With its unique mix of stately propriety and down-to-earth Americana, North Carolina’s Greenville is a surprisingly dynamic real estate market. When I first started my real estate investing business, I’d have never thought to look for juicy purchases in its shady lanes, but if you’re just getting started, you don’t need to make the same mistake.
Another mistake you don’t need to make is choosing a subpar hard money lender. The first few times I worked with a hard money lender, I got hosed on the interest rate as well as the repayment period, which was too aggressively short for me to keep up with. One time, a lender even tried to include a covenant saying that I’d be obligated to give his company a cut of my profits from future deals to repay the interest. Thankfully, I didn’t agree, though I learned later that similar covenants are actually quite common. I got lucky.
If you’re not interested in relying on luck to avoid bad financing terms, you’re in the right place. Today, I’ll be explaining what you need to know about hard money loans, and where to find the most reputable hard money lenders Greenville NC has to offer.
Which Types Of Loans Are Available For Real Estate Investors?
Before you start looking for a hard money lender in Greenville NC, you’ll need to determine the type of financing you’ll need to accomplish your projects. While there are a bunch of different lending instruments that could in theory be used to finance real estate investments, there are a few that are quite ubiquitous. Let’s take a look.
Fix And Flip Loans
Fix and flip loans are the bread-and-butter financing solution for most house flippers. In short, they’re intended to cover most or all of the purchasing costs (and sometimes also the renovation costs) for flips. The idea is that you take out the loan, use the money to buy and rehab the property, sell it, then use the proceeds from the sale to pay the interest on the loan. There are typically a few requirements for the types of properties that are eligible, and it’s not uncommon for lenders to adjust their terms based on the starting condition of the home in question.
Fix and flip loans are most commonly intended for downmarket properties that are in worse-than-average condition. There’s (usually) no rules that prohibit taking out funding for buying upmarket homes in good condition to add even more value via renovations, but it isn’t as common.
When preparing to issue these types of loans, lenders look at the saleability of the home, the estimated renovation costs, and the expected risk of the project going poorly based on the experience and capabilities of the investor. If one lender rejects an application, there’s never any shortage of other places offering the same type of loans. So be sure to shop around.
Bridge loans are similar to fix-and-flip loans, but they’re typically intended for smaller amounts of money and for shorter-term projects. Most lenders that offer fix-and-flip loans will also offer bridge loans, though bridge loans usually have higher interest rates and shorter repayment periods. Some real estate investors use bridge loans to finance the purchase of investment properties for renting out, whereas others use them to pay for extensive renovations, and others simply use them in place of a fix-and-flip loan.
Bridge loans often have faster turnaround times than fix-and-flip loans. The catch is that they’re supposed to bridge the gap between today’s costs and tomorrow’s revenue. You usually won’t be eligible for a bridge loan if you can’t make a strong case that the money being used will imminently yield a significantly larger cash flow. The expectation is similar with fix-and-flip loans, of course, but with bridge loans the shorter repayment period makes the issue more important to underwriters.
A typical use case for a bridge loan is to provide some funding to keep the lights on while you’re waiting for one of your properties to sell (or get refinanced) and deliver a cash flow.
As the name implies, rental loans are instruments intended for the purchase of rental properties. Unlike the other two types of financing above, rental loans often require investors to put a cash down payment that’s worth upwards of 20% of the property’s value before they can get approved. Aside from that, they can sometimes have repayment periods as short as 24 months, though it’s also possible for loan payments to be amortized over a longer period.
The underwriting requirements for rental loans are more stringent than fix-and-flip loans as investors need to be able to prove that they can profitably operate the rental property. You’ll also need to prove that you have enough cash reserves to cover the rental unit in question if there are issues with finding tenants or getting tenants to pay their rent.
But you’ll have a few different options for making your rental loan a profitable financing choice. You can either harvest the excess cash flow from rent after interest repayments, or you can refinance the unit to get a lump sum after renting it out for some time.
Other Borrowing Instruments
Aside from the three loan types I’ve discussed, there are a plethora of other hard money and soft money borrowing instruments that you can use in real estate investing. Most of these less-common loan types are intended for niche applications or for larger and more capitalized businesses rather than the average real estate investing company.
As an example, if your company was trying to finance buying, rehabbing, and renting a massive apartment complex, it might make sense to use a borrowing instrument called structured joint venture financing. Structured joint venture financing uses collateral from both the apartment complex itself as well as some of your firm’s equity to deliver a large lump sum to buy the complex, and then flexibly-sized follow-up payments for renovations in the months leading up to the repayment period. If your business fails to follow through on delivering interest payments, the lender is entitled to own the equity in your business, which then effectively makes the entire project theirs—along with a lot of your previously-invested capital.
Still, until your business becomes quite large and your financing needs get complicated, you probably won’t need to get into these other types of borrowing.
How To Maximize Your Chances Of Getting Approved
As crucial as securing financing is, there’s no guarantee that a lender will be ready to fund your deal when you need them to. At worst, you’ll have a juicy deal fall through and get scooped up by another investor.
As with banks, hard money lenders are more willing to lend to investors who don’t need the money. The idea is that well-off borrowers typically don’t need to borrow as much in proportion to their assets, so they have a higher chance of being able to repay what they take out. That makes them safer customers for the lender.
