Hard Money: The Best Choice for Commercial Real Estate Loans

Men shaking hands over paperwork

In the realm of commercial real estate, time is of the essence. When opportunity knocks, a savvy real estate investor must be able to seize it by having money to push a transaction through before another investor can pounce on it. That’s one reason that hard money lending in Houston, TX, has recently come into vogue for those who make a living from commercial real estate investments.

Hard money loans are approved and executed on a fast timeline because they are not secured by the borrower’s credit, but by the value of the property to be purchased. That makes them a nimble lending tool for those who must capitalize on the dynamic commercial real estate market. Continue reading to learn more about how you can use hard money lending in Houston to give you greater financial fluidity for closing commercial real estate transactions.

Negates Importance of Credit History

Those who are getting started in commercial real estate investment may not have a long loan history that can be used to satisfy the demands of traditional lenders. Also, some investment groups may be newly-formed LLC organizations that have absolutely no borrowing history at all. Hard money loans can help overcome those traditional obstacles to becoming a player in the commercial real estate game.

The money loaned in a hard money transaction is not contingent on the credit history of the borrower, but the value of the property to be purchased with the loan. Therefore, hard money loans provide the perfect option for those who want to get involved in commercial real estate who may have a checkered or inadequate credit history.

Makes Your Deal More Powerful

Countless commercial real estate deals fall through once under contract because the loans fall through at the last minute. Banks and other traditional lending organizations must meet stringent guidelines when loaning capital for commercial projects, and sometimes, those demands simply can’t be met. In those cases, the seller wastes time and loses a sale in the process.

A hard money loan can make your offer more attractive amongst a sea of offers based on traditional lending because it’s less likely to fall through. Because hard money loans streamline the lending and approval process, you can quickly be ready to close with funding in hand. A seller will appreciate that increased confidence in the sale, and your odds of completing the transaction are enhanced.

Provides Buyer Leverage

In a competitive commercial real estate environment, the seller may have the upper hand. The property on the market may be in a prime location, for example, so offers on it come from many angles. That allows the seller to pick from any number of attractive offers. However, use of a hard money loan can provide the buyer with additional leverage. A hard money buyer is attractive to a seller because of the reduced risk of loan denial and a faster escrow and closing timeline.

Therefore, among a sea of offers, the buyer with the hard money will be the seller’s preference. That gives the buyer some leverage to negotiate in some cases, as a hard money loan sale benefits both parties.

Businessperson showing model of condo complex

Speedy Approval Timeline

Maybe the biggest benefit of using hard money loans for commercial real estate transactions is the fast application timeline and quick availability of funds. With a traditional loan, you may not have the confidence to make a binding offer until the loan is approved. In those cases, you may miss out on a chance to put in an offer on a prime piece of commercial real estate. However, because the timeline for a hard money loan is much shorter, you can get involved with an offer more quickly, thus enhancing your chances of closing on the property and beating out other suitors.

If you want to increase negotiating power and enhance your chances of closing on commercial real estate in Houston, TX, hard money lending can provide you with an advantage over other potential buyers. It’s quick, streamlined, and increases your likelihood of successfully completing commercial transactions. For more information on hard money lending for commercial real estate, contact Investor Loan Source.

Hard Money vs Private Money Loans: Know the Difference

Businessman counting out cash for loan

Do you know the difference between private loans and hard money loans? If you’re interested in real estate investing, it’s important to know the difference. While they each have their similarities, there are quite a few distinctions between the loan products that house flippers must know. Keep reading to discover why hard money lending in Houston, TX, is a better option for real estate investors.

Credit Scores

A lot of people with less-than-perfect credit scores want to get in on real estate investing opportunities. Renovating and flipping houses is a great way to build wealth when it’s done correctly. However, many people who have the skills to do the job well lack good credit. If your credit is holding you back from opportunities, Houston, TX, hard money lending might be the answer.

Private loans that are managed by traditional lenders like banks and credit unions have strict credit requirements. If you have a credit score below 700 or 650, it’s harder to get approved for a loan. Hard money loans have fewer credit restrictions because they are more interested in the property’s value. That being said, if the property doesn’t have equity or isn’t worth much in the market when it’s fixed up, the lender may pass on the deal.

