Construction lending is complex for hard money lenders. Thats the point to take from this short post, but also to let others know that is available.
Why complex?
Construction draws – who manages and when to sign off on draw releases
reviewing construction budgets : Many times a hard money would have to hire building /construction planner to confirm that the budget is sufficient to complete the construction.
Managing permits and city inspectors
Making sure contractors are paid (you don’t want mechanic liens down the road)
In order of preference, here are some construction type hard money deals that WE may consider in Texas.
1. finishing construction project (at least 50% complete) : usually these are deals banks were funding,but for various reasons the bank pulled funding or the borrower / builder lost the property due to foreclosure.
The project could be condos where the majority were complete, apartment buildings or single family home that was left as a shell only.
2. renovation of property : Usually by owner or buyer of the distressed property
3. ground up construction : New “to be built” projects are generally better for banks than private /hard money lenders. The borrower needs to exhibit strong experience and strong reserves. The loan to costs would be much a like a bank, only hard money may consider borrowers that may not be bankable due to ability show income via tax returns, may not have high credit scores and in some cases private equity and hard money may partner with borrower unlike a bank.
Please feel free to comment or even pitch potential projects.
Also, share your construction finance stories