Borrowers who have a high chance of getting their loan requests approved with a favorable interest rate tend to:
- Be experienced investors with numerous, recent successes
- Have a significant amount of assets, especially cash
- Request funding for projects that their business is obviously capable of handling
- Have minimal personal and business debt
- Have good credit scores
- Request funding for relatively small proportions of property value
- Have an existing and positive relationship with the lender
Newer investors will probably lack these qualities, but some things are in your control. Try to only request the bare minimum of capital you need to successfully complete your project while leaving yourself a small margin of error. And don’t try to chase opportunities that are on the edge of what’s feasible, at least until you have a few successes under your belt. Similarly, try to pay down as much debt as you can before applying for a loan.
In contrast to the traits that make for a higher chance of approval, borrowers who have a high chance of getting their loan request rejected or approved with a high interest rate tend to:
- Be inexperienced or first-time real estate investors
- Be low on cash and assets
- Request funding for overly-ambitious projects
- Be highly leveraged or indebted
- Have poor credit scores
- Request funding for large property values
As you can see, getting hard money funding can be a bit of a “chicken and egg” problem for new real estate investors. You’ll start off not knowing anyone, not having any successes to tout, and (in all likelihood) with minimal assets to put lenders at ease. The ideal hard money lenders Greenville NC has to offer are those who are accustomed to helping new businesses, but don’t be too surprised if you still need to shop around for a lender that’s willing to give you a chance.
Getting A Good Rate And Terms
Beyond getting your financing requests approved, it’s also important to get an attractive interest rate and favorable repayment terms. For most hard money loans, interest rates start at around 7%, and repayment terms range from 6 to 60 months. The shorter the repayment term, the higher interest rate you’ll usually be paying. Likewise, the less worthy of a debtor the lender’s underwriting process finds you to be, the higher rate you’ll need to pay if you choose to accept their terms.
And the higher the interest rate, the more likely lenders are to attach additional covenants to the loan. These covenants can include additional protections for the lender—nearly all of which will be somewhat detrimental to you.
Therefore, it is not uncommon for newer real estate investors to find that lenders are willing to lend to them, but only under conditions that are too burdensome to accept. This is a problem that usually resolves itself over time as you gain more experience and credibility in the eyes of underwriters. It might even be necessary to suffer through a couple of less-than-ideal loan packages to get your first few flips out of the way.
The good news is that all of those tips for increasing your chances of approval will also increase your chances of getting good terms.
Great Hard Money Lenders In Greenville NC
Now that you’re up to speed on how to succeed at getting financing, let’s take a look at a handful of the best hard money lenders in Greenville NC.
Finance of America
Finance of America is a versatile and flexible hard money lender in Greenville NC. With Finance of America, you’ll be able to take out loans for investment properties, fix-and-flips, and bridge finance. Most loans have repayment terms between 12 and 18 months, and interest rates can go as low as 6.75% in some circumstances. This lender is used to working with new investors, and it tends to offer them better terms than you’d find elsewhere. And for a standard renovation and flip loan, you can secure funding for up to 95% of your property purchasing costs, which is quite good.
There are a few caveats, though. If you’re not an American citizen, Finance of America has some extensive restrictions on whether they can lend to you. And while its rates tend to be better for beginners, it’ll take quite a lot of experience and creditworthiness before you can get rates as low as the 6.75% floor that they advertise.
- Good for new real estate investors
- Offers loans from $50,000 up to $3 million
- Non-citizens may not be eligible
American Heritage Lending
American Heritage Lending is willing to lend you funding for up to 90% of the cost to purchase and repair a property, and they’re also willing to let you hold as many assets as you want in collateral for borrowing. Effectively, that means as long as you have unleveraged assets on hand, you can borrow for up to $2 million per loan, and you can take out as many different loans as you desire at the same time. So, for experienced investors who have enough deal flow to approach multiple opportunities at once, American Heritage Lending is an extremely powerful lender to work with as it opens the door to a much higher throughput of deals than other lenders.
Its loan terms range from 6 to 24 months, and it’s possible to get funding without any troublesome covenants that would otherwise eat into your profit margin. But it’s important to recognize that American Heritage Lending isn’t a great lender for newer investors. While a seasoned investor could make use of its loan multiplexing offerings to go big on a handful of deals at once, less experienced people could easily overleverage themselves and fumble their way into a catastrophe doing the same thing. That risk is made even higher by the fact that American Heritage Lending’s approval rate is on the high side, though their rates tend to be a bit unfavorable.
- Very permissive eligibility requirements
- Capable of helping your business exert massive leverage to chase multiple deals simultaneously
- Dangerous for newer investors
Get Direct Access To Lenders For The Best Results
Before attempting to procure a hard money loan from one of the lenders I’ve discussed, consider that your chances for approval are much higher if you’re willing to team up with a national network of real estate investors who have direct access to high-quality financing. By opting to become an independently owned and operated HomeVestors® franchise owner, you’ll get exactly that, and you’ll have some of the best lenders in the business at your fingertips. You’ll be ready to move as quickly as you need to to close deals, and your business can grow as a result.
HomeVestors® is a lot more than a hard money financing portal with vetted lenders, though. If you become a franchise owner, you’ll also get trained by some of the top real estate investors in the business—and there’s nothing better when you’re just starting your real estate investing career. Plus, you’ll learn how to use property valuation software, get access to a nationwide lead generation platform, and discover smart ways to kick your business into overdrive by making judicious use of different types of financing.
Want to learn more about receiving financing from the top hard money lenders Greenville NC has to offer? Request information about becoming a HomeVestors® franchise owner today.
Each franchise office is independently owned and operated.
It’s time to get serious about your real estate business. If you want to learn more about the best places to invest in real estate in California, contact HomeVestors and request more information on franchise opportunities.