Can You Use a Hard Money Lender for Repair Costs?

Question

Happy Easter all!

I have a commercial building that I'm currently renovating and wanted to know if its possible to get a hard money lender for the repair cost. I was under the impression that hard money lenders are only for if you are first purchasing the property.

If this is possible, please let me know. If you have any suggesting institutions I can inquire with that would be great as well.

Thank you!

Ian Walsh · Answer

I do commercial construction loans all the time.

Kathie Riedel · Answer

There is nothing illegal about using a HM lender for repairs on real property.

Steven Foster Wilson · Answer

Ive had up to $50k on a 0apr credit card before. I funded nearly my whole rehab on my second property. However you do risk having a heart attack because the stress is ALOT! The $50k caused my credit to go down, so we had to refinance in my wife name. Luckily it worked out.

Adam S. · Answer

@Steven Wilson

When you have used the zero APR, how much on your line are you asking for? I’ve been wondering how to finance some rehabs and this seems like a viable strategy for me.

Stephanie P. · Answer

@Alex Brown

The thread could have stopped at @Ian Walsh's comment.

Stephanie

Mya Toohey · Answer

@Alex Brown

Hard money is interest only payments and a very high initial cost.  You would be better off getting a heloc on home or business loan through your company.  At least pay principle and interest, don't just throw money away.

Cathy Evans · Answer

Hi Steven

If the improvements are PACE Eligible (Property Assessed Clean Energy) you may be able to use C-PACE Financing.  Currently 26 states are funding Commercial PACE Financing.  Every State has their own PACE Statute on what type of improvements are allowed.  (Energy Efficiency, Water Conservation, Seismic Retrofit, Resiliency, & Renewable Energy)

PACE is 100% Financing, Non-Recourse, Terms to 30 Yrs with Low Fixed Rates, Transferrable, Payments paid back via Property Tax bill, Has the ability for payments to be passed on to tenants in a NNN situation, CLTV to 100%, Will Finance up to 30% of Stabilized Value.

Examples of PACE Improvements: Cool Roofing, HVAC, Windows, Doors, Insulation, Chillers, Elevators, LED Lighting, Solar, EV Charging Stations, Daylighting...Hundreds of Improvements will qualify depending on what each state allows.

Cathy

Steven Foster Wilson · Answer

Yes, you can. I would call around and ask different lenders. But why not pull out a zero APR credit card if you think you can get it done within that timeframe before it expires/comes time to pay it. My wife and I have done this several times and it has been a success.

Scott E. · Answer

I have a hard money lender who will fund ~75% of the purchase and 100% of the remodel on all of my residential deals. So yes it is possible and an option. I don't have any recommendations for who might do this for commercial, especially if you already own the property, but I'm sure there is somebody out there.

Steven Goldman · Answer

Good Morning Alex: Do you have a first mortgage on the property?  Do you have any other properties which have equity? A hard money lender prefers to be involved in the purchase and rehab. to insure they have a first mortgage position on the property. A local private hard money lender might finance construction costs only, if you do not have a first mortgage, or you have other properties you can offer as collateral. Otherwise, it is very unlikely. One of the  reasons is the potential for a partially constructed property to have unpaid tradesman who may file a mechanics lien divesting them of their secured position.

Can You Use a Hard Money Lender for Repair Costs?

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