FAQs – Florida Property Developments

MAKE YOUR DEVELOPMENT DREAMS A REALITY

FREQUENTLY ASKED QUESTIONS

At Florida Property Developments we never ask or request any upfront fees. Please beware of any companies who charge for pre administration or due diligence upfront fees prior to producing a commitment letter or prior to any closing.

1. How does a hard money loan work?

A hard money loan is a short term real estate loan used by investors to purchase and renovate properties. A hard money lender provides the capital the investor needs to purchase the property, complete the Return on Investment renovations and increase the after repair value of the property. Crucially, the real estate investor is required to pay back the full loan amount at the end of the loan terms (usually 12-36 months). Usually, the funds from the sale of the property are used to pay back the full loan amount.

In most cases, hard money lenders will provide 65% of the funds needed to complete the project, meaning that the investor is responsible for covering the shortfall. For the process to work successfully, the after repair value of the property must be substantially more than the original purchase price. In addition, it is also worth clarifying that there are several different types of hard money loans including:

- Hard Money Standard - Hard Money Re-Financing - Hard Money Bridge/Mezzanine - Hard Money Ground-Up Construction - Joint Venture - New Construction

Hard Money Standard
Hard Money Re-Financing
Hard Money Bridge/Mezzanine
Hard Money Ground
Up Construction
Joint Venture
New Construction

2. How is hard money interest calculated?

Reputable Hard Money Lenders like Florida Property Developments offer interest-only repayment terms. For example, if you were offered a $500,000 hard money loan, with a 10% interest rate, your monthly payment would work out to $4,167.00. Here is how it works:

In other words, your monthly payment only covers the interest portion of the capital that was borrowed. However, you are required to pay back all the capital that was borrowed when the loan expires. It helps to think of it as a balloon payment, but instead of paying a portion of the capital back, your balloon payment covers the full amount borrowed.

3. How do Hard Money Loan Monthly Payments Work?

Hard Money Loan Monthly Payments only cover the interest portion of the loan. This means that with each monthly payment, you do not make a dent in the total capital that was borrowed. Instead, the expectation is that you will pay back 100% of the capital, at the end of the loan's life cycle. For example, let's imagine you applied for hard money financing to the value of $50,000, with an interest rate of 10% and a loan term of 6 months. In this case you would pay:

Month 1: $4,167 ($500,000 * 10% / 12)
Month 2: $4,167.00
Month 3: $4,167.00
Month 4: $4,167.00
Month 5: $4,167.00
Month 6: $4,167.00
End of the loan: $500,000

As you can see from the example above, you only pay off the interest portion of the loan each month. You repay the full capital amount when the loan expires, using the funds from the sale of the property that was used to do so.
Apart from a higher interest rate, this is one of the main ways in which a hard money loan differs from a traditional loan. With a traditional lender, the monthly payment is a mixture of the interest owed and the outstanding capital amount. This is what allows the borrower to pay off their entire loan over time. The borrower basically chips away at the capital month after month and year after year. When the loan comes to an end, there is no more capital to pay off.
This traditional financing approach does not work for investors, because of the cash flow challenges that it would introduce. Conversely, hard money lending provides a short term loan solution for property investors that need to successfully execute a real estate deal.

4. How much are Hard Money Loan Rates?

Hard Money Loan Rates typically range from 7.5% to 15%, depending on the hard money loan lender that you choose, the type of property and the term.

5. How much do you have to put down on a Hard Money Loan?

In most cases, the investor is required to put down whatever expenses the lender does not cover. For example, if the hard money lender covers 65% of the project cost, the investor would need to cover the shortfall of 35%.

6. What are the credit score requirements for a Hard Money Loan?

At Florida Property Developments, we do not require your credit history in order to obtain a loan. We will produce a report to see how efficient the property you chose will be and see how big the ROI could be in order to make sure we are paid back in full. This is a great option for those who do not want to go through the hassle of trying to obtain a loan from a traditional lender and being denied based on credit worthiness.

