Off-market properties represent a key source of investment for those looking to build their portfolios quickly and at lower prices. But the key is getting to such properties before they hit the MLS. And to make it happen, hard money is the only viable financing option.

Hard money is often the most practical way to consistently lock up off-market deals because it matches the investor’s need for speed, flexibility, and financing on properties that did not qualify for traditional bank financing. Other capital sources certainly exist, but they almost always fail real-world constraints.

As a real estate investor, you need financing that is:

• Designed to close quickly.
• Workable even with imperfect assets.
• Available without endless documentation.

You get all three with hard money from Actium Lending. Best of all, working with Actium means working with a small and dedicated team of professionals who want to see you succeed. You will never have to arrange financing with a corporate giant that sees you as more like a case than a person.

Speed Makes Hard Money Mandatory

Speed is the name of the game for investors targeting off-market properties. The truth is that most off-market deals are won by whoever can prove funding the fastest. The quicker you can demonstrate to the seller that you have your financing in order, the more attractive your bid becomes.

Hard money lenders like Actium Lending can approve within hours. We can fund within several days. We don’t need months to get you to closing because our underwriting is based on assets rather than investigating your ability to repay.

Conventional financing has its strengths. It has its place in the broader marketplace of property acquisition. But it is not very compatible with the speed requirements of obtaining off-market properties before they hit the MLS. To be highly competitive in the off-market space, you need financing you can arrange quickly.

Why Conventional Loans Tend to Fail Off-Market Properties

Conventional loans are usually debt-service coverage ratio (DSCR) products. On paper, you could use such a loan to obtain off-market property. But DSCR loans usually break down on off-market properties for the following reasons:

• Properties Fail DSCR Tests – Off-market properties are often distressed properties that fail traditional DSCR tests. Conventional lenders view the properties as unstable. They will not lend on them until they are stabilized.
• Sellers Want Minimal Hassles – Your typical off-market seller wants as few hassles as possible. That means minimal contingencies and a short inspection window. Conventional lenders are looking for a ton of documentation along with seasoning and clean credit. That spells hassle for sellers.
• Sellers Need to Sell Quickly – In nearly every case, sellers of off-market properties need to sell as quickly as possible. They don’t have time to wait on conventional lenders who do not have the same urgency as they do. Hard money is the fastest way to get a deal done.

Conventional funding does not work well for off-market properties. But hard money does. Although hard money wasn’t built for off-market properties, it is really the only viable way to obtain off-market properties without having to jump through hoops.

Hard Money Fits the Off-Market Profile

Off-market properties are known for a certain profile that scares conventional lenders away. Once again, it’s hard money to the rescue. It fits the off-market profile perfectly.

For starters, off-market deals are typically quirky. There may be title issues involved. There may be issues with zoning, building condition, in more. None of these things scares away a hard money lender willing to take on a bit of risk in order to gain a strong return.

Consider the following three things:

1. Underwriting Based on Assets

In addition to speed, a big strength of hard money is an underwriting process based on assets. The property being obtained acts as collateral on the loan. Investors don’t need to offer a perfect borrower profile because lenders are more interested in the properties themselves. Even investors with multiple projects and complex financials can get funded.

2. Distressed Properties Are Okay

Because underwriting is based on assets, distressed properties are okay. It is all about the numbers. If a lender sees the right numbers in place, funding is doable. A hard money lender will not immediately walk away simply because a property is distressed.

3. Hard Money Terms Are Short

Hard money loans are short-term loans by nature. Generally in the 12-24 month range, they also tend to be interest-only loans that work well for investors looking to preserve their cash. Hard money tends to work better than a long, fully amortized bank note because it is better suited to the shorter timeline associated with off-market properties.

Hard Money Even Beats Alternative Funding

It is clear that hard money is superior to conventional lending for obtaining off-market properties before they hit the MLS. But what about other funding sources? What about some of the other alternatives?

• Private Lenders – Private lenders, like friends, family, and small investors, can help fund new property acquisitions. But such lending requires constant capital-raising and private lender education. It can be more work than an investor wants to put in.
• Seller Financing – Seller financing is like gold when an investor can find it. But seller financing is rarely available for off-market properties. Why? Because sellers are looking to offload them quickly and cleanly.
• Crowdfunding – Crowdfunding can also work in a pinch. But it takes time, it requires more paperwork, and it is less flexible. Relying solely on crowdfunding to obtain off-market properties is not really a suitable strategy.

There is money to be made in hunting down and obtaining off-market properties to add to an investment portfolio. The most successful investors know that hard money is the key to it all. Here at Actium Lending, we have the loans you need to fund your investment strategy.

FAQs

Can I fund any off-market acquisition with hard money?

Although hard money lenders are more amenable to off-market properties, not every deal can be financed. A property must still have enough value to act as sufficient collateral.

Do hard money lenders check borrower credit?

Underwriting in the hard money space is based on assets. Credit checks have nothing to do with approval.

What sort of documentation is necessary to arrange a loan?

Documentation requirements are significantly less demanding compared to conventional lending. Your lender will tell you what they need to get your loan done.

What is the loan-to-value (LTV) ratio in hard money?

Hard money lenders are private lenders. They are free to establish their own interest rates and LTV ratios. Ask your lender when you apply. Note that hard money is known for higher interest rates and lower LTVs.

How quickly can you approve and fund a loan?

The average Actium loan is approved and funded in under a week. However, we have been known to get things done in a matter of days when circumstances dictate. We can even approve and fund in 24 hours in an emergency.