Hard Money Loans For the Beginner Investor - Commercial and Apartment building Property Rehab

Here is why, if the property is a major rehab endeavor then, you will have to calculate the interest expense into your opportunity costs. Interest charges on a hard asset loan are anywhere from 11-18% with 4-8 points paid on the front end. You could find typical Loan to Value ratios for commercial hard money between 50-65%. And the payments are normally interest only. The duration of normal hard asset financing are between 6-24 months. To make sense in pursuing, as you could see from the information above, there must be notable equity in a rehab or hard money deal.

If your just starting out to investing in commercial real estate property, you should consider that there are several moving parts to a rehab which include:
Directing the major rehabilitation - This necessitates picking qualified project managers and contractors. Also, you must select the best equipment and building systems to improve and or replace or you will not force the appreciation near as much as you might think.

Managing the Contractors - Choosing a dishonest might honestly place you in a tight situation and set you back.
Handling the lease up - With out tenants, you won't make any money. On the other hand, selecting the incorrect occupant can finally end up being worse than not having an occupant at all.

Sticking to your time schedule - It is imperative to fall within your originally projected time schedule, both for permitting and financing reasons.
Refinancing before your balloon is due- A typical venture need to have at least 2 years of positive financial statements before a conventional lender is ready to refinance the building and pay the hard asset loan off.

The above stated factors are examples of the things a seasoned commercial investor understands can fail in any renovation. Don't get me wrong, I work with quite a few builders that renovate and rehabilitate properties but they have other pieces set that allow them to maneuver on these types of deals with negligible opposition from lenders.

Another way to structure a hard money transaction is to acquire a property that's currently occupied, but is under performing. This requires a good portion of the lenders exposure away. With this strategy, there is a considerable part of the property time fully removed since there isn't any renovation process. Therefore, allowing those critical additional months of profitability to successfully secure permanent financing.

The next time you evaluate a commercial renovation deal, keep these matters in mind.

Are you seeking to place or acquire large commercial deals? Listen in and find out from one of the industries top $250 million + producers.

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