I’ve got a couple of old college buddies who will be returning home this year to start new careers as real estate investors, like me. Thinking about it cracks me up. None of us could wait to get out of Pennsylvania when we were done with school. Then, one by one, each of us couldn’t wait to get back. Randall and I tried our hand on Wall Street after college. Wes, on the other hand, hung his hat in accounting out in California for a while. We were all successful in our own ways, but unhappy just the same. Now, it looks like we’re all going to be at home in PA again and doing much of the same thing: pursuing careers that fulfill us.
And, since I’m the one who’s been investing for a while, Randall and Wes have already started picking my brain about the industry over Skype. During our last chat, they were looking for the goods on how to be a real estate investor when you’re new to the field and have no money to burn. I told them that, for the most part, real estate investors in Pennsylvania use hard money lenders to fund their deals. Knowing which ones are actually worth your time, however, can be tricky. But, since they had me to guide them, they should be able to navigate their options—and their new careers—with ease.
Which Hard Money Lenders in Pennsylvania Are Worth Your Time
Unless you enter into the world of real estate investing with ready access to significant cash flow, you’re going to need to find a way to quickly fund your deals. Most traditional lenders can’t approve or close on a loan fast enough to accommodate the tight timelines investors work with. The risks of investing in residential property are just too great to take on for a lot of banks and credit unions—especially when you, as a borrower, don’t have a lot of experience doing it. That means you’ll likely have to get a hard money loan for your first several projects. Since hard money lenders provide loans based on a property’s value more than your credit-worthiness or experience, even seasoned investors like myself use them. They can usually help you close on your deals fast.
Of course, when you are a new investor, understanding the full scope of how hard money works can seem like a daunting task. After all, you’re also learning how to buy houses to renovate and sell successfully too. But, without the former, the latter isn’t always possible. Thankfully, the internet has allowed most lenders a useful forum for describing their terms in a way that you can understand. And, I’ve detailed three specific lenders below that service some of Pennsylvania’s largest cities that may be worth your time, as well as my buddies.
Conquest Funding, in Allentown, has been working with residential real estate investors since 2011. Typical loan terms for unoccupied properties are six to twelve months on amounts ranging between $50,000 and $500,000, maxing out at 65% of the property’s assessed After Repair Value (ARV). Interest rates vary, usually between 12% and 14%, as do the points, or origination fee, that have to be paid up front when the loan is approved. Interest-only payments are mandatory, but there is no penalty for prepayment and it’s possible to get an extension. So, if you need more time to finish a renovation, you can get more time to pay only interest on your loan.
That the details of Conquest’s hard money terms are made available online makes the company a decent contender for being a potentially good lender—if you can actually get what they advertise. Their best rates are awarded based on your investing experience, financial status, and credit score, in addition to the loan amount and requested terms for the property in question. In fact, to even qualify, you may need to prepare a personal financial statement, proof that you’ve achieved a higher-than-average credit score, and a kind of real estate investor credibility kit documenting your past projects as well as the plans for your current one. That’s going to be tough to do if you haven’t yet bought, renovated, and sold a house, which is your reason for needing funds fast in the first place.
M & M RE Holdings
M & M RE Holdings, based in Pittsburgh, has been providing hard money loans to new and more seasoned real estate investors since 2007. They can approve your loan application in three days or less and promise a quick disbursement of funds upon approval as well. Loan amounts can be as little as $50,000 or as much as $500,000, up to 65% of the property’s ARV, and interest-only payments are available for the life of the loan. And, if you can pay it off early, you won’t be penalized for doing so. Then, once you’ve done a few projects with the team, you can qualify for better terms, like deferred interest on your loans, and receive additional discounts.
Unfortunately, in terms of what’s provided on their website, the rest of the info you’ll need to see if M & M is right for you is pretty lacking. Interest rates, whether or not there is an origination fee, the time to close, and term lengths aren’t listed. What you need to qualify for a loan, if anything, is also absent. You can email the team for more information and, according to the website, they will respond quickly. But, when you’re trying to build a real estate investment business in a competitive city, like Pittsburgh, time is of the essence. And, depending on the deal, you may not have time for a lot of back-and-forth correspondence, particularly if it turns out you aren’t the kind of borrower they’ll lend to. In my experience, it’s better to know up front what you’re getting into so that you don’t risk falling behind on getting your funds—and losing a deal.
Legacy Capital, out of Philadelphia, launched in 2015 to help local investors buy and renovate a variety of residential real estate properties. They offer loans on 60% to 80% of the purchase price for amounts no less than $40,000. Terms are available for as few as three months and for as many as twelve and, no matter the term you request, you can always prepay early without accruing additional fees. After filling out your application online, you can expect to hear back from someone within 24 hours. So, be sure to cross your T’s and dot your I’s to get the fastest and most favorable response possible. If everything looks good and the property’s third-party appraisal gels with the group, you can expect to have money for closing in about five days.
But, as transparent as Legacy’s terms are on their site, there are a few details missing and few more worth reconsidering. For example, the amount of interest and other fees you may have to pay aren’t stated outright. And, what you will need to qualify—assuming you’ll want to—isn’t as clear as it could be, either. Although, it seems that you do have to be a business entity and provide a personal guarantor to apply. If neither of those are possible, it’s not probable you will get a loan. Like other lenders’ websites, you can certainly email for more information and, in fact, they prefer it. When it comes to getting money for my deals, however, I prefer having more information about who I’m dealing with.
Generally speaking, getting hard money loans for investing in real estate can be easier to do when you’ve already got access to the kind of deals most lenders fund. And, as you gain more experience, it’s possible you’ll get better terms. Partnering with a more experienced investor, or joining a well-known team that can boost your credibility can also help to speed up the process.
Another Option for Funding Your Keystone State Projects
Fortunately, as an independently owned and operated HomeVestors® franchisee, getting the money I need to buy, renovate, and sell properties is never a problem because HomeVestors provides financing for qualifying purchases and repairs. Since the kind of leads that come to me are the types of deals that lenders like to fund, I don’t have a difficult time showing other hard money lenders the value of the deal, too. And, with the tools and resources that I have access to, like HomeVestors®’ proprietary valuation tool, ValueChek™, I never pay, or borrow, too much for a project. I also don’t have to take a guess at who to trust when finding capital since I have a local and regional network of other HomeVestors® franchisees who help recommend where to turn for funding. And, now that I’m an old hat at this, I make recommendations to others—even old college buddies, like Randall and Wes.
Leaving your old job to turn your passion for real estate into a career too? Get the tools you need to start by asking HomeVestors about becoming a Pennsylvania franchisee today!
Each franchise office is independently owned and operated.