The unprecedented demand for houses in Norfolk, VA, is creating great opportunities for real estate investors. According to the July 2021 report from Realtor, the median list price rose by 7.3% year-over-year.
Whether you’re looking to flip houses or invest in a rental property, the time to enter the Norfolk real estate market is now. However, arranging the financing in time is crucial to taking advantage of these investment opportunities.
As a result, many investors turn to hard money loans in Norfolk, VA, to capitalize on these limited-time opportunities. Getting hard money loans can be a very speedy process which means investors can jump on an opportunity as soon as they see it.
When it comes to commercial real estate financing, getting hard money loans is relatively easier as compared to getting a loan from the bank. However, there are several reasons due to which your hard money loans may be denied.
Let’s look at the top five reasons most financing firms deny hard money loans:
1. Loans against Soft Assets
When it comes to asset-based lending, hard money loans are provided against hard assets. These assets serve as collateral so you can get the necessary funding for your next real estate investment. To explain simply, hard assets are tangible such as physical assets, whereas soft assets are intangible such as a patent or stocks.
However, private equity funding is a popular option, but most financing firms prefer to offer hard money loans if you can put a hard and tangible asset up as collateral.
2. Loans without Exit Strategy
Another common reason for your loan application getting denied is when the borrower has no exit strategy. It’s important to keep in mind that the hard money loan will only serve as a short-term financing option which means there should be a good exit strategy in place.
As a borrower, you should know exactly how you’ll pay back the amount, and without a viable exit strategy, your lender can deny the financing.
3. Loans on Dreams
Hard money loans cannot be availed simply on dreams, no matter how inspiring they might be. When it comes to hard money loans, financing firms look for the three Cs; collateral, cash, and character. The collateral is obvious, and the cash will be the amount of money you will put up, i.e. your down payment.
Finally, your character refers to your track record and experience when it comes to real estate investment. In other words, you need more than just dreams to get hard money loans.
There are several other reasons hard money loans are denied, but that shouldn’t demotivate you. The point is to be prepared and to fully understand the purpose of a hard money loan.
Global Capital Partners Fund is a global commercial financing firm offering asset-based financing in Norfolk, VA, as well as in numerous other locations across the US and Canada. The firm offers numerous financing solutions based on the borrower’s requirements and plans.
To discuss your financing needs, you can contact a senior partner at GCP Fund today!