A “hard money loan” is a loan in which the loan decision is primarily based on the value of the property (the “hard asset”). This is in contrast to criteria such as income history, and credit history. Hard money rates often are higher than long-term rates. However often banks are not fast enough or have reasons preventing a loan. Banks may require high credit scores, high taxable income, and lots of verification, etc. Alternatively, hard money lenders often have very few criteria. Hard money lenders often can underwrite and fund a loan in a matter of days rather than weeks or months. The term “hard money loan” may mean different things to others. Property value is the primary concern for Good Funds Lending, LLC. Good Funds Lending, LLC is not concerned about credit scores or income but considers other aspects of borrowers.
There are several reasons why a business might want a bridge loan while waiting for a bank loan. Sometimes a transaction needs to happen quickly or the business owner needs liquidity quickly, but the bank needs more time to process the loan. Sometimes a bank can’t provide the loan until more time has passed after a credit or income hiccup.
Sometimes income or rental property needs to be quickly refinanced after or during a divorce. An ex-husband or ex-wife may no longer willing to be a borrower or guarantor. Sometimes a divorce damages one or more of the ex-spouses’ credit. The ex-husband or ex-wife may not have sufficient income to get a bank loan without the ex-spouse. However, a divorce decree may require the ex-spouse to no longer be a borrower or guarantor on the promissory note. Often with time a spouse may repair his or her credit, sell the property, or provide sufficient income to get longer term loan. Good Funds Lending, LLC provides loans secured by investment properties only (not properties intended for personal, family or household use). Good Funds Lending, LLC does not provide loans for personal residences (rental and investment properties only).
A “hard money lender” is a lender who makes loan decisions mostly based on the underlying value of the property (aka the “hard asset”). Hard money rates often are higher than long-term rates. However often banks are not fast enough or have reasons preventing a loan. Banks may require high credit scores, high income, and lots of verification, etc. Alternatively, hard money lenders often have very few criteria. Hard money lenders often can underwrite and fund a loan in a matter of days rather than weeks or months. The term “hard money lender” may mean different things to others. Property value is the primary concern for Good Funds Lending, LLC. Good Funds Lending, LLC is not concerned about credit scores or income but considers other aspects of borrowers.
What provisions in the Contract To Buy And Sell Real Estate do I need for Colorado hard money loans?
Financing provisions are a common area of confusion. We do not provide legal advice. You should speak with your real estate agent and your own attorney at your own expense. Often we see something in Section 4.5.3 of the commission approved Contract To Buy And Sell Real Estate where “Other” is checked and the blank is filled in along the lines of: “cash, private money loan, or other financing as selected at the discretion of the Buyer”. However, that may not be correct, sufficient, adequate, or appropriate.
This post likely to become out of date as forms Colorado Real Estate Commission are changed. As of May 2017, Colorado Real Estate Commission approved forms can be found on the Colorado Division of Real Estate contracts and forms webpage.
Do you provide loans for properties to be used for marijuana related business (retail, medical or cultivation)?
We do NOT provide loans for properties to be used for marijuana related business (retail, medical or cultivation, etc)? We do not knowingly provide loans for properties to be used for any illegal purposes, even if the illegality is related only to unenforced federal law.
As “The Colorado hard money lender for experienced real estate professionals™“, we are focused on providing ethical and good service and we reliably fund our loan commitments.
In financial and real estate transactions the term “good funds” often means funds that are bank guaranteed or immediately available, which typically include cash, cashier’s checks, certified checks, bank money orders and sometimes other forms.
As a Colorado hard money lender we want borrowers to associate our name with real estate transactions and the reliability of “good funds”.
What if the repairs (rehab work items) are more or less than I budgeted for in the Rehab Draw Account?
(Question and answer applies only to Fix & Flip and Fix & Hold Loans)
During the hard money loan application process, you will provide us a detailed list or your expected rehab costs, by line-item. For a brief and simple example, let’s assume $3,500 for a new roof, $2,500 to refinish hardwood floors, $1,500 for a stainless kitchen package, $1,000 for kitchen countertops and $1,500 for kitchen cabinets. That’s a total rehab budget of $10,000.
We then calculate the amount Reimbursement Percentage, which is equal to the amount borrowed for rehab from Good Funds Lending, LLC divided by the total rehab budget (e.g. if you borrowed $10,000 and the rehab budget is $10,000 then the Reimbursement Percentage is 100%. if you borrowed $8,000 and the rehab budget is $10,000 then the Reimbursement Percentage is 80%).
