Hard money loans, also known as private loans, rehab loans, bridge loans and construction loans, are a form of financing available to purchase and repair an investment property. Hard money loans do not conform to conventional underwriting standards and are not typically offered by banks or mortgage brokers. One unique attribute of hard money is that financing is made available for the repair of the property in addition to the purchase cost. Another attribute is that the loan amount is based on the future “after repaired value” of the property versus the “as-is” value. Due to these factors a borrower can access a much higher amount of leverage for a distressed real estate purchase than what would be available through more traditional financing.
Real estate investors prefer hard money financing over traditional or bank financing for a multitude of reasons. One main factor is the speed at which they can procure the financing. A quick closing with fewer contingencies on financing can be a powerful negotiating tool when purchasing investment real estate. Another reason is that real estate investors typically make a higher return on investment with hard money loans due to the fact they can finance the repairs to the property as opposed to using their cash.
Most hard money loans are short term to cover the time it takes to repair the property and refinance or resell it. At Sherman Bridge, we offer a variety of purchase-only and fix-and-flip loans with a 12-month term and the option to extend the term if needed. We also offer 36-month rental loan programs designed for buy-and-hold investors.
Once you have found an investment property, you should forward the executed contract to your Sherman bridge loan officer. At this time or before, you will be provided with an estimate of your down payment, monthly payment, and estimated net profit based on the deal figures and projected holding time. Next, you’ll order your rehab inspection and pay your commitment fee. You’ll also provide your rehab budget, which documents your rehab plan and the amount of money you want to borrow for repairs. After we receive your rehab budget, we are ready to order a subject-to-repairs appraisal and generate loan documents for closing. We like at least seven business days from receipt of a contract to closing, but shorter turn times can sometimes be accommodated.
We only lend on 1-4 unit single family residential properties that are detached. We do not provide funding for land, new construction or commercial real estate.
Most of the underwriting is performed on the asset you are purchasing verses the individual, although a credit score above 600 and a minimum of $30,000 in liquid assets are required. Our loans are not available to first time homebuyers, and the purchaser can not occupy the homes during the life of the loan. Loans are only made to real estate investors.
Sherman Bridge currently lends in Alabama, California, Colorado, District of Columbia, Florida, Georgia, Kansas, Kentucky, Maryland, Missouri, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Wisconsin.
Yes. Sherman Bridge Lending will order all inspections. These will include an appraisal, survey, and home inspection. The borrower will not be responsible for providing any reports, and Sherman Bridge will not accept any submitted reports if the borrower does order one of the above.
Typically, loans close within seven business days from when the real estate investment purchase contract and rehab budget is received.
An appraisal is used to determine the loan amount. The appraisal is based on the scope of work and what the borrower plans to do to rehab the property. The appraiser will assign an after repair value of the home (ARV). In most cases, Sherman Bridge will loan up to 75% of the after repair value but not to exceed up to 90% of the purchase price plus up to 90% of the cost of repairs.
The draws are dispersed based on completed work. Sherman Bridge does not issue forward draws.
There is an initial rehab inspection to determine the scope of work and subsequent inspections when draws are requested to determine if the appropriate work has been completed. The inspector will not release funds for uncompleted work, materials or appliances that are on site but not installed, or for work that must be redone due to poor quality or incorrect application.
Yes. Tax returns are evaluated, and income is a factor in our underwriting process although a borrower with little or no documented income can qualify for a loan if the property is projected to have adequate cash flow after repaired.
Available liquid assets play the largest factor in qualification.
Sherman Bridge lends hard money loans at a minimum of $75,000 and a maximum of $4,000,000.
A FICO credit score of 600 or higher is needed for most loan products.
Sherman Bridge can work with many specific types of credit issues. Although in most instances a recent foreclosure, bankruptcy or late mortgage payment could prevent a borrower from qualifying. There can be absolutely no open collections or unsatisfied judgments or tax liens associated with the borrower.
Sherman Bridge cannot sign a loan contract if the borrower has filed for bankruptcy within the last 24 months or has a credit score lower than 600 with insufficient liquid assets.
Yes, the loan must be issued to an LLC (or other business entity).
No, a notary can bring the appropriate documents to you.
No, it is not required to take a draw. However, work is not considered complete until a draw inspection has been performed and validated.
Although third party closing fees traditional to real estate transactions can be expected, such as title company fees, appraisal, survey, and etc., Sherman Bridge itself only collects two fees for closing a loan. The first is a loan origination fee, which is a flat percentage of the loan amount, and the second is a processing fee for all of the documentation and admin work involved to close the loan. These fees may differ based on loan type, so please refer to the loan type you are requesting to determine your exact fees.
The advantage of using hard money over conventional bank financing is the amount and type of properties it allows you to purchase. Most conventional lenders will not lend money on a distressed property. Whereas hard money is meant to lend on distressed properties and includes money to repair them. The other main advantage is it takes much less cash to close on a hard money loan versus a conventional loan.
You will be asked to provide current and updated financial documents with every loan. This is to ensure you will be successful and limit any unnecessary risk.
