A hard money loan is a short-term, asset-based loan that provides funding for acquisition and repairs on investment properties. These loans are funded by private individuals, like the investors behind Milwaukee Hard Money. Requirements vary by lender, however, most private hard money lenders are more concerned with collateral and equity protection, than borrower credit scores.
A hard money loan is generally based on the after-repair value (ARV) of the asset, in contrast to a conventional loan, which is typically based on the actual value (AV) of the asset which is the value of the asset “as is” at the time the loan is made. The ARV is calculated based on the value of the real estate asset after the estimated repairs are made on the property. Typically hard money loans are meant to be a quick turn-around or after-repair situations. Rates are typically higher than conventional financing, however, funding times are usually much faster and the loan criteria and repayment terms can be customized to the individual situation. Conventional financing is best used for your traditional rentals and long-term hold scenarios. Many investors use hard money as a way to secure the property in a short period of time, then refinance into conventional financing.
This type of loan allows for a simple qualification process, a more competitive offer, quicker closing, enablement of multiple purchases, and leverages your buying power to name a few.
The main criteria for qualification is the evaluation of the property, repairs, and the ARV using comparable sales data. We make sure the borrower has cash upfront for closing costs and fees, but also cash reserves and/or collateral to support monthly interest payments and possible refinance costs. We don’t focus on your credit score or other documents typically requested by a conventional lender.
Real estate non-owner-occupied property only (residential or commercial), based in Wisconsin, and on a case-by-case basis in surrounding areas. We enjoy partnering with investors and we consistently strive to support the local investment communities and neighborhood revitalization efforts.
We loan money for the purchase, the repair costs, or both. We can include repair costs with the acquisition, as long as the loan-to-value (LTV) of the after-repair value (ARV) does not exceed 65%. Repair funds are based on the requested fund amount submitted in the Scope of Work. If you’re simply looking for repair cost money, we require a minimum loan amount of $25,000. We do require a Draw Request form to be filled out to identify the completed repairs to the property, along with copies of the invoices from the contractors. After work is inspected (typically within 24-48 hours), draws can be dispersed. Typically, repair work is not paid in advance.
We typically write the notes for 6 months. Longer-term notes are available but may be subject to increased costs or interest rates.
Yes. You will need money upfront for closing costs and origination fees. You will also need cash reserves for monthly interest payments and any potential refinance fees, in case you need to extend the loan beyond 6 months. On some occasions, deals require a minimal down payment. You can use our Loan Calculator to help determine costs based on your loan amount.
There is no standard rate since each deal is unique and all of our loans are custom. We price each deal based on the individual needs of our clients. However, costs do include closing costs (approx. $2,000), an origination fee (5-10% of purchase price), and monthly interest-only payments (15-18% interest only).
Absolutely not. Our clients are free to pay-off the loan at any time within the loan period, without incurring any additional charges or fees.
Typically, it takes 7-10 days for us to fund a loan, compared to typical bank funding times of 4-8 weeks. We are able to fund much faster because our loans are funded directly by our company, with minimal paperwork. Once we have the title commitment, we can usually close in 3 days or less.