Under Budget – Let’s say you complete the hardwood floors but find someone who can complete the job for $2,000. You would submit the draw request, the lien waiver, and photo of the finished floor (let’s assume that the floor is the only work item for this draw request although it is common to submit many items per draw request). If everything is in order and the work has been completed to a professional standard and manner and appropriate like, kind and quality, your disbursement is granted for the original budgeted amount of $2,500 multiplied by the Reimbursement Percentage (Additionally the $75 draw request fee taken from the draw account and paid to the loan servicer). You can never draw more than what has been borrowed. The last draw is typically lower than the amount of the work items in that draw because the draw request fees that have been paid. Hence if there have been 2 draws (draw requests), there would be a $150 in draw request fees).
Over Budget — Let’s say you complete the roof, but it goes over budget and costs $4,000 and you did not speak to us earlier and there were no changes to allocation across work items. You would submit the draw request, the lien waiver, the finalled permit and photo of the finished roof (let’s assume that the roof is the only work item for this draw request although it is common to submit many items per draw request). If everything is in order, your draw request would be granted, but only for $3,500 multiplied by the Reimbursement Percentage (the $75 draw request fee taken from the draw account and paid to the loan servicer). You can never draw more than what has been borrowed. The last draw is typically lower than the amount of the work items in that draw because the draw request fees that have been paid. Hence if there have been 2 draws (draw requests), there would be a $150 in draw request fees).
Provided that you complete all of the items on time and there are no defaults, you will be able to draw the full borrowed rehab amount minus draw request fees at $75 each, even if you come in over budget. If you come in over budget, your the amount you can draw is the same.
We are a Colorado hard money lender for non-owner occupied properties in the Colorado Denver Metro Area.
What if after I start the project and determine I need to change rehab work items for the rehab draw account?
(Question and answer applies only to Fix & Flip and Fix & Hold Loans)
Please open a dialog with us as early as possible. Although we don’t change the total amount of draw account or loan amount, but we typically try to be flexible in allocation and work items assuming we believe the changes are financially wise and we have been kept in the loop.
(Question and answer applies only to Fix & Flip and Fix & Hold hard money loans with rehab accounts)
There is time and expense involved in evaluating your draw request and transferring the money to you. Typically, we (the hard money lender) will have the loan servicer inspect the property to verify that the work has been completed in accordance with the agreements.
(Question and answer applies only to Fix & Flip and Fix & Hold Loans)
If the hard money loan includes a funds borrowed from us held in a rehab account, then such funds are part of the loan and interest is charged to the borrowers from the date of origination of the loan. This is because as soon as we originate your loan we set aside the full amount of your rehab budget in an account ready for disbursement. When the money is in the rehab account we cannot loan this money to any other borrowers.
(Question and answer applies only to Fix & Flip and Fix & Hold hard money loans that include a rehab draw account)
We will typically disburse funds to you either by ACH transfer or business check. To facilitate ACH transfer, you will need to fill out appropriate paperwork and your bank must accommodate the transaction. We typically do not disburse by wire due to the costs associated for both parties.
This hard money loan can be used if you buy a property that you intend to flip with no rehab or refinance, but you need to hold onto it for a certain period of time before you can sell it to the next buyer or refinance the loan. This could be some sort of deed restriction, a bank rule or law about how quickly you can flip a short sale or the end buyer’s lender’s rules about how quickly title can be transferred. We are a hard money lender that requires that we hold the first and only lien on the property (hard asset).
After you have completed and paid off one hard money loan with us, typically repeat borrowers are permitted to have up to four concurrent loans with us, but a sum total maximum principal of $650,000, but this determination will be made in our sole discretion and will involve a more in-depth understanding of the availability of your work crew(s).
As a Colorado hard money lender, we require that we hold the first and only lien on properties.
As a Colorado hard money lender, we will only make loans as the first and only lien holder on a property. In our loan agreements, you will agree not to further encumber the property (e.g. no 2nd mortgage, other liens etc.). You should plan to have cash available for 3rd party closing costs (title insurance, closing fees), holding costs (insurance, taxes, utilities), property maintenance and cleaning expenses, staging expenses, cost overruns, other expected or unexpected expenses and rehab labor and material expenses (until you receive rehab draws, if you have a rehab draw account). If you borrow money for any of these purposes, it may not be secured/collateralized with the property or items attached to the property.
