As a Philadelphia real estate investor, gaining access to conventional financing options can be a real pain in the neck. Traditional loans tend to have lengthy application processes and stringent qualification requirements. Other than that, traditional lenders scrutinize your credit history and financial situation, which makes it hard for some people to qualify.
This is where hard money loans come in. Why would anyone forgo traditional loans and mortgages in favor of hard money loans? For starters, hard money loans are offered by private lenders to investors looking to finance investment projects that traditional lenders might not look at twice.
They are also referred to as bridge loans, as they are short-term and common with fix-and-flip investors or those buying an investment property that might be in need of major repairs. Hard money lenders generally look at your assets or the investment property you’re buying. While they may look at your creditworthiness and income, they’re not core qualifying factors.
These loans offer investors flexibility as they’re much easier to access and get approved faster.
How to Access Hard Money Loans in Philadelphia
The Philadelphia real estate market is booming and very attractive to new and experienced investors. Accessing hard money loans in Philadelphia may not be that much of a headache. However, you want a lender that’s going to understand your needs and have custom-made plans to suit your needs.
Here are some essential tips to access hard money loans in Philadelphia
Network With Other Real Estate Professionals
Unlike traditional loans and mortgages where you can just walk into a banking hall and fill the application form, hard money loans are all about relationships.
Word of mouth and recommendations could be your best bet when looking for hard money loans. Reach out to experienced real estate agents, brokers, attorneys, fellow investors, and other professionals who’ve been in the game for some time. Chances are that they could know of good hard money lenders in Philadelphia to whom they could refer you.
Also, don’t overlook your close circle and other people outside the real estate industry. Maybe your parents, siblings, colleagues, or close friends know the ins and outs of the hard money lending game.
While they may not be current investors, they might be waiting for a good opportunity to get started in the real estate industry. They may also have valuable networks that may be instrumental in your investment.
Be careful with this approach because it could sever your ties and relationships if the deal falls through. Ensure you’ve refined skills in looking for and vetting a good potential investment so that you understand all the risks involved. Also, clarify these risks to your network beforehand so no one is caught unawares.
Here are a few questions to ask yourself to clarify your expectations:
- How much down payment can you afford?
- What loan duration do you expect?
- How long is your investment period?
- How much rehab is needed?
- Who are you going to hire for the project?
Most importantly, approach potential connections with the utmost respect. Remember you’re pitching an investment opportunity. It may take time to see its fruits but networking can open great doors.
Search For Hard Money Lenders in Philadelphia Online
The easiest way to have a list of potential hard money lenders in Philadelphia is by searching online. Simply go to Google and type “Hard money lenders/loans + Philadelphia”. The search will bring a result of hard money lenders in Philadelphia.
Be on the lookout for web presence. An established online presence means that that lender is more likely to respond to your query online. You want a lender with responsive communication.
Trust your instinct when doing your due diligence. If something looks off or you notice inconsistent communication and a lot of negative feedback, move on to the next lender. A competent lender will clearly state their terms and fees.
Prepare Your Presentation Materials
As we’ve mentioned, you’re basically going to be pitching. Think of hard money lenders as private investors who you’re trying to bring on board. You need to put together materials that you’ll present to the lender. They include:
- Company overview
- Partners involved
- Past projects
Prepare all this information and put together a good presentation or video. Clearly outline the past projects that you have worked on and include pictures, financing numbers, and other relevant information.
You don’t necessarily have to show every single past project. The best past work will do. Remember you want this presentation to show your strengths and leave a good impression.
Don’t forget important information, such as when they should expect the loan to be settled in full, how long the investment will take, and other investment partners and their roles. Prepare this information beforehand so that you’re ready for any questions that are asked.
Best Hard Money Lenders in Philadelphia
Here’s our list of the best Philadelphia hard money lenders for real estate investors:
Bridgewell Capital offers hard money loans for investors who need funding to buy, fix and sell, or buy, fix and rent residential property in Philadelphia.
Investors have to place a down payment of 10% of the total investment, then Bridgewell Capital funds 80% ARV (after repair value). Loan pre-approval is fast and can take place in 15 minutes. The APR (annual percentage rate) starts at 7.95%.
Based in Rosemont, Rehab financial offers hard money exclusively for fix and flip investors. The lender can finance up to 100% of the investment’s value.
Rehab financial also offers resources to equip investors on the profitability of certain neighborhoods in Philadelphia. You can also calculate the APR using these resources.
Anchor Loans is located at Las Virgenes Rd, Philadelphia, and was the first lender to fund over $1 billion worth of projects in a single year. This lender approves your fix-and-flip loan within a few days and can finance up to 80% of your project. The rates range between 8% and 13%.
Investors only need to fund 10-20% of the acquisition cost.
Stormfield Capital is a private investment firm that’s also a hard money lender, offering hard money loans on commercial and residential real estate investments. This lender offers loans from $250,000 to $1,000,000 with a loan term of between 12 and 18 months.
Their interest rate varies between 7.99% and 10.99%. There’s also an origination fee of between 1% and 2% of the loan amount.
Delancey Street is a business consultancy firm that also provides hard money loans for real estate investors. It is named after the visually appealing and historically rich street in Philadelphia.
The lender focuses on residential projects, such as fix-and-flips, buy and holds, and commercial real estate projects. They fund up to 70-80% of the project and require you to have a track record to show.
Hard money loans are a great financing option when you’re looking for flexibility or you want to steer clear of conventional loans. Luckily, you’re spoilt for choice when looking for hard money lenders in Philadelphia. Get a competent lender that will hold your hand and help you succeed.
Before committing to anything, make sure to use the Mashvisor rental property calculator to ensure that the numbers make sense and that you are able to turn a profit.
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