If you work in the construction industry, you may already know that private money lenders have a longstanding history with developers. While most commercial institutions such as banks may see your efforts as carrying too much risk, ground-up construction loans also come with the potential for private money lenders. People offering ground-up construction hard money loans have started to exercise a little more caution since the recession. Nevertheless, they are still a viable option for you to consider.
What Is A Ground-Up Construction Hard Money Loan?
A ground-up construction hard money loan is financing available to individuals planning to embark on a new commercial or residential building project. The total amount you can borrow depends on the purpose, state rules, and how much you think the real estate will be worth after completion. You can generally borrow 100% of the vertical costs and up to 50% of land acquisition or refinancing. If your construction project seems to be ambitious and your investor agrees that it will produce good returns, you may even land a higher land acquisition figure. Ideally, interest rates for a private money construction loan start at 8.5%. Nevertheless, as you will soon see, you can offset your interest rate with your investment efforts.
When Do You Require A Private Ground-Up Construction Loan?
Let’s say you have a new ground-up construction project in mind. You have finalized a piece of land and understand that there might be a lot of competition for the property. All this makes your project time-sensitive. If you hope to get a quick closing, you must consider getting a ground-up construction hard money loan. Depending on how much information you can provide and the speed you deliver it, you can easily acquire funding within one to three weeks effortlessly.
Ground-up construction hard money loans also work well if your credit score is not as good as you’d like it to be. Most real estate brokers can work with a credit score as low as 600. In some cases, you can also find opportunities to get funding if you are a foreign national. If you look risky to a bank, a private money lender may overlook a few factors in favor of the final asset you can deliver. After an independent surveyor verifies the potential financial outcome of your ground-up constriction project, a private lender may consider you and your project as a wise investment instead of financial risk.
You should also note that such loans tend to work best when you plan on selling the property within the first 12 to 18 months after completion. Since most short-term real estate loans come with a high-interest rate, they make perfect sense to lenders despite the reduced time to earn gains via interest. On the other hand, banks often work with significantly lower rates, so they have less interest in the quick turnaround time, making loans much less profitable.
How to Access a Ground-up Construction Loan?
Accessing a ground-up construction loan means tidying your finances to make them look presentable. You will also need to prepare yourself with a lot of information regarding your project costs and plans. It would be best to do this since your potential lender needs all the evidence they can get to assure themselves you’re worth investing in. So, start gathering details about your profit forecasts, turnaround times, contractors, and project location. You can even contact a professional broker to understand your loan options. Brokers can comprehend what most private lenders ask for regarding repayment plans. Once they learn your anticipations and gauge market conditions, they will be able to find a loan option that matches all your expectations.
Contact Real Estate Funding Solutions For Professional Guidance Today!
Hard money ground-up construction loans are short-term loans, typically lasting 12 to 24 months, and help builders pay for their constructions. If that sounds like a plan to you, contact the Real Estate Funding Solutions team to get started. We can help you get an ideal ground-up construction hard money loan without stress. Thanks to years of training and on-field experience, we understand what works and what won’t, easing decision-making for our clients. We can seamlessly land you a perfect deal for your next significant real estate investment.
Our professionals only have your best interest in mind, so you can rest easy, knowing we will do right by you. From finding an ideal loan to closing, our team will stick by your side throughout the process. We can help educate you on what to expect from your real estate investment in the long haul. If you plan to invest in a real estate property anytime soon, call our experts today at 855-913-8637. Our professionals will discuss all your wants and needs before making the final decision.