As most experienced real estate investors know, getting started with a project can require quite a bit of capital funding. In the past, it used to make sense to always go to your local bank or credit union to seek business loans to fund investment projects. But ever since the housing market crisis of the late-2000’s, banks have been heavily regulated regarding mortgage lending practices, especially on investment properties. That’s where hard money lenders come in.
Though the term “hard money” may evoke some negative connotations, the reality is that there are several benefits to working with hard money lenders. Whether you’re a dedicated house flipper, or a landlord growing a portfolio of rental properties, hard money lenders can provide certain attractive advantages that big banks simply can’t.
Securing funding for your real estate project doesn’t stop once you submit your loan application. In fact, the journey has just begun. To maximize your chances of securing funding quickly and efficiently, you need to understand how to position yourself as the ideal borrower. This means being prepared, professional, and maintaining clear communication throughout the process.
Positioning Yourself as the Ideal Borrower
The first step in becoming the ideal borrower is recognizing the value of preparation and professionalism. As a borrower, how prepared you are, how well you understand the requirements, and how you communicate these aspects can have a significant impact on the success of your loan application.
Being professional and organized isn’t just about having the right documents; it’s about demonstrating to your lender that you know your project inside and out. This sets a positive tone and establishes trust early on. At JCREIG Capital Funding, we want to see that you are proactive, detail-oriented, and committed to the success of your project.
The Benefits of Being the Best Borrower
There are clear benefits to being an ideal borrower. The first is faster deal closures. Efficient communication leads to smoother processes. Cutting corners on documentation will only slow you down in the long run because lenders will always need every necessary detail. By providing complete and accurate information upfront, you save time and get your project funded faster.
Another benefit is that you build credibility with your lender. Showing that you know what you’re doing sets a strong tone for the relationship. And for beginners, honesty about your experience is crucial. If you’re new to real estate investing, lenders are more likely to work with you successfully when they understand your background, rather than if you try to “fake it.”
Finally, being the best borrower opens doors to better terms and opportunities. Professionalism pays off with more favorable loan terms, faster pre-approvals, and even access to special deals. Showing that you’re serious and professional signals to lenders that you’re worth investing in, and they will work harder to accommodate your needs.
How to Get on Our Good Side: The Application
The foundation of any deal starts with your application. The quality of your application determines how smoothly the process will go from there. Submitting an accurate, detailed application is key because the information you provide will guide the entire underwriting process. A sloppy or incomplete application can lead to delays, while a well-prepared one sets the stage for a quicker, more streamlined process.
Effort truly shows. At JCREIG Capital Funding, we can tell within seconds if an application has been done with care or not. Borrowers who submit well-thought-out applications benefit from quicker reviews, faster underwriting, and immediate callbacks. These are the applications that get personal attention from leadership because they demonstrate that the borrower understands the project and is serious about getting the deal done.
Transitioning to the In-Depth Application Review
Once your application is submitted, it’s time to transition to a more detailed review. This is where lenders will dive deep into the specifics of your project. A good application will streamline this process, minimizing the need for back-and-forth clarifications and speeding up approvals.
The Importance of Communication Post-Application
Submitting your application is just the first step. To ensure that the rest of the process goes smoothly, staying communicative and responsive is essential. Be available and responsive throughout the process to address any additional questions or provide supplementary information. A delay in communication can slow down the entire process.
It’s also critical to inform us of any changes. If there are adjustments to your project’s timeline, scope, or financials, let us know immediately. At JCREIG Capital Funding, we can only work with the information we have. If you fail to update us on important changes, it could cause unnecessary delays or even affect the approval of your loan.
One of the most valuable aspects of staying communicative is the ability to solve problems together. Real estate projects are complex, and challenges often arise. Whether it’s unexpected costs or construction delays, identifying issues early and working together on solutions can keep your project on track. The earlier you flag challenges, the quicker we can help you find effective solutions, preventing larger issues later in the process.
JCREIG Capital Funding
Using hard money loans allows real estate investors to maximize leverage when purchasing a property and close within just a few days, all while freeing up their own cash for other uses.
Problem Solving Through Collaboration
Collaboration is key to solving challenges as they arise. If you identify potential roadblocks—whether financial, logistical, or related to the project timeline—communicating these issues allows us to work together to find solutions. Waiting until the problem becomes severe only leads to delays or potentially derailed deals. The sooner we know about any challenges, the sooner we can adjust, whether that means modifying loan terms or extending the timeline.
