My pal, Jerry, has been saving his money for several years now, knowing that, when the time came, he’d be quitting his corporate job for a startup in real estate. When we met for beers over at the Bronx Brewery last week, he said that time was just around the corner. I’m more than happy for him. I’m relieved, too. He’s been picking my brain about buying, rehabbing, and reselling properties here in New York longer than he’s been saving to do it. Over a couple of Slow Your Roll IPAs, he insisted he was finally ready to make his move. His main concern was which NY-based residential hard money lenders to use to fund the deals he’d find. He’d saved enough money to live on for a while, but not necessarily enough to buy properties outright. I told him that that conversation was worth another round.
Residential Hard Money Lenders That Serve NY
Most investors, whether you’re new to the business or have been doing it for years as I have, use hard money lenders at some point to fund their purchase and renovation projects. Part of the reason is that traditional lenders don’t always like to lend on fixer-uppers. But, there are also distinct advantages to using hard money lenders for real estate investments that banks and credit unions can’t, or won’t, offer. For example, you can get short loan terms with manageable interest-only payments that are designed specifically for buying, renovating, and selling homes. And, you can usually get access to your funds within a few days of approval—something you often need when you’re trying to build your real estate investment business in a competitive market.
What you need in order to qualify for a hard money loan will vary, as will each lender’s terms. But, most lenders will consider the property you’re buying above—or, at least, in conjunction with—other criteria when deciding on whether to loan to you and at what cost. And, luckily, you can find most of this information online. To help narrow the scope of your search, however, I’ve listed three of the lenders that I reviewed with Jerry below. Each serves markets throughout New York state. So, no matter where you’re investing, you should be able to find the funds you need.
Sky Equity offers residential hard money loans between $100,000 and two million dollars, though larger loan amounts are possible, for up to 75% of the property’s purchase price. Loan terms of six months to two years are available with interest rates ranging between 11% and 13%. As with most hard money lenders, you can make interest-only payments if you need to. Their origination fees, expressed in either percentages or points, fall between 1% and 3%, but there are no prepayment penalties or fees. Approval typically takes about two days and, provided you have a real estate investment plan, exit strategy, former experience, a high net worth, and liquidity, you have a good chance of getting the money you need.
Unfortunately, as a new investor, proving you have real estate investing experience will be hard, to say the least. And, not everyone who comes to this industry comes with a high net worth or access to liquid cash, like Jerry. So, your chances of getting approved for a loan—or, at least, of getting affordable terms—are slim. Even if you do get funding, you may not get it fast enough. Sky Equity can close on deals in about two weeks time. That’s not bad, but it’s not the best either. Depending on where you invest, and the specific deal you’re trying to buy, timing could be everything. And, not being able to close for two weeks could leave you with nothing if another investor can do better.
Hard Money Loans New York
Hard Money Loans New York provides funding for projects that cost as little as $250,000 or as much as $10 million, and will even consider larger amounts on a case-by-case basis. They can fund up to 75% of the purchase price for your property, and even more for its renovation, and have historically offered interest rates as low as 11%. Though most loan terms are for 12 months, terms for up to five years are possible. You can also make customized monthly installments on the loan, or choose interest-only payments, and prepay early without penalty. And, once approved after applying online with pictures of the subject property, it’s possible to get your money in just a few days.
But, other critical information—like if, and how much, the origination fees might run you—are missing from this lender’s website. At one time, these fees were listed at between two and six points. With them gone, it’s hard not to wonder the reasons why. Perhaps, their fees have gone up? And, unfortunately, it’s never been clearly stated online what else you might need to qualify for one of their loans. Without knowing how to put your best foot forward, you might inadvertently misstep and miss out on an approval when you apply. They aren’t terribly responsive to email and phone inquiries, either. That can turn especially problematic when you need answers, and money, to close on a home fast.
Residential Capital Partners (ResCap)
ResCap gives loans of $75,000 to $1.5 million dollars for fix-and-flip residential properties to both experienced and beginning investors. And, unlike the companies listed above, this hard money lender will fund up to 100% of 65% to 70% of a property’s After Repair Value (ARV)—and at an interest rate of only 10%. So long as you correctly calculate your numbers and buy at the right price, you could potentially fund all of your costs to buy and rehab a property with a loan from ResCap. They can approve and close on deals quickly, and they can also help you find buyers.
The ResCap folks have flipped houses themselves and know the local market, too, which means they know first-hand what it takes to pull through a project. So, loan terms are standardized at nine months, but extensions are sometimes available if a harsh New York winter puts your rehab behind schedule or you experience another contingency. And, of course, there is no prepayment penalty. You will have to pay three points as an origination fee, but those points can be rolled into your loan. These loan terms are plain as day on their website—no surprises.
To qualify for these terms, you’ll, of course, need to have good credit, liquid assets, and some investing experience for pre-approval. If you partner with a more experienced investor on your first few deals, however, the relationship you build with ResCap could pay off.
Whether you have a minor fixer-upper in New York City or a major one in Rochester, there’s plenty of hard money lenders who will find a way to work with you. The real question will be whether or not you want to work with them since, as a new investor, most will not give you the best terms. Rather than just accept what’s offered, however, it’s a good idea to turn to your network for recommendations you can trust. Of course, that means you’ve got to get one of those, too.
Getting the Hard Money You Need When You Need It
Fortunately, as an independently owned and operated HomeVestors® franchisee, I have a solid, ready-made network—my fellow local and regional HomeVestors® franchisees—who can give trustworthy feedback on just about anything I need, including the reputations of local hard money lenders. So, I don’t have to rely solely on what’s advertised online or spend hours calling around to find a lender that I can feel good about doing business with. Plus, as a member of the HomeVestors® team, HomeVestors will also provide financing for qualifying purchases and repairs. Having options like these certainly makes the hard work of investing in residential real estate a little bit easier—especially if you’re a new investor, like Jerry, trying to get into a competitive market, like New York.
To have an easier time getting the money you need to invest when you need it, contact HomeVestors to request more information about getting your own ready-made network of fellow franchisees today.
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