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: This 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

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

Here are several reasons why a Virginia Beach real estate investor might choose a hard money loan over a conventional bank loan, even with lower interest rates from the bank:

1. Speed of Funding:

• Time-Sensitive Deals: Virginia Beach's real estate market can be competitive. Properties in foreclosure, at auctions, or with distressed sellers often need to close quickly. Hard money lenders can provide approvals and funding within days, while banks can take weeks or even months.
• Competitive Advantage: This speed gives investors using hard money a significant advantage in securing desirable properties.

2. Qualifications: Focused on Asset, Not Borrower

• Less-Than-Perfect Credit: Banks have strict credit score and financial history requirements. Hard money lenders focus primarily on the property's value and the investor's equity, making funding possible even with past credit issues.
• Self-Employed Investors: Proving income can be difficult for self-employed investors, a common profile in real estate investing. Hard money lenders might be more flexible in these cases.

3. Flexibility with Property Condition:

• Fix and Flips: Many lucrative deals in Virginia Beach involve properties needing renovations. Banks often won't finance properties in poor condition. Hard money lenders are willing to lend based on the after-repair value (ARV) of the property.

4. Non-Traditional Investment Scenarios:

• Unique Property Types: Hard money lenders are open to properties banks may deem too risky – commercial properties, land, or unconventional structures.
• Short-Term Strategies: "Buy, Rehab, Rent, Refinance" (BRRRR) strategies or wholesale deals rely on quick execution, where traditional loans are too cumbersome.

What are the interest rates in Virginia Beach hard money loans?

Interest rates for hard money loans in Virginia Beach can vary depending on several factors, including the lender, loan term, borrower's creditworthiness, and the specific property being financed. Some general trends and factors to consider regarding interest rates for hard money loans in Virginia Beach:

1. Market Rates: Interest rates for hard money loans in Virginia Beach typically range from 8% to 15%, but they can sometimes be higher or lower based on market conditions and lender policies.
2. Loan-to-Value (LTV) Ratio: Lenders may offer different interest rates based on the loan-to-value ratio. Lower LTV ratios (i.e., higher equity in the property) might lead to lower interest rates, while higher LTV ratios could result in higher rates.
3. Loan Term: Short-term hard money loans often have higher interest rates compared to longer-term loans. For example, a loan with a term of 6-12 months might have a higher rate than a loan with a term of 2-5 years.
4. Property Type and Condition: The type and condition of the property being financed can also impact the interest rate. Lenders may offer more competitive rates for properties in good condition and located in desirable areas.
5. Borrower's Experience: Experienced real estate investors with a strong track record may qualify for lower interest rates compared to first-time borrowers or those with less experience.
6. Lender Policies: Each hard money lender in Virginia Beach may have its own underwriting criteria and policies, which can influence the interest rates they offer. It's important to shop around and compare rates from multiple lenders to find the best deal.
7. Market Trends: Interest rates for hard money loans can be influenced by broader economic trends, such as changes in the Federal Reserve's monetary policy or fluctuations in the real estate market.

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

Several elements converge to determine the interest rate you'll pay on a hard money loan in Virginia Beach:

• Risk Assessment: Hard money lenders focus primarily on the property's value and the borrower's potential to repay. High-risk scenarios (low LTV, poor property condition, inexperienced borrower) usually translate to higher interest rates.
• Your Financial Health: While credit scores are less critical than in traditional loans, lenders still consider your ability to manage debt. A better financial picture can lead to more favorable rates.
• Specific Loan Parameters: The requested loan amount, how it compares to the property's value (LTV), and your proposed exit strategy (how you'll repay the loan) are all factors in the lender's interest rate calculation.
• Prevailing Market Rates: Keep an eye on the broader economic climate and competition among Virginia Beach hard money lenders. These forces can indirectly influence the rates you'll be offered.

How fast can a Virginia Beach hard money loan close?

Need lightning-fast funding to secure hot properties? Gelt Financial can close your loan in days with your complete package, giving you an edge in the competitive real estate market. Avoid missing out on opportunities due to slow financing.

Here's a selection of interesting facts about the Virginia Beach, VA real estate investing market: