If you know even a little about the construction industry, you probably understand that private money lenders have a longstanding history with real estate developers. Though several financial institutions and banks may look at your efforts as carrying too much risk, new construction loans tend to come with the potential for private lenders. After the recession, ground-up hard money lenders exercise a little more caution. Nevertheless, they are still a viable option you can consider.
What Do You Mean By A Hard Money Construction Loan?
A ground-up hard money construction loan is a kind of finance used by individuals planning a new commercial or residential building project. You can borrow 100% of your vertical costs and 50% refinancing or land acquisition. If your project seems ambitious and ground-up hard money lenders agree with your prediction, you can secure even higher land acquisition figures. How much you can borrow will depend on several factors:
- Purpose of your real estate
- The total worth of your project upon completion
- Rules and regulations in your state
When Do You Need a Ground-Up Construction Loan?
Let us use a hypothetical scenario to help you understand when you may require a ground-up construction loan. Let’s say you have a construction project in mind. You have successfully located a piece of land and know that the competition for the property may be high. This time-sensitive nature of your construction project calls for a quick close of the deal. Depending on how much information you can provide and the speed you offer it, you can quickly receive your funds within one to three weeks.
Ground-up hard money construction loans can also work well when you don’t have an attractive credit score. Several real estate brokers work with scores that are at least 620. In some cases, you also have an opportunity to borrow funds if you’re a foreign national. A private money lender may overlook a few risk factors in favor of the final assets you promise to deliver, even if you look financially risky to a bank. After they receive a report for a surveyor that verifies your predicted outcome for your construction project, a private lender may look at you as a wise investment rather than a financial risk.
You must also note that such loans tend to work even better if you plan on finishing your construction project and selling the real estate within the first 12 to 18 months. Since all short-term loans tend to come with a higher interest rate, they make perfect sense to ground-up hard money lenders despite the reduced time to earn profits via interest. On the other hand, banks work with lower rates, so they don’t have much interest in quick turnaround times that make loans less profitable.
How Can I Access a Ground-Up Construction Loan?
Accessing a hard money construction loan means tidying your finances a little. You must gather all necessary details regarding your project location, contractors, prospective turnaround times, and profit predictions. You will also have to arm yourself with all the details about your construction project costs and plans. Doing this is vital since your potential lender will need all the evidence they can get to assure themselves you are worth the risk.
If you want to increase the number of people willing to finance your construction project, you can always choose to work with a real estate broker. All Real Estate Funding Solutions brokers understand the hard money construction loan world more than you. Moreover, they know what most private lenders require regarding repayment plans. Once you call our team, they will speak with you about your construction project. After they fully understand how you wish to proceed with completing your construction, paying contractors, and making other payments related to the project, they can help you find a ground-up hard money construction loan that matches your requirements. If you wish to access financing quickly, you must not write off private money lending avenues. Assuming your business model is stable, you can soon close an agreement and bring yourself a little closer to working on your construction project.
Want To Explore Private Lending Options? Real Estate Funding Solutions Can Help!
If you are having difficulty finding the right lender for your ground-up construction project, you can always reach out to Real Estate Funding Solutions for assistance. Our team has years of training and experience in the real estate business and can help you find an ideal loan option for your next construction project. We understand what you need to get approval and will do our best to provide you with financing in no time. As long as you have experts on your side, you can rest easy, knowing you have professionals working on your case. Call our team today at 855-913-8637 to get started on your project.