HARD MONEY FAQ
- What types of hard money loans do you offer?
- Why do you give a Custom Rate Quote?
- Do you use credit reports?
- If I have bad credit, can I still get a loan?
- Hard money lenders vs. bank lenders?
- How long does it take to fund a hard money loan?
- What is the process for getting a hard money loan from Aloha Capital?
- Do I need to get an appraisal?
- What are Aloha’s fees?
- What are the loan terms?
- Does Aloha Capital charge an extension fee?
- What are your underwriting guidelines?
- What types of property do you lend on?
- What is After Repaired Value (ARV) and how is it calculated?
- What is Loan to Value (LTV) and how is it calculated?
- What are reserves and do I need them?
- What is the scope of work?
- How do construction reserve draws work?
- What if a mechanic’s lien is filed on the property?
- What if I go under budget on my scope of work?
- What if I go over budget on my scope of work?
- How can I invest in hard money loans?
What types of hard money loans do you offer?
Fix and Flip Loans
Fix and Flip Loans are made for purchasing, rehabbing, and selling single family or 1-4 unit residential properties.
Rental Property Loans
Rental property loans are used by investors to acquire, improve, and tenant properties with the goal of refinancing using long-term conventional bank funding.
Bridge loans are for residential and commercial properties that need little or no improvement and are considered interim financing until permanent financing can be obtained.
Transactional loans are for real estate investors that need financing for a very short period of time, usually 1-3 days. This type of loan is used when:
- back-to-back close is required
- borrowers have the end buyer in place
- a conventional loan is not possible to execute the transaction
Why do you give a custom rate quote?
Each deal and each borrower is unique. We offer lower rates and better terms for less risky loans and repeat borrowers. The more experienced the borrower and the lower the loan-to-value, the lower the rates. Our Custom Rate Quote form takes five minutes to complete.
Do you use credit reports?
Yes, but as hard money lenders we make our lending decision primarily on the value of the asset, the experience of the borrower, and the overall strength of the deal.
If I have bad credit, can I still get a loan?
Hard money loans are underwritten primarily on the value of the property and the strength of the deal. We have borrowers with low credit scores, bankruptcies, and foreclosures on their credit history.
Hard money lenders vs. bank lenders?
Hard money lenders are different from bank lenders because they fund based on the appraised value of the asset, they fund more quickly, and with fewer application requirements. Banks have a time-consuming, paperwork intensive process designed to verify cash flow and credit history of the borrower.
How long does it take to fund a hard money loan?
As a hard money lender, it takes 5-10 business days on average for us to fund each loan. Typical bank funding can take between 4-8 weeks.
What is the process for getting a hard money loan from Aloha Capital?
Please refer to the detailed Hard Money Loan Process page.
Do I need to get an appraisal?
Yes. Aloha will order an appraisal once the appraisal fee is received from the borrower.
What are Aloha’s fees?
Our fees are the loan origination fees (points) as a percentage of the loan amount, plus a $695 document preparation fee charged at close. The document prep fee is only charged if the loan is funded. We do not charge an application fee. Typical costs, such as county recordation and appraisal fees, of any real estate transaction apply. Please Contact Us if you have questions.
What are the loan terms?
Please refer to the detailed Rates and Terms page.
Does Aloha Capital charge an extension fee?
Yes. extension terms are detailed in each contract and agreed upon prior to closing. Each loan extension fee varies based on original terms of the loan.
What are your underwriting guidelines?
We consider these main guidelines when determining rates and approving a hard money loan:
- LTV: 70% or lower
- Experience: your overall real estate experience and track record with Aloha Capital
- Equity: how much cash you are investing in the deal
- Reserves: amount of cash in a liquid account available, net of closing costs
What types of property do you lend on?
Aloha Capital lends to real estate investors on non-owner occupied, single-family and multi-unit residential properties. Commercial deals are considered on a case-by-case basis.
What is After Repaired Value (ARV) and how is it calculated?
The ARV is the fair market value we expect the property to fetch on the open market after it has been renovated in accordance with the borrower’s schedule of work. The ARV is determined by an approved Aloha Capital appraiser using standard appraisal guidelines including comparable sales in the area and relevant market data.
What is Loan to Value (LTV) and how is it calculated?
LTV is a ratio used by lenders to determine the maximum loan amount for any given mortgage.
Value of the property: $100,000
LTV = 70%
Loan Amount: $70,000
$70,000/$100,000 = 70%
Loan Amount/Value = LTV
Loan to Value (LTV) is calculated by taking the loan amount and dividing by the value of collateral. Depending on the type of loan desired, the “value” is either:
- the appraised value at purchase
- the appraised After Repaired Value (ARV)
What are reserves and do I need them?
Reserves are the amount of easily accessible cash in a liquid account. Real estate investors should always maintain a minimum level of reserves in order to cover unexpected expenses and interest payments. Acceptable reserve accounts are checking, savings or brokerage accounts; any account that can be accessed rapidly. Aloha Capital requires at least six months of reserves. Higher reserves may lower your rates.
What is the scope of work?
This is a detailed construction estimate provided to Aloha during the underwriting process. This document details the rehab work to be done on the property with line by line cost estimates and timeline. Our appraisers will use this document to establish the ARV during the appraisal process. The total amount of the scope of work is held in a construction reserve and distributed as work on the document is completed.
How do construction reserve draws work?
Because we lend on ARV, verification of the construction listed on the schedule of work is required.
- The process is as follows:
- Draw requests are made for reimbursement of work detailed on the schedule
- Inspection of completed repairs is ordered
- An Aloha inspector verifies the work has been completed
- Aloha Capital issues funds
What if a mechanic’s lien is filed on the property?
If a property owner fails to pay a general contractor for services rendered, or if the general contractor fails to pay sub-contractors per the terms of their agreements, a mechanic’s lien may be filed. Title insurance does not protect against mechanic’s liens, therefore Aloha requires all sub-contractor and general contractor releases to be properly executed before disbursing final construction draw funds.
What if I go under budget on my scope of work?
Congratulations! Prudent estimating is an important part of your process. Aloha will send you any remaining construction draw funds, once the schedule of work is complete and all inspections are made.
What if I go over budget on my scope of work?
Completing the scope of work is a condition of your loan; you are required to make all the repairs indicated. We will not loan additional money to complete this obligation. This is why conservative estimating on the front end is so important. Building in a reasonable amount for unforeseen expenses is imperative.