Mac and I have been Bridgeport neighbors for years, but have rarely said more than two words to each other. Don’t get me wrong; he’s always seemed like a nice enough guy. But, that corporate gig of his has kept him very busy—and a bit stressed—morning, noon, and night. So, when I ran into him over at Harborview Market last weekend, I couldn’t help but take the opportunity to ask how things were going.
As it turns out, he’s making plans to leave his corporate job to start a business as a real estate investor, like me, and saving every penny he makes. Still, he’s well aware that he’ll have to find other sources of funding for his first several deals and isn’t sure which of the several Connecticut hard money lenders he should go with. So, I told him that if he could spare just a few minutes more, I’d help him sift through some options.
A Few Good Options for Hard Money Lenders in Connecticut
The balancing act that Mac is trying to play—building one business while planning an exit from another—is a tough one, especially when the field you want to enter is one like real estate investing. To make money investing in real estate, you’ve got to have money to invest. And, most new investors, like Mac, don’t necessarily come to the field with enough cash stashed to even buy that first investment property. So, they usually turn to hard money lenders in Connecticut—and, for very good reason.
The use of hard money can put you at an advantage in a competitive industry like real estate investing, even when you’ve never bought, renovated, and sold houses before. The reason is that lenders typically fund deals based on the value of the property you want to buy, rather than on whether you have great credit or a lot of experience. And, they can do it fast—often in a matter of days. Plus, they’ll help you finance the fixer-uppers that banks and credit unions won’t touch. So, if you’re lucky enough to find a great investment property as a new investor, you’ll probably encounter some luck in getting the deal financed with hard money, too.
That said, knowing which lenders will be a good fit can be hard to figure out—especially when you’ve just started to grasp how hard money works in the first place. Luckily, we’ve got a few good lender options here in Connecticut that might be more-than-willing to fund the projects you find. Here are three that I looked at with Mac:
Capital Three Sixty, LLC
Capital Three Sixty, based in Avon, offers several options for financing and renovating non-owner occupied residential properties. Loan amounts typically range from $75,000 to two million, but they do offer an option that allows you to borrow as much as three million. And, with some of their loans, you can receive 90% of the purchase price to help you close the deal. Term options are between six and 12 months, though 12 months is the norm. You can, of course, pay the loan off early without fear of incurring a penalty—which is a good way to go since your interest-only payments won’t put much of a dent in the balance. Note that your interest rate will vary, as will your origination fee, based on your personal and professional profile. But, you’ll know the terms that apply to you soon after you inquire. Then, shortly after that—in as few as seven days—Capital Three Sixty can fund your deal.
In order to qualify for hard money with this lender, however, you’ll have to prove that you’re worthy. And, the terms you’re granted will be based on just how valuable you are. So, be prepared to provide a real estate investor credibility kit that includes two years of tax returns, your credit score, and proof of liquid assets—along with a portfolio that outlines your experience. Without these items, you won’t get approved. But, even with them, you’re not guaranteed to get the best deal. In fact, only those investors deemed to have a reasonable income, cash reserves, and net worth will get good terms, even if the property you’ve found is the best deal in town. That just doesn’t seem reasonable coming from a hard money lender. And, as a new investor, you can find someone better.
Stormfield Capital Management
Stormfield Capital Management, in Southport, originates loans on all types of properties, including vacant single-family homes and multi-family units. For a property you intend to buy, rehab, and resell, they’ll fund up to 65% of the After Repair Value and 85% of the purchase price. And, they can provide as little as $150,000 or as much as one million, and only charge one to two percent as a fee. Loan terms range from 12 to 18 months and interest rates vary too—usually between 8.99% and 11.99%. With such flexible terms and remarkably low rates, it’s hard not to like—or want to use—this lender. That they offer interest-only payments, no prepayment penalty, and a fast 10-day close only adds to their appeal. As a bonus, you don’t have to offer your FICO.
Unfortunately, you will have to pay quite a bit up front if you want to borrow from this particular lender. A hefty expense deposit is required to cover any legal fees, third-party reporting costs, and other ambiguous expenses that aren’t specifically detailed on the website. The lack of transparency about what these fees are, and how much they will be, gives me pause in recommending this lender wholeheartedly. You’ll already be faced with potentially paying a substantially large earnest money deposit, even if Stormfield finances the full 85% of your property’s purchase price. To give more to your lender on top of what you’ll be paying for the property may not, in the end, add up to the best deal.
Sachem Capital Corporation
Sachem Capital, located in Branford, provides hard money loans for real estate investors who buy unoccupied distressed properties to fix up and flip. They’re unique in that they make an effort more than most to truly be an asset-based lender. That means there are no application, loan origination, or expense account fees. Nor do they require you to pay for the cost of an appraisal or performing due diligence. They’ll handle it all and still help you close in about ten days. And, in return, you can have up to three years to repay your loan, whether you borrowed their minimum of $30,000 or their maximum of $750,000. Your interest rate may vary, but it’ll be based on the collateralized property, not on your credit score or experience. So, no matter how new of an investor you are, you get the same funding opportunities as everyone else.
Except that, because Sachem Capital only funds a maximum of 50% of a property’s value, you may not get to close on an opportunity at all. Now, if you’re an old hat like me whose built up reserves through the years, paying for half of the purchase price out of pocket may be easy to do. But, even seasoned investors can find half hard to swallow—especially since getting a loan for 50% of the balance may require you to collateralize more than one property. Of course, I get their position; they want their investment secured. But, I don’t recommend risking other investments—or your own home—just to secure financing that’s risky on its own.
As these examples above prove, hard money terms can vary somewhat from lender to lender; but, generally speaking, you shouldn’t have too much trouble getting a hard money loan. Instead, the real issue may be whether, as a new investor, you can get the best terms. You might not even want to work with the lender who is willing to work with you. So, I think the better option for finding the funds to finance your deals is to get a network you can trust to make suggestions you can count on. And, that is very easy to do.
One of the Best Options for Getting the Funding You Need
Like Mac, I scraped and scrounged every last penny before switching careers to become a real estate investor. And, like Mac, I still had to find funding for my first several deals. But, because I became an independently owned and operated HomeVestors® franchisee right out of the gate, I’ve always been able to fund my projects more easily than my peers. See, not only does HomeVestors provide financing for qualifying purchases and repairs but you get access to a regional network of other HomeVestors® franchisees who can make other hard money lender recommendations, too. So, you don’t have to go without getting the best possible loan terms just because you’re a new investor. It also means you don’t have to lose out on buying a property because you couldn’t get a loan at all.
To get the one option that can open you up to others, contact HomeVestors and ask about becoming a franchisee today!
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