Keeping Construction Projects on Track with Hard Money Loans

There are a number of different ways to approach real estate investing—ranging from renovating and reselling properties, acquiring multifamily rental units or managing commercial real estate assets. With housing inventory levels hovering around historic lows in a majority of the markets across the country, investing in new construction projects is a great option for investors looking to sidestep the increasing competition for available properties and cater to the rampant demand from buyers for new housing choices.

With that being said, obtaining financing for a new construction property from a traditional mortgage provider is no small feat, particularly if you have limited experience with the process. Locking in a construction loan from a conventional lender is a meticulous and lengthy endeavor, with the bank’s underwriters closely examining every minutia of the detail. This time-consuming process may well result in delays in the planned construction project. A private money, or ‘hard money,’ loan is an ideal alternate funding approach for real estate investment strategies in which time is of the essence.

A key benefit of partnering with a reputable hard money lender is that they inherently have a greater degree of flexibility when it comes to lending parameters as opposed to traditional banks. This is certainly applicable when it comes to financing new construction projects, which are steadily trending upwards as the building sector continues its recovery from the pandemic-induced shutdown. Private money lenders can offer funding products that can be used to cover the costs associated with all stages of a construction project, from buying the property itself to paying for building materials. Hard money lenders can also provide bridge loans that allow investors to transition to longer-term financing after the construction phase is completed.

Using Hard Money for Construction Projects: Key Advantages

For investors weighting their financing options for upcoming construction projects, here are some of the main benefits of leveraging the unique flexibility and efficiency of hard money loans:

1. Mitigate Delays: Hard money loans can be underwritten and closed efficiently—oftentimes in less than a week—as opposed to conventional lenders where the process can take weeks or even months. Regardless of whether you plan to use private money to fund the entire build or need an infusion of capital at a pivotal stage of the project, getting the money you need when you need it is one of the hallmarks of private money that makes it an extremely attractive option for real estate investors.
2. Underwriting Flexibility: Traditional banks are constrained by federal and state regulatory guidelines which limits the extent to which they can work with savvy investors to get potentially lucrative deals across the finish line. That’s where hard money comes into play. These lenders premise their decision-making on the inherent value of the underlying real estate asset and the specifics of the proposed deal.
3. Less Arduous Underwriting: Qualifying for a conventional loan involves mountains of paperwork and a similarly epic time commitment. For investors with a less than ideal credit score or lack of proof of income, working with a traditional funding institution may be off the table entirely. The good news is that hard money lenders are more interested in the equity that you bring to the table and the potential upside of your proposed project

Get on Track, Stay on Track

When it comes to a new construction project, time is one of the most important elements of success. When you partner with Express Capital Financing, you can rest assured that you will have access to the capital you need when you need it. Our team of experts has years of experience assisting successful investors maximize their returns and scale their businesses. Contact us today to learn about how we can do the same for you!