In general no, we will only loan as the first and only lien holder. As the loan is a hard money loan we want the hard asset (i.e. the property) to be unencumbered by other loans, whether subordinate or superior to our loan. In some cases we require a first lien on the project property and may be secured by junior liens on other properties.
Yes, as long as the loan meets our loan amount to value criteria and you want to roll in the origination fee into the hard money loan.
Yes, we will roll origination fees into the hard money loan as long as the loan meets our loan amount to value ratio criteria and you want to roll in the origination fee.
None of standard loan programs charge a pre-payment penalty. We welcome your successful hard money loan payoff at any time. Custom loans that don’t conform to our standard loan programs could have minimum interest amounts, but typically do not.
(Question and answer applies only to Fix & Flip and Fix & Hold Loans) Besides the application fee, you will not owe us any money until you sell or refinance the property or until you extend beyond the initial term (typically 180 days), unless you default on the loan or choose to pay the origination fees upfront, rather than roll the origination fees into the loan. However, you will need to have cash available for 3rd party closing costs (title insurance, closing fees), holding costs (insurance, taxes, utilities), property maintenance and cleaning expenses, staging expenses, cost overruns, other expected or unexpected expenses and rehab labor and material expenses (until you receive rehab draws, if you have a rehab draw account). On the first day of the extension and every 30 days thereafter, you will owe an extension payment equal to 0.3% of the outstanding principal amount at that time. Accrued interest is added to principal every 30 days.
The extension automatically occurs after the initial term (typically 180 day period) unless you have paid off the loan or there has been a default. On the first day of the extension period (typically day 181), your extension payment of 0.3% of the outstanding principal amount (includes any accrued interest that has been added to the initial principal) is due. (extensions only available for the Fix & Flip and Fix & Hold loans).
Because we are private hard money lender with a single source, we are the final decision makers and do not need to consult with anyone else in making our lending decisions, restrictions and rules. This allows us to act quickly. Also, we don’t have to promise outside investors higher rates of return (charge higher rates). Good Funds Lending, LLC provides hard money loans for non-owner occupied properties in the Colorado Denver Metro Area.
Why are your rates lower than the typical 3 to 4 points (i.e. 3-4% origination) and 14-15% interest?
We work hard to keep our costs down so we can provide very competitive rates. We also try to minimize unnecessary costs for our borrowers (e.g. single family properties do not require an appraisal).
- We use one source for funds, so we are the final decision makers and do not need to consult with or comply with anyone else in making our lending decisions, restrictions and rules. We don’t have to compete for additional money sources that may require higher rates.
- We work to keep our overhead low.
- We underwrite in-house and don’t need to spend resources communicating back and forth with other parties.
- For rehab/ fix and flip loans we look at borrowers’ experience and qualifications to lower risks and costs to all parties.
If you (your family or your employees) are living in the property (single family residence or a 2-4 unit residential property) or the loan is for personal, family or household use, the loan is classified differently by federal and state law and we would not be allowed to offer these loans or would have additional process and administrative requirements. Therefore the restriction that you, your family and employees may not occupy, reside in, or live at the property is strict and is expressly prohibited in our loan agreements. Additionally we like lending for investment purposes only and do not want to be put in the position of ever having to potentially foreclose on someone’s home.
Yes, we can provide custom bridge loans for up to 3 years. Fix & Flips loans are typically limited to 360 days or less. Our bridge loans can also be used as Transaction/Flash Funding and Seasoning Funding.
Hard Money is not always the correct solution. Before using hard money, you should explore other financing options available. We are building a Colorado hard money business focused repeat business where our borrowers use our hard money lending services only when appropriate and as one part of their financing strategy. We are a private lender seeking:
- To provide loan beneficial to the community, the borrowers, and Good Funds Lending, LLC
- Long-term relationships with ethical people
- Borrowers strategically using hard money, often because banks and credit unions are too slow or unreasonalbe to capitalize on an opportunity.
Hard money is not always the best solution. You should consider other options before using hard money.
Our Colorado hard money business is aimed at helping smart and ethical borrowers, where our borrowers use our hard money loans only when appropriate and as a part of their financing strategy.
Answers to frequently asked questions regarding Good Funds Lending, LLC and Colorado hard money loans are available on our Frequently Asked Questions Page.
Colorado hard money loans for single family, multi-unit residential (2-40 units), operating/occupied commercial , and operating/occupied industrial properties in the Denver Metro Area (residential properties must be non-owner occupied).
Colorado is a wonderful place to live and do business. We are happy to be a part of the Denver business community.