The Utah commercial real estate market continues to expand, in Salt Lake City and across the rest of the state. From the bustling logistics hubs in West Valley City to the retail centers driving growth along the Wasatch Front, investment opportunities abound. Capitalizing on the best of them requires speed, agility, and an understanding of alternative financing.
If you are new to Utah real estate investing, there is one thing you need to know: traditional bank financing tends to be a bottleneck that prevents new investors from accessing the best opportunities. Private funding is a better option. Do yourself a favor and learn how to utilize it to make yourself more competitive.
For the purposes of this post, private lending refers to hard money and bridge loans from firms like ours. Actium Lending provides asset-backed loans structured to take advantage of the unique framework of Beehive State commercial real estate.
Let us break down the mechanics of hard money loans in Utah and see how they can power your commercial property investments.
The Asset-Backed Funding Structure
If your only experience with commercial financing is the traditional small business loan, the concept of asset-backed funding may be foreign to you. Right off the bat, it is important to avoid the temptation of viewing a hard money loan as a commercial mortgage. It’s not a mortgage in any way, shape, or form.
Mortgages from traditional banks rely exclusively on a borrower’s personal creditworthiness. Banks look at the customer’s:
- Personal financial history.
- Debt-to-income ratio.
- Personal and/or business tax returns.
- Personal and/or business income.
Private lending is drastically different. It relies on assets. When we review a loan application, we are most interested in the asset a borrower is offering as collateral. And in Utah commercial real estate, that asset is almost always the property the borrower is looking to acquire. We want to know if it has enough value to cover the amount being requested.
When you secure a hard money loan in Utah, you are partnering with a private investment firm like Actium. You are not going to a bank seeking a business loan. This offers many benefits, including the fact that private lenders are not subject to the same rigid regulatory constraints that force banks to move so slowly.
A Wholly Different Underwriting Experience
Private lenders in Utah are still regulated. We do not engage in predatory lending practices. We do not subject borrowers to abusive loan agreements. What we do offer is a wholly different underwriting experience that manifests itself in three key ways:
- The Collateral Focus – Whether an investor is looking to buy a multi-family apartment complex in Provo or an office building along the Silicon Slopes, approval is based on collateral value. The borrower’s personal credit history is a non-factor.
- The Lack of Bureaucracy – Traditional funding is subject to the bureaucracy corporate lenders are known for. Instead of working with a constantly changing group of corporate employees, you work directly with the lender’s underwriting team. When you partner with Actium, you might even work with the owners themselves.
- The Customization Possibilities – Traditional lenders are forced to work within rigid criteria. Private lenders are free to treat each commercial deal as an independent business venture. Loans can be customized to meet even the most unique needs.
It has been our experience that borrowers accessing hard money loans in Salt Lake City for the first time are amazed by how different the underwriting process is. Throughout Utah, private money is on an entirely different plane.
Why Investors Prefer Hard Money
Commercial real estate investors prefer hard money over traditional funding across the entire Beehive State. But hard money is especially attractive in the fast-moving economic landscape that is the Wasatch Front. Things move quickly here. As a result, financing needs to move quickly too.
Utah real estate investors appreciate the speed and flexibility private lending affords. They also appreciate the streamlined underwriting process, the reduced documentation requirements, and the ability to work with a smaller and more personal team.
Sometimes hard money is more than just a preference. Here are three scenarios demonstrating it as an indispensable tool for the Utah investor:
1. Retail Space: Quick and Certain Execution
Imagine a prime retail space becoming available in Salt Lake City. It is an outstanding property in a high-demand area, so it draws a lot of interest. The seller has made it clear that potential buyers capable of guaranteeing a swift closing will get preference.
Hard money allows the Utah investor to bypass traditional lending’s endless underwriting loops and documentation requirements. Quick closing – usually in a week or less – gives an investor a competitive advantage as the bidding wars begin.
2. Capital for Asset Repositioning
Traditional lenders are hesitant with certain types of investments because they prefer stabilized properties. These are properties that are fully leased and already generating steady income. But consider a lucrative property with a ton of potential, yet still lacking stabilization.
Private money, by way of a hard money or bridge loan, is the perfect tool for acquiring and stabilizing the property. With 6-12 months to repay, the loan gives an investor plenty of time to improve and fully lease the property before seeking a conventional loan to refinance.
3. Bridge Financing From One Asset to the Next
Consider an investor looking to purchase a distribution facility in West Jordan. Meanwhile, he has a retail space in Provo that he is trying to sell. A bridge loan can power his West Jordan acquisition while offering a 6-12-month term. Once the Provo property sells, the proceeds from that sale will cover the loan on the West Jordan property.
Utah hard money loans fuel a consistent stream of commercial real estate investments. If you are new to the Utah market, consider hard money financing. If you have a property with strong value, enough cash to bring a solid down payment, and a reasonable exit strategy, securing a hard money loan is very doable. We would be interested in taking a look at your project. So contact Actium Lending at your earliest convenience.
FAQs
Can out-of-state investors secure Utah hard money loans?
Absolutely. Because private lending is based on asset value, lenders are less concerned about where an investor lives. As long as a property’s financials are in order and the borrower meets minimal lending requirements, hard money funding should be possible.
How do private lenders determine asset value?
Private lenders can utilize a variety of tools, including in-house appraisals and broker price opinions. Whatever tool gets the job done accurately and as quickly as possible is the one a lender will typically use.
Why would an investor choose a private lender over a traditional bank?
Private lenders offer a faster and more streamlined underwriting process. From application to loan closing, getting things done in 7 days or less is routine.
What is the standard term for private lending?
Lenders are free to do as they choose in the hard money space. Most hard money loans have terms of 6 to 24 months.