Leverage is utilizing smaller amounts of capital in order to increase your buying power. Here is an example of leverage: There is a private investor who wants to purchase a property for $80,000 and wants to put $20,000 into the property for repairs and feels the property will be worth $130,000 once the repairs are complete. That investor may have $110,000 in an account to use for real estate investing. If that investor does not use the leverage, he will be forced to liquidate that entire account to purchase and rehab the property. Once the repairs are complete, the investor has no cash left and has to wait for the property to sell to recoup his investment and profit. This process could easily tie up that money for 6 to 9 months. Now consider that same investor uses the leverage of hard money to purchase and rehab that property. He will only be out of pocket $15,000 to $20,000 leaving the rest of the money in his account to keep investing in more properties. In this way, he is using a small portion of his total cash on hand to act as much more. Yes, there are fees involved when using hard money but many investors find it’s a small price to pay for the ability to make more money in a shorter time frame.
Each situation is different. There are many factors that will determine how much leverage you can use. The biggest of these factors is the amount of assets that an investor can convert into cash quickly.
Sherman Bridge is limited to certain geographic areas because of the amount of hands-on involvement in each property. Currently, we lend in 19 states and the District of Columbia. Also, we will use a 3rd party appraisal to evaluate the estimated after repair value (ARV) on the property to ensure it will be profitable once sold or leased. Sherman Bridge will only loan on properties that are 1-4 unit single family residences, not rural and are permanent, non-mobile housing.
No, Sherman Bridge will not lend on raw land or provide ground-up construction loans. However, we do offer a Buy-and-Scrape program that will allow you to scrape an existing structure and rebuild.
A landlord or rental loan is a loan for those who want to rent out their real estate investment property. We offer purchase, refinance and cash out rental programs. For those looking to fix-and-rent, we offer a two-step process that allows the investor to obtain a hard money rehab loan to finance the purchase and repairs on an investment property, and once repairs are complete, the property is refinanced into a 36-month interest-only rental loan.
We offer rental loans ranging from $100,000 to $1,000,000.
A borrower must have a minimum of 640 to qualify for a landlord loan, but there are other factors that we look into as well.
No, a notary can bring the appropriate documents to you.
An appraisal is a licensed appraiser’s opinion of the value of the subject property based on recent properties that are similar in area, size, location, school districts, features and quality; typically that have sold within the last 3 to 6 months.
Sherman Bridge will use a repeating rotation of licensed, qualified and independent, 3rd Party appraisers based on availability. These appraisers are experienced and qualified to do a “subject to repairs” appraisal. Unlike a typical appraisal, the appraiser must adjust the value based on repairs planned not current condition alone. We do not and cannot request a specific appraiser to do the work.
The appraiser will use the planned repair budget to determine the property’s potential value based on what similar homes in that area have sold for typically within the last 3 to 6 months.
The appraisal will be sent to Sherman Bridge and the borrower prior to closing. If the borrower plans to refinance into a long term landlord loan, a new appraisal will be ordered to be used in underwriting to justify the value of the property at refinance.
In most circumstances, appraisals are very accurate. However, keep in mind the appraisal is still just an opinion of a qualified and licensed professional. Of course, there are always situations out of the borrower’s control that may affect the value of the property between appraisal and the sale of the property.
An “as-is” appraisal is the opinion of an appraiser showing the value of the property based on current condition and similar properties sold in the area within the last 3 to 6 months. A “subject-to-repairs” appraisal uses the projected repairs, rehab inspection budget and similar properties in the area sold typically within the last 3 to 6 months to determine the property’s projected value after repairs have been completed.
Sherman Bridge uses a percentage of the after repair value to help determine the maximum loan amount. The ARV (or after repair value) is determined by the “subject to repairs” appraisal. The borrower’s qualifications determine the LTV (or loan to value) percentage. Both of these numbers determine the amount of money loaned to an investor.
A broker is a liaison between an investor and a direct lender and acts as the middleman to provide funding to an investor. A broker typically does not have the ability to provide financing themselves but instead, has a connection with a sponsoring lender who then originates loans for consumer investments.
If you have the ability to refer clients to Sherman Bridge, you can be a broker. There’s no licensing required.
No. The financing is not being lent to the broker, so there is no specific requirement on minimum assets.
The broker program provides the option for brokers to handle as little, or as much, of the workload as they’d like. If you choose to collect the necessary documents, keep up with communication from the investor, and handle the processing, you can do so. This option also provides the ability to earn additional commissions.
There is not. Your commissions will be based on the program option you choose at the time of application.
Often yes, they are one in the same. Real estate agents and property wholesalers have their own client base that sometimes need additional financial services. As a broker, you will be able to provide full-service to your clients, including lending.
As a direct lender, Sherman Bridge Lending can offer an array of different products to fit specific needs, and close deals for the borrower very quickly. We typically close within 7-10 days. We understand the importance of a fast turnaround and respond quickly and accurately to all inquiries from our broker partners.
We have several different broker program options that you can choose from. You have the choice to designate as much, or as little, of the work to our in-house Loan Officers as you like. We can handle the processing and the paperwork, and will send you a check when we close the deal.
Brokers are paid once the loan is successfully closed. After the sale is closed, payment is made to the broker on the closing settlement statement which ensures timely and accurate payment from our referral partners.
Sherman Bridge only finances residential 1-4 unit investment properties. If your client’s property fits those qualifications, then you are ready to go!