What Types of Properties Do Hard Money Lenders Lend On?
Hard Money Loans for Any Property Type
Hard money loans for real estate can be made on any type of property including single family residential, multifamily residential, commercial, retail, industrial, office buildings, healthcare, hotels, land and special purpose property.
The majority of hard money lenders provide hard money mortgages for residential property but many lenders will also provide a hard money mortgage for commercial property.
Although a hard money loan can be secured by any type of property, it may be difficult to find a hard money lender willing to provide a hard money mortgage for more specific types of property such as land, industrial, churches, restaurants or other special purpose property. The more specific and unique the property is the harder it will be to find a hard money lender who is able to provide the loan.
Hard money lenders tend to prefer lending on property that would be very easy to sell. This allows the lender to get their funds back quickly if the borrower decides to get out of the project or isn’t able to make their loan payments.
There are many more buyers for a 3 bedroom, 2 bath, single family residence than there are for a raw piece of land or a church. The more buyers that exist for a certain type of property generally means it will sell faster and fetch a better price.
Some hard money lenders can also provide loans against properties in special situations such as in the case of estate loans. When an estate is going through the probate process, heirs often need to borrow funds to settle debts and obligations of the estate. Hard money lenders can make a loan secured by real estate within the estate and then have an heir assume this loan. This is something that a conventional lender such as a bank or credit union generally isn’t willing or able to do.
Owner Occupied vs Non Owner Occupied Property
The vast majority of hard money lenders will not provide a hard money mortgage for an owner occupied property. Owner occupied loans require the lender to have additional licensing and comply with added regulations that make the process longer with more paperwork and mandatory rescission periods.
Even fewer hard money lenders will provide a loan against an owner occupied property if the primary use of the funds is consumer purpose. When the property is owner occupied and/or for consumer purpose the loan process is slowed down due to the federal government’s regulations which apply to these types of loans.
Non-owner Occupied Properties
Hard money loans for real estate which is non-owner occupied can be approved and funded quickly with little red tape and government regulation. A real estate investment loan can be approved and funded within days.
Fix and Flip & Rehab Loans
Fix and flip loans or rehab loans are a popular loan type for many hard money lenders. These loans are used to purchase residential property with the intention of making repairs and upgrades and then quickly reselling the property for a profit.
