If you’re a real estate investor or looking to finance a property purchase, understanding the criteria for qualifying properties is valuable. Hard money loans offer an alternative financing option for those who may not meet traditional lending requirements. Learn more about the types of properties that are typically eligible for hard money loans and valuable insights to make informed investment decisions. Whether you’re considering a fix-and-flip project or need quick funding for a unique property, LJC Financial can guide you through the many possibilities with hard money loans.

Understanding Hard Money Loans

Hard money lending is a form of financing that allows borrowers to secure quick and flexible loans based on the value of their collateral, typically real estate properties. Unlike traditional bank loans that heavily rely on credit scores and financial history, hard money loans focus primarily on the asset being used as collateral. This makes them an attractive option for real estate investors or borrowers who may not meet the stringent requirements of traditional lenders. 

Hard Money Advantages

The benefits of hard money loans include faster approval times, less paperwork, and greater flexibility in terms of loan terms and repayment schedules. Compared to traditional bank loans, hard money loans are often funded by private individuals or small lending firms, allowing for more personalized and efficient processes. However, it’s important to note that hard money loans typically come with higher interest rates and shorter repayment periods. The interest rates can range from 8% to 15%, depending on factors such as the borrower’s creditworthiness, the property type, and the loan-to-value ratio.

Learn more about Hard Money Loans.

Property Qualifications for Hard Money Loans

When it comes to hard money loans, certain property qualifications must be met to secure financing. There are various types of properties that qualify for hard money loans, including residential properties, commercial properties, and fix-and-flip properties. Whether you’re interested in purchasing a single-family home, a retail space, or a distressed property to renovate, hard money lenders are typically open to these property types. In addition to the property type, there are specific condition requirements that lenders consider. 

Property Criteria Hard Money Lenders Look For

When considering applicants for hard money loans, lenders typically evaluate specific criteria to assess the risk and viability of the loan. Here are a few key factors that lenders commonly look for:

Borrower’s credit history and financial standing: While hard money loans are less reliant on traditional credit scores, lenders still consider the borrower’s credit history and financial standing. This helps them gauge the borrower’s ability to make timely payments and manage their finances responsibly. While a strong credit history is not always required, demonstrating financial stability and a reliable income source can positively impact the loan approval process.

Real estate investments are still possible with “bad credit”. Learn more about How to Flip a House With Bad Credit

Loan-to-value (LTV) ratio: The loan-to-value ratio is an important metric that lenders use to determine the risk associated with a loan. It is calculated by dividing the loan amount by the appraised value of the property. Lenders typically have a maximum LTV ratio that they are willing to offer, which can vary depending on factors such as the property type and the borrower’s financial profile. A lower LTV ratio indicates a lower risk for the lender, as there is more equity in the property to offset potential losses.

Exit strategy for the loan: Lenders want to ensure that borrowers have a clear and viable exit strategy for repaying the loan. This is especially important for short-term hard money loans, such as fix-and-flip projects. Common exit strategies may include selling the property, refinancing with a traditional lender, or using other available funds to pay off the loan. Having a well-defined and realistic exit strategy demonstrates to lenders that the borrower has considered the potential challenges and has a plan to repay the loan successfully.

Minimum Property Value: Lenders want to ensure that the property being used as collateral has a sufficient value to justify the loan amount. This helps protect their investment in case of default.

Maximum Rehabilitation Costs: If you’re planning to renovate or flip a property, lenders will assess the estimated costs for the required repairs or improvements. They will consider whether the rehabilitation costs align with the overall value of the property and the potential return on investment.

Property Profitability: They will analyze the market value, rental income potential, or resale value of the property to determine if it is a viable investment opportunity. This assessment ensures that the property has the potential to generate sufficient returns to cover the loan and associated costs.

What Type of Properties Will LJC Financial Use in a Hard Money Loan?

Typically we will consider most properties when assessing your assets. Here is a list of properties we typically see and usually finance:

  • Single Family (Investment)

With this style of property, this used to take equity out of the house a used for more properties to buy or to refinance the mortgage for a better rate

  • Duplex, Triplex, Quadplex

This type of property is our bread and butter when it comes to financing. Typically you want to use our services when you want to purchase a property quickly and want to acquire more similar properties and begin receiving income from renters in as few as three months.

  • Large Developments

A large development is anything that has more than fourplex properties. We work with many developers in the Houston area to help with their short-term financing needs so they can continue to build and create value in the city.

The first step is always to fill out our contact form and one of our team members will get back to you shortly to discuss your options! We’re here to help grow your portfolio and increase your income – let us show you how!

  • Condo Conversions

Converting an existing property into condos can be a great way to increase the value of your investment. But it takes time – and money. Hard money loans can provide the financing you need to get started on your project right away.

We’re experienced in working with condo conversions and can help you navigate the process. We’ll work with you to come up with a loan that makes sense for your project and helps you maximize your return on investment.

  • Multi-Family Properties

Investing in multi-family properties can be a great way to build your portfolio and generate passive income. But it takes capital to get started. Hard money loans can provide the financing you need to purchase or refinance a multi-family property.

We’re experienced in working with multi-family properties and can help you navigate the financing process. We’ll work with you to come up with a loan that makes sense for your project and helps you maximize your return on investment.

  • Mixed-Use Properties

Mixed-use properties can be a great investment, but they come with their own set of challenges. LJC Financial has the experience and expertise to help you finance your mixed-use property.

We’ll work with you to understand your goals for the property and craft a loan that helps you achieve them. We have a deep understanding of the Houston market and can help you navigate the complexities of financing a mixed-use property.

  • Commercial Properties (Office, Retail, Industrial)

We also work with commercial properties. These can be anything from office buildings to retail stores to industrial warehouses. Whatever your commercial property needs, we can help you find the right financing.

  • Land Investments

We understand that sometimes the perfect property is just a piece of land. If you’re looking to buy land for future development, we can help you get the financing you need. Typically we would want to know the location as well as the sale history of the land to assess its value. These are less common in hard money lending, but we have recently closed on a few land-based loans.

Do you have a rental property that you’re looking to finance? Are you unsure if a Hard Money Loan is the right option for you? LJC Financial is here to help! We are experts in the financing of rental properties in Texas, and we can help you get the money you need to make your investment successful. We understand that every situation is unique and offer a variety of loan options to meet your specific needs. Contact LJC Financial today to learn more about our rental property loans!