At JCREIG Capital Funding, we want to be a partner in your success. Addressing issues early helps ensure that your project stays on track, even when unforeseen challenges occur. By working together, we can address issues before they become unmanageable.
Conclusion: Keep Your Project on Track
Effective communication after submitting your loan application is just as important as filling out the application itself. The key to becoming an ideal borrower is not only submitting a thorough and accurate application but also staying engaged, solving problems collaboratively, and being proactive about any changes.
By following these steps, you’ll not only keep your project moving forward but also position yourself for long-term success in securing future deals with JCREIG Capital Lending. Becoming the ideal borrower means faster funding, better loan terms, and a stronger partnership with your lender.
JCREIG Capital Funding
Looking to finance your next investment project?
JCREIG Capital Funding is a hard money lender that can help you fund your loan.
We have over a decade of experience, and have funded hundreds of millions of dollars in private money loans for commercial and residential real estate projects across The Sunshine State.
Reach out to us @ 561-303-0334 if you require funding or have any questions.
FAQs
In hard money lending, a point refers to a unit of prepaid interest that allows you to secure a lower interest rate on the overall loan. Each point typically represents one percent of the total loan amount.
Example Calculation:
Imagine you’re taking out a hard money loan for $150,000. The lender offers you a two-point option, meaning you can pay 2% of the loan amount upfront to reduce the interest rate.
Two points = 2% of $150,000 = $3,000 upfront cost.
By paying this $3,000 upfront, you’ll secure a lower interest rate throughout the loan term. This can potentially save you thousands of dollars in interest payments over the life of the loan.
Hard money loans are commonly used by real estate investors, particularly those involved in house flipping projects or other time-sensitive scenarios. They are suitable for situations where traditional bank loans might not be readily available due to factors like tight timelines, unconventional property types, or the borrower’s credit profile.
Interest rates on hard money loans are typically higher compared to traditional bank loans due to the inherent risks involved for the lender. Additionally, there might be origination fees, points (explained above), and other closing costs associated with hard money loans.
The ability to deduct points paid on a hard money loan from your taxes depends on the type of points and the purpose they serve. Here’s a more detailed explanation:
- Discount Points: These are essentially pre-paid interest. The IRS allows borrowers to deduct mortgage interest from their taxes, which includes discount points under specific conditions. For these points to be deductible, they must be paid as part of a deal to secure a loan for the property and not for any other purpose such as covering other closing costs. The deduction can be taken immediately if it pertains to the purchase or improvement of a primary residence. However, if the loan is for a property that is not a primary residence, such as an investment property, the deduction for these points must be spread out over the life of the loan.
- Origination Points: These are fees paid to the lender to cover the costs of processing the loan. Origination points are not generally deductible as interest. However, if they are used solely for the purpose of obtaining the mortgage—not for paying other closing costs—they can sometimes be deducted. The rules here can be complex, depending on the specifics of the loan and its use.
Given the complexity and the potential for significant tax benefits, consulting with a tax professional is highly recommended to ensure you are applying these rules correctly in your specific situation. A tax advisor can provide guidance on how to properly deduct these points and help maximize your tax return benefits based on current IRS rules and regulations.
Deciding to buy points on a hard money loan involves a careful financial analysis and understanding of your long-term investment goals. Here’s a more thorough approach:
- Breakeven Analysis: This is the starting point. Calculate how long it will take for the monthly savings gained from a lower interest rate to outweigh the upfront cost of buying points. This period is your breakeven point. If you plan to own the property past this point, buying points might be cost-effective.
- Cash Flow Considerations: Evaluate your current financial liquidity and cash flow needs. Buying points requires upfront cash expenditure, so ensure this does not impede your ability to manage other expenses or investments. It’s important to maintain a balance where you can comfortably cover all your financial obligations.
- Property Holding Period: Assess how long you intend to hold onto the property. If you plan to sell or refinance quickly, the upfront investment in points may not have enough time to yield savings. Points generally favor longer holding periods where the accumulated interest savings can be more significant.
- Market and Investment Strategy: Reflect on the potential for property value appreciation and your overall investment strategy. In a rising market, the cost of points could be justified by the overall growth in property value. Additionally, consider how this purchase fits into your broader investment portfolio and goals.
- Consultation with Professionals: Given the complexities involved, consulting with a mortgage broker or financial advisor can provide tailored advice based on your personal circumstances. These professionals can help analyze the potential returns on buying points versus other investment opportunities, helping you make a decision that aligns with your financial goals and market conditions.
By considering these detailed factors, you can make a more informed decision on whether buying points on your hard money loan aligns with your financial strategy and goals
