If you read “hard money loan” to mean a loan secured by a hard asset (real estate), then the term makes sense. For some, the phrase “hard money loan” reflects the reason why they’re looking for a private loan rather than a bank loan. Banks often make it difficult, if not impossible, to get a real estate loan.
Perhaps the property is too distressed to be valuable collateral; that makes the bank nervous. Of course, from your perspective, finding a property you can rehab is the whole point. In other situations, the bank’s credit and underwriting criteria might be too stringent for your case, or the bank would require you to have a large down payment.
For so many prospective borrowers, the bank loan application process just takes too long. This is where the phrase “hard money loan” really becomes a bit of a misnomer. One of the advantages of taking a private loan is that the process is much simpler than trying to get a real estate loan from a bank. We certainly like to simplify the way BMC approaches our borrowers and loan packages. We prioritize transparency and speed.
Transparency means borrowers know exactly what the loan costs before they come to the closing table. No closing day surprises. It’s common for some hard money lenders to surprise borrowers with all sorts of fees at the last minute. They have many names: processing fees, underwriting fees, closing fees, doc fees. Whatever they’re called, the lender often springs them on the borrower at the last minute. BMC lending fees are clear cut. There’s the agreed-upon origination and exit fees, plus a flat processing fee. That’s it, simple. No surprises.
When it comes to keeping the entire application and close process fast, all hard money lenders are faster than banks. Yet some hard money lenders close deals faster than others. That’s because some hard money lenders aren’t lenders at all. They are brokers disguised as lenders. Once they structure a loan, they then have to go out to find a lender to put up the capital. That takes time and in some cases, it might not happen at all. If they can’t find a lender willing to fund the loan, the borrower is back to the drawing board.
Other hard money lenders, like BMC, are true lenders. They have a discretionary fund from which they provide the capital for their loan packages. Because this type of hard money lender is using its own capital, the loan is guaranteed to close – and without requiring extra time to source the loan funds.
Partners – not just lenders
Transparency and speed are valuable qualities for deals and partners. They’re two ways we invest our loan packages with core BMC values of operating with integrity and respect towards our borrowers and investors. However, we also focus on ensuring we’re adding value, both to the deal and to the borrowers’ and investors’ experience with us. Especially with less experienced borrowers, the BMC team takes the time to work with them throughout the process.
To start, we’ll step through the details of the transaction with the borrowers to identify any issues they may have overlooked or that might be detrimental to the value of the deal. For example, a less experienced borrower might not take account of the fact that the property in question backs up to a busy street or even a fire station. They’re making financial calculations and decisions based on the comparable sales in the neighborhood, which means they have unrealistic expectations of the ROI they can get on the property. The noise and activity of the location mean that the abutting property will have a sales price below the comp average. In this situation, we use our real estate expertise to help the borrower understand the value levers impacting this deal, and make sure the borrower makes decisions based on the best information available.
We will also review rehab or new construction budgets and contractor proposals with novice borrowers. Our goal here is to confirm that the borrower has put together a realistic rehab budget and one that reflects the market in which the property competes. If all the area properties have quartz or granite countertops, then the budget and contractor’s proposal better include those as well. Or maybe a novice borrower got too excited about some bells and whistle features that will price the property out of the market.
Beginner or experienced borrower – BMC takes a broader perspective to the deal. We don’t see ourselves as just lenders, but as partners and we want to provide solid return for everyone. That’s how we meet our business goals. Happy, successful borrowers are repeat borrowers and great referral sources.
At any given moment, a significant percentage of our portfolio is made up of repeat borrowers. We’re proud of that fact because it’s the testimony that BMC does hard money lending right. You can get a sneak peek what a BMC deal for you might look like with our deal calculator, or you can learn more about the BMC team here.
About Bay Mountain Capital:
Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans over that time period. We specialize in financing all types of residential and commercial property investments throughout Texas. Using a common sense and value added approach, we strive to incorporate these principles into our underwriting and closing processes.
As a direct lender, Bay Mountain Capital can close a loan within one day after receiving clear title and a complete file. The process generally takes from two to three weeks, but can be accelerated where circumstances require it.
We are an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.