Property Types for Hard Money Loans

Hard Money Loans can work for most property types including:
  • Multi-Family Properties – These are a lender’s dream as the perception is that housing is always going to be in demand, which helps ensure very low vacancy rates. Lenders only major concern is whether or not the income generated by the property can service the debt service.
  • Commercial Properties – Retail or office properties have the potential to generate large amounts of income, but they can also be extremely difficult to stabilize if “anchor” tenants are lost. Lenders generally look for stabilized properties with long-term leases in place. That being said, retail has been hit hard across the country and most lenders are being more cautious with this property type. The loan to value ratio lenders feel comfortable with is down as compared to recent history (10-30 years ago).
  • Industrial/Warehouse Properties – With all the recent development of apartment complexes across the country, some of which built in former warehouse/industrial zones, the warehouse/industrial market has seen a boom in pricing recently. Simply put, it’s difficult to find a good warehouse property that is centrally located these days. The few that still exist are bringing in some very high prices. Lenders are very aware of this and are actively looking to lend on this property type, depending on the location.
  • Land – Depending on the size, zoning and ease of development, land can either be very attractive or totally unappealing to lenders. In places like New York City, where as-of-right development is allowed, lenders have a greater confidence in the value of the land. Outside of NYC or areas allowing as-of-right development, lenders are much more cautious and will lend only on land that has already been fully approved for development. Of course some land has value with or without approvals as parking lots, storage areas, etc.
Most lenders won’t lend to owner-occupied properties. Depending on the property type, loans to owner-occupied properties can either be an extremely risky proposition due to predatory lending concerns or just be extremely hard for a lender to evaluate. 1-4 family homes that are owner-occupied shrinks the pool of lenders quite a bit as lenders shy away from anything that might put their capital at risk due to predatory lending laws. Commercial/industrial properties are a safer bet in terms of the lending laws, but also difficult for a lender to evaluate. Most owners pay themselves a rent, but whether or not it’s realistic or representative of the market is another story. Lenders who lend on these properties generally demand for a proper lease to be signed between the business tenant and the ownership entity to protect themselves in the event of a foreclosure. H&O Capital specializes in loans on all property types! The only exception being owner-occupied 1-4 family homes. Please call us today to discover how we can help you succeed. We’re always here to help, contact us if you have questions!

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