Colorado Hard Money Loans

Faqs

← Faqs

General

In the context of real estate, the term “hard money lender” typically refers to a lender who makes loan decisions primarily based on the underlying value of the property (aka the “hard asset”) rather than focusing on the borrower’s income, assets and credit. Hard money rates tend to be significantly higher than you’d see for a conventional long term loan for an owner-occupied property, but often conventional lenders will not loan on Fix & Flip projects, or have strict criteria that frequently include requirements for large percentage down payments, high credit scores, high monthly income and/or assets, a small number of total property loans secured by the borrower etc.

Permalink


We are a Colorado based hard money lender and our primary focus is the Denver Metro Area and we will also lend in Boulder and Colorado Springs. If we have experience with you, we may consider other areas in Colorado and other types of properties as well.

Permalink


No. Good Funds Lending, LLC is a hard money lender that provides asset based loans secured by real estate in the Denver Metro Area.

Permalink


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.

Colorado Hard Money Financing Provisions

Colorado Hard Money Financing Provisions Section 4.5.3 from Contract To Buy And Sell Real Estate (Residential) (CBS1-6-15)

This post likely to become out of date as forms Colorado Real Estate Commission are changed.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.

Want a term sheet or to start the application process? Submit a Loan Inquiry (free)

Permalink


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.

Permalink


Our typical hard money loan process follows the the process linked here. Start the process by submitting a Loan Inquiry.

Permalink


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.

Permalink


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.

Permalink


  • We only work with experienced real estate investors, which on average have lower risk to us.
  • We are working with 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 promise outside investors higher rates of return.
  • We have low overhead.
  • We don’t use or charge for third party appraisals.
  • We underwrite in-house and don’t need to spend resources communicating back and forth with other parties.

Permalink


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).

Permalink


(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.

Permalink


No. We welcome your successful hard money loan payoff at any time. Flash/Transaction loans do have a minimum of 15 days interest due.

Permalink


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.

Permalink


No, you will need to have cash available for 3rd party closing costs (title insurance, closing fees, etc.).

Permalink


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.

Permalink


(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.

Permalink


(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.

Permalink


(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.

Permalink


(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.

Permalink


(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.

Permalink


← Faqs

Leave a Reply

Your email address will not be published. Required fields are marked *