7. What is the difference between a hard money loan & a bridge loan?

On a broad level, hard money loans and bridge loans are very similar. However, bridge loans can be offered by traditional finance institutions and they can be used to fund a wider range of purchases (rather than just real estate).

8. What is the origination fee (hard money loan points)

The origination fee is an additional cost associated with hard money loans. It usually ranges from 2-5%, but this is ultimately up to the lender that you choose.It is the expense that the lender charges the borrower to cover all the costs associated with initializing the loan. So, if your loan amount is $500,000 and your origination fee is 2% which would result in $10,000. This will only be paid at the time of closing.

9. Why do people use Hard Money loans rather than traditional loans?

When the interest rates on traditional loans are typically lower, the approval process is far more stringent and time-consuming. This can be a deal breaker when you spot an opportunity for investment properties. In most cases, you need to move swiftly in order to capture the deal. That is why a hard money lender like Florida Property Developments can be so useful to investors. Effectively you get:

Flexible loan terms
Easy loan application
Less stringent financial requirements
Speedy approval and closing
Instant proof of funds
closings in as little 3 business days

The origination fee is an additional cost associated with hard money loans. It usually ranges from 2-5%, but this is ultimately up to the lender that you choose.It is the expense that the lender charges the borrower to cover all the costs associated with initializing the loan. So, if your loan amount is $500,000 and your origination fee is 2% which would result in $10,000. This will only be paid at the time of closing.

10. Are there any upfront fees?

At Florida Property Developments we never ask or request any upfront fees. Please beware of any companies who charge for pre administration or due diligence upfront fees prior to producing a commitment letter or prior to any closing.

OUR SERVICES

Multifamily, Retail, Assisted Living Facilities, Independent Living Facilities, Offices, Industrial, Mobile Home Parks, Fuel Stations, Land & Hotel/Motels.

Acquisition & Development, Build to Suit, Equity Cash out, Acquisition Only & Partner Buyouts and Joint Ventures.

* WE DO NOT LEND ON RESIDENTIAL FIX & FLIPS OR ANY OWNER OCCUPIED RESIDENTIAL PROPERTIES OF 1-4 UNITS*

MAKE YOUR DEVELOPMENT DREAMS A REALITY

FREQUENTLY ASKED QUESTIONS

At Florida Property Developments we never ask or request any upfront fees. Please beware of any companies who charge for pre administration or due diligence upfront fees prior to producing a commitment letter or prior to any closing.

1. How does a hard money loan work?

2. How is hard money interest calculated?

Reputable Hard Money Lenders like Florida Property Developments offer interest-only repayment terms. For example, if you were offered a $500,000 hard money loan, with a 10% interest rate, your monthly payment would work out to $4,167.00. Here is how it works:

3. How do Hard Money Loan Monthly Payments Work?

4. How much are Hard Money Loan Rates?

Hard Money Loan Rates typically range from 7.5% to 15%, depending on the hard money loan lender that you choose, the type of property and the term.

5. How much do you have to put down on a Hard Money Loan?

In most cases, the investor is required to put down whatever expenses the lender does not cover. For example, if the hard money lender covers 65% of the project cost, the investor would need to cover the shortfall of 35%.

6. What are the credit score requirements for a Hard Money Loan?

7. What is the difference between a hard money loan & a bridge loan?

On a broad level, hard money loans and bridge loans are very similar. However, bridge loans can be offered by traditional finance institutions and they can be used to fund a wider range of purchases (rather than just real estate).

8. What is the origination fee (hard money loan points)

9. Why do people use Hard Money loans rather than traditional loans?

10. Are there any upfront fees?

At Florida Property Developments we never ask or request any upfront fees. Please beware of any companies who charge for pre administration or due diligence upfront fees prior to producing a commitment letter or prior to any closing.

OUR SERVICES

Apply for Fast, Flexible Financing For Your Project Now

The financing you need to move forward with your real estate goals is waiting for you. Whether you need help choosing a loan product or you are ready to apply now, please email sfreyre@floridapropertydevelopments.com or call (813) 334-4038 to get started. We look forward to working with you.

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