Consider Borrowing Funds for Rehabilitation or Fix

• Maintaining more liquidity provides for a cushion in the event of a longer hold or expenses over budget 
• Less expensive than an equity partner
• Increases return on equity rates
• From a Lenders perspective, why do we encourage it?

Let’s run some examples on a:

$400k purchase a 5-month loan term a $75k rehab cost an a $620k flip sale price

Basic Acquisition Loan