Are you wondering what the difference is between Residential vs commercial hard money loans? Look no further because we’ll help you out in this informative blog post that should answer all of your questions. (And if you have any more questions, feel free to reach out to our friendly and helpful team at (239)360-3176!
Real estate investors acquire properties, they fix them up and either sell them or rent them out to tenants. This sounds like a great strategy to make money (it is!) but the problem is: it can be VERY capital-intensive, which means it can take a lot of money to run and real estate investing business – and that ties up your money for a while (and what if you need that money?)
Worse yet, investors discover that they can only grow so far using their own capital. Even if you don’t mind your money being tied up, you can only do so many deals at once. If you want to grow, you need even more money.
That’s why many investors are turning to hard money loans as a source of capital to help them. A hard money loan is a special loan for investors to help them acquire properties and renovate them.
Perhaps you’ve been researching hard money loans and are wondering what the difference is between residential vs commercial hard money loans, and which one is right for you.
The answer is that it depends on a lot of situations, but here are some general rules of thumb to help you…
It partially depends on the end-use of the property. Is the property going to be a place for people to live? Or will they be working there? In general, if someone is going to be working on the property, it’s very likely a commercial loan. If someone is going to be living there, then it could be a residential or commercial loan…
When individuals are residing on the property, the loan type typically hinges on the size of the structure. A single-family home, duplex, or triplex may require minimal repairs, necessitating a smaller loan, typically classified as a residential loan. Conversely, larger multi-family units such as condos or apartment buildings often require more substantial financing and are typically associated with commercial hard money loans.
Other factors that could determine whether it’s residential vs commercial hard money loan include: whether it’s a new development or a smaller renovation of an existing property; whether it’s a structure or an set of structures (such as a mobile home park), and what the end use will be (such as if you’re renovating a house to be a retirement home for several non-related renters).
Summary
Determining whether you need a residential or commercial hard money loan depends on various factors specific to your project. We encourage you to reach out to us and provide details about your project. With this information, we can offer guidance on which type of loan will best suit your needs and help you achieve your goals.