Interest Rates

You’ve probably heard that interest rates are higher for hard money loans than private loans. This is true, and there’s a very good reason for this. Ideally, when a person applies for a hard money loan, their goal is to pay the loan back within 6 months to 3 years, depending on how fast they’re able to move the property. People who take out private loans aren’t usually investing in property they’re going to sell for profit within a few years. Instead, these are your traditional home buyers.

When dealing with hard money lending in Houston, it’s important to understand that private loans have a longer period to collect interest payments. Therefore, the rates appear to be substantially higher for hard money loans, but it all equals out in the long run.

Process Timelines

Money lending in Houston doesn’t always go as fast as you need it to for an investment property, if you’re trying to get a private loan. That’s why investors choose hard money loans. The private loan process can drag out for months and require a lot of paperwork and verification.

With hard money products, the lenders want the process to go as quickly as you do because they want to see a return on their investment as quickly as possible. Whereas private loans might take 1 to 3 months to fund, hard money loans can be funded in as little as 7 days, depending on varying factors.

Interior of home with fixer upper stamped over

The Bottom Line

So, which loan product is best for you? It all comes down to why you’re buying the property. If you’re a real estate investor looking to make quick cash on a “flip” house, then hard money loans are the better deal. They’re easier to get with less-than-perfect credit, and the funding process isn’t as long. For people buying their forever home, it’s a better deal to go the private loan route and find a lender offering great 30-year or 15-year interest rates.

To learn more about money lending in Houston, TX, contact Investor Loan Source today for commercial, rental, and fix & flip loan options.

Common Hard Money Lending Mistakes You Should Avoid


Hard money lending in Houston can be a sale-saving source of funds for some contractors, prospective homeowners, or business owners who need to make capital improvements to their facilities. If a person needs cash quick or has credit issues, a hard money loan might be the only option they have. There are, however, some things common mistakes everyone considering hard money lending as a funding source should avoid before they sign on any dotted lines.

Not Getting Prequalified

Setting up as a sale before you know you can fund it makes no sense. Getting prequalified for any money lending arrangement is smart business because it makes your purchase a cash buy for all intents and purposes. That not only will appeal to sellers, but it also will expedite the purchase process. It will make a sale go quicker than having to wait for approval for a bank loan and can open the door to negotiate a better price. Avoiding the paperwork, wait, and processing of a loan usually makes a seller much more open to coming down in price.

Finally, liquidity lets you get started if you are borrowing for a project. Waiting on a loan can take days or even weeks, which means you and your crew aren’t able to start work on a project. Having preapproval gives you the cash you need to start buying supplies, lining up contractors, and even to complete actual project work. That ultimately saves time and money, which makes it easier for any contractor or developer to hit their budget goals. There is a reason the saying “cash is king” has been around for so long!

Not Building a Relationship with the Lender

This is just common sense. When you deal with a bank, it’s easy to treat the entire transaction as a swap. You present the bank with your credit score and information and ask the bank for a certain amount. Then, the bank looks at your credit score, and, if it’s good enough, offer you a certain amount. With hard money loans, though, relationships between the lender and borrower are much more important. The more they know about you and your project, the more likely it is they will view you as a worthy investment.

The other benefit of building a relationship with your hard money lender is the fact that they likely will know the market better than you. Even if you work in the market you are securing the loan in, the lender will have a broader perspective of what is going on in the entire region. Having a relationship with them will likely lead to them giving you useful tips and advice regarding different properties or projects in your area.


Fretting the Interest

A hard money interest rate is high; there is no getting around it. When you consider the risk the lender takes and the terms you get, the rate isn’t all that much. Consider this:

  • You can get a loan much quicker than if you went through a bank.
  • You can get a loan if your credit is less than perfect.
  • You get access to immediate cash upon approval, which can give you leverage with a seller.
  • You get access to money with no risk to your credit rating.

Houston, TX, hard money lending is one way of getting the cash you need for an investment quickly and easily. For more information on hard money lending or how to get a loan, check out Investor Loan Source.