Mixed Use Hard Money Loans

Mixed use hard money loans are a type of borrowing instrument utilized by those wishing to invest in commercial and residential properties for money-making purposes. These agreements are usually provided via private lenders, rather than via banks and mortgage companies, and the interest and pay back terms may be a bit more stringent than traditional lenders as far as level of interest rate and number of years required to pay off the balance. For example, banks may provide money for mixed use purposes for 6-85, while private hard money lenders may ask for 10-15% interest. These types of loans are not meant to be long term loans, although terms as long as 30 years out can be obtained. Rather these types of mixed use hard money loans lending instruments are also called bridge loans, and are for investors needing cash right away for the short term.

One example of mixed use hard money loans is for investors buying apartment buildings which will be rehabbed and then put right back onto the market and sold for a profit. The borrower is only interested in obtaining the cash to purchase and flip the property, hopefully selling it off before the terms of the agreement become due. Some investors will want to buy vacant land or commercial property that will be used for a variety of reasons: retail, storage, health, etc. These types of investments are considered to be non-conforming and are more suitable for private or hard money lenders. Some lenders are particular or picky about lending for strictly residential reasons, but most are open to this.

Mixed use hard money loans lenders are interested in getting their cash back with the interest, and therefore if something can be worked out with borrowers who have experienced bankruptcies, foreclosures, difficulty in coming up with down payments, self-employed situations, etc. then they will go ahead with the deal. As long as the lender thinks they can get their cash back out of the collateral or property plus interest then everything should be copacetic. The process is extremely easy, and in most cases, the borrower can get the funds in less than 7 days. Application can be done online. In some cases, there are websites that will have lenders compete for the borrowers business, which only serves to help drive down the interest rate on the loan and works for the client. This may be the best way to go to ensure the interest rate is the most competitive in the market. "If any of you lack wisdom, let him ask of God, that giveth to all men liberally, and upbraideth not; and it shall be given him." (James 1:5)

For investors interested in new construction, mixed use hard money loans can be the solution, especially if the builder is just starting out in the business, and there is no reliable way to tell if the product will be good or not. The funds are usually put into an escrow account to be used as needed in the form of draws as the construction is completed stage by stage. A bridge loan may not work here, because if the property being built is a large apartment complex, most likely it will take two to three years to complete all the phases, and most bridge loans are for no longer than two years. Therefore, a lending instrument will need to be obtained that will be sure to cover all the months of build out needed for the project.

There are mixed use hard money loans provided by lenders who specialize in lending to investors wishing to borrow large amounts of money, even into the millions of dollars for commercial uses such as building assisted living centers, medical centers, storage facilities and entertainment parks. These lenders are interested in the loan to value ratio, searching for equity in property generally not above 70%. That is, the borrowed amount will not be greater than 70% of the worth of the property. In all cases, the lender is interested in understanding how the borrower plans to pay back the loan. The client needs to have all of that figured out at the time the loan is taken out. 

Those who are looking to get mixed use hard money loans are probably those who understand the real estate market, and so want to ensure they get the very best deal on a loan. Seasoned investors are used to negotiating all kinds of loan instruments and fully understand what level of interest rates can be handled with various types of properties for which the funding will be used. These loans would be appropriate when an investor needs cash to buy property being sold at auction, where the sellers expect the buyer to have the funding in hand at the time of the sale. Proof of funding is required when registering for these types of events. Short term loans are also appropriate for these types of investments but would be classified as a bridge loan, as explained earlier in this article.

Mixed use hard money loans lenders may request that an appraisal of the property be conducted as part of the process of approving a loan of this type, because they are making lending decisions based on the value of the property in question. This is why they can by-pass all the traditional lender paperwork requests required in putting together traditional mortgages. This is also why the loan can be put together in a relatively short period of time, which is ideal for people who need to cash quickly to close on an investment.