What is a hard money loan?

A hard money loan is a short-term financing option secured by real estate collateral. Unlike traditional loans that focus on a borrower’s creditworthiness, hard money lenders primarily consider the value of the underlying asset. This makes them ideal for situations where traditional financing might be difficult or unavailable, such as:

• Quick property acquisition: Need funds to purchase a property fast, before securing conventional financing?
• Property rehabilitation: Looking to finance renovations or repairs before selling or renting out a property?
• Bridge financing: Bridging the gap between selling one property and purchasing another.

Key characteristics of hard money loans:

• Shorter terms: Typically range from 1 to 5 years, compared to 15-20 years for conventional loans.
• Higher interest rates: Reflect the increased risk associated with shorter terms and reliance on collateral.
• Faster closing times: Can close within days or weeks, compared to conventional loans that take several months.

Types of properties financed with hard money:

• Commercial properties (retail, office, industrial)
• Multi-family and single-family homes

Remember: Hard money loans can be a valuable tool for specific situations, but the higher interest rates make them a costlier option. Carefully consider your options and consult with a financial professional to determine if a hard money loan is right for you.

Why would a Fort Lauderdale real estate investor pick a hard money loan (asset–based loan) over a conventional loan provided by a bank with lower rates?

There are numerous factors that lead borrowers to opt for private financing or hard money loans instead of traditional lending options.

(1) Expedited Funding: While traditional banks may take a minimum of 45 days to fund a single-family residential loan and anywhere between 60 to 90 days for a commercial loan, Gelt Financial typically processes hard money loans within 7 to 14 days.

(2) Property Rehabilitation: Traditional banks often have stringent underwriting criteria that prevent them from financing properties in need of repairs or lacking cash flow. However, Gelt Financial is willing to finance such properties provided that the borrower has sufficient equity invested. For example, banks rarely finance loans secured by properties requiring repairs, prompting borrowers to turn to hard money lenders to purchase and renovate the property before refinancing with traditional financing. Similarly, Gelt Financial can provide temporary financing for commercial properties without tenants until they are leased up and stabilized.

(3) Asset-Centric Approach: Unlike traditional banks, which heavily rely on a borrower’s credit score and income, Gelt Financial emphasizes the value of the underlying asset in relation to the loan amount rather than the borrower’s credit history. Our capital decisions primarily hinge on the Loan-to-Value (LTV) ratio, typically 65%, enabling us to serve a diverse range of borrowers, including those with high incomes but significant debt burdens who traditional lenders may overlook.

What are the interest rates in Ft. Lauderdale’s hard money loans?

Speed and Flexibility at a Premium: While hard money loans in Fort Lauderdale offer faster approvals and more flexible terms than conventional financing, they come with significantly higher costs. Let’s break down the key details:

Interest Rates: Expect rates between 10% and 15%, considerably higher than traditional mortgages. Factors like loan size, project risk, and property type influence the exact rate.

Points: Upfront fees (points) are standard, with each point equaling 1% of the loan amount. Investors typically pay 2-5 points for hard money loans in Fort Lauderdale.

Term Length: Prepare for shorter repayment periods, typically ranging from 6 months to 3 years. This accelerated timeline leads to higher effective interest costs.

Prepayment Penalties: Be aware that many lenders charge penalties for early loan repayment, ensuring they receive their expected interest income.

Weighing the Trade-Off: While cheaper financing options exist, they often involve longer processing times, potentially causing missed opportunities in Fort Lauderdale’s competitive market. The advantage of fast and flexible funding makes hard money loans a viable option for some home flippers and developers, despite the higher costs. However, it’s crucial to do your financial analysis and ensure your business model can accommodate the increased expenses.

What factors affect the interest rate for a hard money loan?

Several key factors influence hard money loan interest rates in Fort Lauderdale:

1. Loan-to-Value Ratio (LTV): The higher the percentage of the property value you borrow (LTV), the higher the risk for the lender, often leading to a higher interest rate.
2. Borrower’s Credit Score and Income: A strong financial profile with a high credit score and stable income can typically secure lower interest rates.
3. Property Condition and Location: The property’s overall condition, repairs needed, and location can impact the rate. Desirable areas or properties requiring significant work might come with higher rates.
4. Borrower’s “Skin in the Game”: Your equity investment in the property (down payment) demonstrates your commitment and reduces the lender’s risk, potentially lowering the rate.

Remember: Interest rates for Fort Lauderdale hard money loans are typically higher than conventional bank loans due to the faster processing, flexibility, and risk involved. Comparing offers from multiple lenders and negotiating based on your strengths is crucial.
While Gelt Financial can’t claim universally “the lowest rates around,” we encourage you to reach out for a personalized quote based on your specific loan request. This way, you can compare our offer with others and make an informed decision.

How fast can a Ft. Lauderdale hard money loan close?

Need fast funding for your real estate project? Gelt Financial can close loans in as few as days once we have your complete loan package. That’s significantly faster than the industry average of 1-2 weeks, which often involves lengthy appraisals and title reports. Get the money you need quickly and move your project forward without delays.

Some interesting facts about the Fort Lauderdale, Florida real estate market

• Market shift: After a period of rapid growth, the Fort Lauderdale market is experiencing a slight moderation. Median home prices are still increasing, but at a slower pace than in recent years.
• Strong rental market: Despite the shift, the rental market remains robust, with high occupancy rates and rising rents. This is driven by population growth and continued demand for Florida living.
• Diversity of options: Fort Lauderdale offers a diverse range of real estate options, from beachfront condos and luxury single-family homes to more affordable townhouses and apartments. This caters to a wide range of budgets and lifestyles.
• Increased international interest: The market is seeing growing interest from international buyers, particularly from South America and Europe. This is contributing to demand and price stability.

Unique Characteristics

• Waterfront lifestyle: Fort Lauderdale’s extensive waterways, including the Intracoastal Waterway and numerous canals, make it a popular destination for boaters and water enthusiasts. This plays a major role in the appeal of the real estate market.
• Entertainment and attractions: The city boasts a vibrant nightlife scene, numerous restaurants, cultural attractions, and family-friendly activities. This contributes to its desirability as a place to live, work, and invest.
• Proximity to Miami: While offering similar coastal living, Fort Lauderdale provides a more relaxed and less expensive alternative to Miami, attracting budget-conscious buyers and those seeking a quieter atmosphere.
• Emerging neighborhoods: While established areas remain popular, new developments and revitalized neighborhoods are attracting attention, offering diverse investment opportunities.

Additional Fun Facts

• Fort Lauderdale is nicknamed “The Venice of America” due to its extensive network of canals and waterways.
• The city hosts the largest boat show in the world, the Fort Lauderdale International Boat Show.
• It has a thriving arts and culture scene, with numerous museums, theaters, and art galleries.
• The average household size is smaller than the national average, potentially impacting demand for smaller living spaces.