Exploring the real estate market in Columbus, Ohio, can be challenging, especially when traditional financing options don’t align with your needs. Whether you’re eyeing a quick property flip in German Village or looking to invest in rental properties near Ohio State University, knowing all of your financing options is essential. One such option that has gained popularity among local investors is the hard money loan.
Hard money loans offer a flexible and fast alternative to conventional loans, making them ideal for real estate investors in Columbus. This guide will explore what hard money lenders are, how these loans work in Columbus, and how they can be a valuable tool for your investment strategy.
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Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private individual or company that provides short-term loans secured by real estate. These lenders typically work with real estate investors such as house flippers and those looking to invest in rental properties. Unlike traditional lenders, hard money lenders focus on the value of the property rather than the borrower’s creditworthiness.
The loan amount is usually based on the after-repair value (ARV) of the property, which is the estimated value of the property after renovations. Interest rates for hard money loans are generally higher than traditional loans, ranging from 8% to 15%. Borrowers also need to be aware of origination fees, closing costs, and other expenses. If a borrower fails to repay the loan, the lender can foreclose on the property to recover the investment.
Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront.
How does a hard money loan work?
Hard money loans provide a quick and flexible financing option for real estate investors in Columbus. Here’s how these loans typically work:
- Short-term loan: These loans are usually short-term, ranging from 6 months to a few years, which suits investors looking to flip properties quickly.
- Faster funding option: Hard money loans can be processed and funded much faster than traditional loans, often within days, allowing investors to act quickly on opportunities.
- Less focus on creditworthiness: Unlike traditional lenders, hard money lenders place less emphasis on the borrower’s credit score and more on the property’s value.
- More focus on property value: The loan amount is based on the property’s loan-to-value ratio and its after-repair value (ARV).
- Not traditional lenders: Hard money lenders are private individuals or companies, not banks or credit unions, providing more flexibility in loan terms.
- Loan denial option: If the property does not meet the lender’s criteria or the investment seems too risky, the loan can be denied.
- Higher interest rates: Interest rates are higher, typically ranging from 8% to 15%, due to the increased risk.
- Might require larger down payments: Borrowers may need to provide larger down payments, often 20%–30% of the property’s value.
- More flexibility: These loans offer more flexibility in terms, allowing negotiations on interest-only payments or other arrangements.
- Potential for interest-only payments: Some hard money loans may offer interest-only payments for the loan term, with a balloon payment at the end.
What are hard money loans used for?
Hard money loans can be versatile tools for various real estate investment scenarios. Here’s how they can be useful:
- Flipping a house: For flipping homes, hard money loans provide quick capital to purchase, renovate, and sell properties for a profit.
- Buying an investment rental property: Investors can use these loans to acquire rental properties that generate steady income.
- Purchasing commercial real estate: Hard money loans are also an option for buying commercial properties, which might not qualify for traditional financing.
- Borrowers who can’t qualify for traditional loans: Borrowers who don’t meet conventional lenders’ strict criteria can use hard money loans to fund their projects.
- Homeowners facing foreclosure: Homeowners at risk of foreclosure can use these loans to access their home equity and prevent losing their property.
How much do hard money loans cost?
Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:
Online calculators can also help you estimate these costs.
Alternatives to working with hard money lenders
Perhaps you’re a homeowner rather than an investor, but you’re looking for a way to leverage your current home’s equity. Here are a few options to consider that aren’t hard money loans:
- Take out a second mortgage: If you have substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide the needed funds at a lower interest rate compared to a hard money loan.
- Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment. It often comes with lower interest rates than hard money loans.
- Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a more affordable option.
- Use a government-backed loan program: Programs offered by the FHA, VA, or USDA can assist in purchasing homes with lower down payments and reduced interest rates.
- Peer-to-peer loan: These loans are provided by individual investors through lending platforms like MeridianLink or Funding Circle, functioning similarly to hard money loans but often with different terms.
- Specialized loan programs: Consider specialized loans for fixer-uppers or investment property refinancing if you already have a hard money loan and seek to replace it.
- Request a seller financing option: In some cases, sellers may agree to finance the purchase themselves, which can result in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
Sometimes, the perfect listing pops up when you’re least expecting it. Maybe it’s a rare mid-century modern home or a two-bedroom condo within walking distance of your job.
If you’re a Columbus, Ohio, homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that streamlines the process.
The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.
Here’s how HomeLight Buy Before You Sell works:
Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home. On top of that, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.
3 top hard money lenders in Columbus Ohio
Traditional lenders might not be the solution for every real estate investment. If you’re looking to move quickly and capitalize on an opportunity, explore the hard money lending options available in Columbus, Ohio.
The Hard Money Co., Columbus
Founded in 2008, Longhorn Investments, based in Texas, specializes in direct private lending for real estate investors. They focus on hard money loans tailored for San Antonio investors engaged in house flipping or rental property rehab. Their residential loans apply solely to single-family homes and two-to-four-unit townhomes, excluding condominiums and manufactured homes. Loans, typically based on the property’s after-repair value (ARV), can close swiftly in three to five business days.
Lending clientele: Residential and commercial real estate investors
Loan criteria: Up to 75% of the ARV (rentals), up to 70% of the ARV (flips)
Longhorn Investments maintains a 5-star Google rating from over 200 reviews, noted for its streamlined loan process, quick communication, and helpful staff.
Longhorn Investments, Columbus
Founded in 2008, Longhorn Investments, based in Texas, specializes in direct private lending for real estate investors. They focus on hard money loans tailored for San Antonio investors engaged in house flipping or rental property rehab. Their residential loans apply solely to single-family homes and two-to-four-unit townhomes, excluding condominiums and manufactured homes. Loans, typically based on the property’s after-repair value (ARV), can close swiftly in three to five business days.
Lending clientele: Residential and commercial real estate investors
Loan criteria: Up to 75% of the ARV (rentals), up to 70% of the ARV (flips)
Longhorn Investments maintains a 5-star Google rating from over 200 reviews, noted for its streamlined loan process, quick communication, and helpful staff.
Tidal Loans, Columbus
Tidal Loans, a Houston-based hard money lender, offers flexible financing for fix-and-flip and rental properties. Established in 2016, their team has over 50 years of combined real estate expertise. Upon receiving all required documents, Tidal Loans typically closes loans on the next business day. Their lending services extend to multiple parts of Ohio, including Columbus, Cleveland, Cincinnati, Toledo, Akron, and Dayton.
Lending clientele: Residential real estate investors
Loan criteria: Up to 70% ARV
Tidal Loans maintains a 4.8-star Google rating from over 70 reviews. Customers highlight their professionalism, commitment to service, and the friendliness of their staff.
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Columbus, Ohio?
The decision to use a hard money lender in Columbus, Ohio, should be based on your individual situation and real estate investment goals.
Hard money loans are best suited for real estate investors who require quick, flexible financing and can handle higher interest rates and fees. These loans are ideal for projects like flipping houses, purchasing rental properties, or investing in commercial real estate.
However, if you’re a homeowner looking to leverage your equity, consider HomeLight’s Buy Before You Sell program as an alternative. This program allows you to secure a new home before selling your current one, providing a seamless transition without needing a hard money loan.
With HomeLight’s support, you can confidently navigate the Columbus real estate market and achieve your investment goals.
For more information and to explore your options, visit HomeLight.
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