When catching up with my former boss, Rick, the other day, he mentioned that he’d always had a feeling I was right for the real estate industry and wasn’t surprised at all when I left the company. Instead, he admitted, he was a little jealous—especially since I quit to start investing in properties, which was something he’d always wanted to do. Now, several years later and over beers at the Federal Taphouse, he was hoping I could give him a few funding pointers on how to make the leap. Assuming I’d used one of the many hard money lenders in Rhode Island to finance some of my projects, he’d even compiled a list of local options for when he buys his first investment property. So, I gave them a look and suggested where he might get the best deal.
Funding Deals With Hard Money Lenders in Rhode Island
Some investors do start buying and renovating property to resell later with access to large stores of cash, but many—like me—do not. And, that can be problematic when you’re trying to build your real estate investment business in a competitive market where funding fast gives you an edge. That’s where hard money comes in. Since most lenders base their approval on the property itself and can disperse funds quickly for projects with potential, getting a hard money loan can be a great option for new investors without other sources of financing.
But, hard money loans aren’t only good for those who are just getting into real estate investing. Since traditional lenders like banks and credit unions typically can’t close fast on fixer-uppers, if they loan on them at all, experienced investors use hard money, too. So, even after you’ve built up your own cash reserves, and a lot of sweat equity, you may still find that occasionally using hard money loans for investing in real estate is an option that works for you.
Whether you need to fund an investment opportunity now or sometime in the future, here’s the list of Rhode Island hard money lenders that Rick compiled and I reviewed. Hopefully, it’ll point you in the right direction on where you can find the best financing deal.
Stage Point Capital
Stage Point Capital, LLC, based in Cranston, provides hard money loans primarily for the purchase and renovation of unoccupied single-family homes and multi-family units. Loan amounts range from $40,000 to $400,000, up to 70% of the property’s After Repair Value (ARV), and can be repaid in as little as six months or as long as two years. During the loan’s term you make interest-only payments, charged at a 13 to 15 percent annual rate. But, you can pay the balance off early without any penalty. It’s possible to get approved in a matter of days, too, after which you’ll be charged an origination fee of three to six percent (or points) of the loan’s value to get things started. Then, Stage Point can close on the loan for your investment in under three weeks.
To be considered for a loan, you’ll need to submit a $1,000 deposit with your application and that won’t necessarily speed up the approval or time-to-close. The loan is still subject to the property’s appraisal and only then will Stage Point confirm that they’ll fund. Granted, that may all happen in a matter of days. But, if they have additional questions about your application or property, your timeline to close could get pushed further out. Three weeks is already longer than what many lenders can do, so Stage Point may not be the fastest hard money lender on the block. And, because they don’t directly state on the application what else you’ll need to qualify, they may not be the easiest lender to work with, either.
Foxpoint Lending, out of Providence, loans on non-owner occupied properties for investors who are buying, renovating, or building residential homes. They loan between 65% and 75% of a property’s pre-rehab value and can get you those funds in less than 10 days. The turnaround time for approval is also fast since it’s only your asset’s value, not your credit history or income, that determines their decision. So, a lack of good credit and other credentials doesn’t have to stop you from financing a deal. And, though most loan terms are for 12 to 24 months, Foxpoint can give you up to five years to repay. If you can pay it off early, they won’t mind—or charge you for it—either.
Of course, you might find that you pay in other ways if you have less-than-stellar credit or no prior investing experience. The amount of interest that’s charged, any origination fees, and the cost to close are not disclosed on Foxpoint’s website. And, there may be no way of knowing these numbers until after you apply. Typically, that means they will vary depending on what’s provided in your real estate investment credibility kit, which, if you’re a brand new investor without a lot of liquidity, won’t contain much. So, it’s possible you won’t get good rates even if you do get a loan. And, if you don’t get the loan, you could lose your deal.
Northborough Capital Partners, LLC
Northborough Capital Partners, also located in Providence, lends on residential investment property purchases and renovations, too. The minimum you can borrow is $100,000, but your maximum can go as high as three million. So, as your experience grows, the size of your projects—and your loans—can grow as well. Loan amounts are approved for up to 75% of the property’s value and terms are usually six to 12 months. However, you can request an extension should you need it or pay it off early if you prefer. Interest rates range between 12% and 16% and there is an origination fee of two to five points, but Northborough can close fast—in as few as seven days—once they’ve performed their due diligence and approved the property as collateral.
Unfortunately, Northborough charges other fees for the convenience of a fast close, and perhaps for using them at all. First, there is a commitment deposit, in addition to the origination fee of 2% to 5%, that’s rolled into the loan once you’re approved for funds. Plus, you may accrue brokerage fees paid at an additional 1% to 3% upon closing should Northborough connect with you another lender instead of providing funds directly. You will be warned of these fees in advance, of course, and have to agree before they are charged. But, that won’t take the sting out of the added expense when you feel forced to say yes so that you can close on your investment at all.
For the most part, so long as you’re buying a property that has high potential to produce good returns, your chances are great at getting approved for hard money. And, as you gain more experience you’re likely to get better rates, too. But, you’ll also benefit from having a team you can count on to help review all of your options each time you need funding. I can direct you to a short list for that as well.
Getting the Support You Need for Financing Your Projects
By the time I put in my notice with Rick back in the day, I was already on my way to becoming an independently owned and operated HomeVestors® franchisee. I chose that path for starting my real estate investing career for two main reasons. First, I’d get the training and ongoing support I needed to invest in the kinds of properties that hard money lenders will want to fund. And, second, I’d have another source for the money I needed to buy, renovate, and sell properties because HomeVestors also provides financing for qualifying purchases and repairs. So, no matter how, or who, I chose to fund my investment deals, I’d have resources available to ensure I made a sound choice each time. That is what pulled me away from my old desk years ago to become an independently owned and operated HomeVestors business as a professional real estate investor.
To get the support you need for financing your Rhode Island projects, contact HomeVestors about becoming a franchisee today!
Each franchise office is independently owned and operated.
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