As a young boy, I would often be dispatched to the mom-and-pop corner variety store to fetch milk, bread, or stewed tomatoes and with any luck—a candy bar for my efforts. Funny thing was I didn’t need cash or a credit card. The store’s proprietor would simply pull out a well-worn journal and record the purchase “on account” for payment when my own Mom or Pop got their paycheck. In those days, neighborhoods were a tight-knit unit and a family’s character earned them credit with the local grocer. No FICO scores needed.
Some local banks also heavily weighed community standing and integrity even when one would apply for a mortgage back then but those practices have ceased among traditional lenders. I buy, renovate, and sell several homes per year and traditional banks won’t back my rehab projects because of the unique nature of the deals. That’s why I rely on hard money lenders for real estate investors in Michigan. These niche lenders understand buy-renovate-and-sell pursuits and many of them are investors themselves. Rather than focusing just on credit scores, these hard money lenders examine each deal on its own merits—and your investing experience does make a positive difference, too.
Hard Money Lenders in Michigan: Know Your Options
When I began flipping houses, cash was a concern. I had some money saved but using it all to seal my first deal seem prudent. A friend recommended that I investigate hard money lenders who could put financing in my hands within a few days, not months like traditional lenders. By using hard money, I skirted a lot of red tape and cut right to the chase of quickly buying and selling homes for profit. While hard money was integral to getting my professional real estate investing business off and running, you do need to be aware of what you are signing up for. Let me tell you about a few of the Michigan hard money lenders and what they offer.
Groundfloor specializes in funding investments in single-family or 1-4 family residential units. Unlike other companies that finance flips, Groundfloor operates on a crowdfunding platform but, despite that, every other aspect of this lender resembles hard money institutions. Applications can be submitted online and no tax returns or bank statements are required for approval. Loans can close in as few as 15 days and current rates begin at 5.4%. Groundfloor has the ability to lend anywhere from $80,000 to $2,000,000 for non-owner occupied residential properties.
The application details get fed to an algorithm that analyzes the merits of each deal and assigns a letter grade to the project. Depending on the results, the rates offered to you may increase above the stated minimum. In addition, once the loan matures, a balloon payment can become due. So it’s quite possible that you will end up paying significantly more than you expected at the outset. One more caution: Despite the lack of financial disclosure required, you may still need to pledge personal assets to secure funding.
Do Hard Money
Do Hard Money has no floor to the amount they will lend real estate investors but their maximum loan does cap off at $250,000 with five-month terms of repayment. While certain hard money lenders will want to see that the borrower is not strictly a beginner at flipping houses before a deal will be approved, Do Hard Money caters to new investors as well as seasoned ones. Whether you are just starting out or not, Do Hard Money may help you ramp up your cash flow quickly because they allow multiple deals to be executed at one time.
It’s important to note that Do Hard Money is more conservative than traditional lenders. Loan-to-value ratios may go as low as 50% so that they can improve the chances of recovering their money should the project fail. So, be aware that rehab costs might require additional out-of-pocket capital—and you could end up in over your head because you are on a five-month timeline to turn the property around and get it sold.
Distressed investment houses require numerous repairs and upgrades and you may need to go out-of-pocket to pay for that work. But, LendingOne can finance up to 90% of the after repair value (ARV) of a property, so in many cases, the personal funds spent on renovation can be minimized or negated. Current rates for LendingOne applicants range from 7.49%-12.9% and repayment terms can extend to 12 months.
If you are fortunate enough to obtain a loan, finish the rehab ahead of schedule, and sell quickly, paying off the debt with LendingOne poses no pre-payment penalty. It’s prudent to know that not all hard money lenders are the same, however. While some companies don’t require documentation and creditworthiness, LendingOne does require bank statements and a minimum FICO score of 600.
Wherever You May Roam
I knew everybody in my old neighborhood and all we all looked out for each other. In my real estate business, I’ve found my local HomeVestors® franchise network to be a lot like those tight-knit neighbors of old. If I need a referral to a hard money lender or any other kind of vendor, I simply contact my dedicated Development Agent or ask one of my regional franchisees to get a good recommendation. HomeVestors® is also a hard money lender for qualifying purchases and repairs solely for its franchisees The HomeVestors® team is a national network of experienced professional real estate investors who are sincerely interested in helping my Michigan business grow.
Contact HomeVestors® to get the support you need to invest in Michigan real estate and build your own business.
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