What is a hard money lender in St. Louis? 8 Part Mega Guide

Wondering what a hard money lender in St. Louis is? See why and how smart real estate investors use hard money lending to achieve their goals. FAQ included!

Hard money is a term for short-term business financing and is most often utilized by real estate investors.  Many people think of banks when they think about financing a home but banks are limited in what products they are able to offer due to regulations and oversight.

What is hard money?

Hard money is a private business loan that uses real estate or land as collateral.  Hard money often has more flexibility and a typical hard money lender in St. Louis can fund deals much faster and easier than a traditional bank.

Hard money is unintentionally a well-kept secret that many investors are unaware of still in 2023. Many people do not know how they can use it in their business or how to implement it.  As a fellow real estate business owner, my business tripled in growth since hard money became one of our regular business tools.  Hard money can be a tremendous game-changer once an investor knows how to employ it in their business properly.

Banks are wonderful strategic business partners for real estate investors but they often do not offer short-term financing solutions nor have the ability to cut through the red tape.  Hard money offers creative solutions for faster cash funding and real estate closings.  It also offers businesses leverage to increase an investor’s buying power and the ability to scale a real estate business more quickly and efficiently.  These strengths make hard money an incredible tool for ease and growth.

What are the benefits of a hard money lender in St. Louis?

• SPEED: Hard Money Lenders can decide on a loan application and property in 7 to 10 days.
  • You can get hard money loans in St Louis and FasterFunds Lending can decide in as quickly as 3 to 5 days for a pre-approved borrower.
• FLEXIBILITY: Hard money has a significantly small amount of red tape.  It is typical to have qualifying standards, but the underwriting process is typically in-house and the lender does not have to meet a board’s expectations, 3^rd party investor’s standards, or the 2010 Dodd-Frank Act regulations.
• AFTER REPAIR VALUE: Hard money loans are based on the after-repair value (ARV) of a home or commercial property.  This gives the borrower added protection because the hard money lender will evaluate the market comparable sales and give a professional opinion on what the property could appraise for fixed up.  Banks are limited to lending on the current value of the asset.
• MINIMUM CASH INVESTMENT: With hard money, investors can use other people’s money to purchase real estate investment properties as well as to fund their rehab expenses on the same property.  If an investor has less of their personal funds invested in a deal then their cash-on-cash return on their investment has increased.
• GROWTH: With traditional bank financing, investors must put 20 to 25% down on each property in addition to funding their own rehab expenses.  With a hard money lender in St. Louis, real estate investors can have multiple fixes and flip projects going on at the same time while also using hard money to build a rental portfolio.  Growth is truly limitless depending on how many deals your hard money lender is comfortable lending on at the same time and your business relationship with them. 

Hard Money Lender in St. Louis Examples

Scenario A:     Investor A understands the benefits of real estate investing in St. Louis and growing a rental portfolio to build wealth and financial freedom.  He has never heard of hard money and as a beginning investor does not know how to fund his real estate deals.  He takes out a HELOC on his personal residence, adding a burden to his debt-to-income ratio on his credit score.  The HELOC is for $50,000. 

Investor A quickly realizes that $50,000 can only buy a very small house or maybe fund just the renovations on a larger real estate project.  Investor A pivots. On to plan B. 

Investor A networks and finds 2 houses for sale for $200,000, as is condition, that need $40,000 in renovations.  He is so excited about making the investment in the homes that he starts a relationship with a bank.  The bank informs the investor that he must put 20% down on the current appraisal price of the houses.  Investor A realizes “YIKES!  That’s $40,000.” 

Investor A grasps that he could purchase the houses, but he would not have enough money for renovations or emergency repairs.  Investor A feels frustrated and he doesn’t understand how to grow his business or come up with more capital!

Scenario B:    Investor B loves real estate and wants to start investing in real estate properties.  She pours herself into research on how to fund real estate deals and different financing options.  Investor B finds an article called “What is Hard Money Lending in St Louis” by Arielle Morris and learns about all the benefits to hard money. 

Investor B reaches out to FasterFunds Lending in St Louis and she gets preapproved to be one of their regular borrowers.  As a benefit of working with them, she gets the first pick of their wholesale deals.  Investor B buys her first house from their wholesaler and gets funding for the purchase price and rehab funds.  Investor B has none of her own capital in the real estate deal and she closes at a local title company in 1 week! 

Investor B has the entire house renovated in a month’s time.  Her hard money lender puts her in touch with a great commercial bank lender who does a refinance on the house.  The bank can lend on the full purchase and rehab because the house is now worth its highest and best appraisal amount.  When the bank refinance goes through, Investor B pays off the hard money lender and has no prepayment penalties. 

With the quick loan turnaround, the loan fees are minimal.  Investor B has no money in the real estate deal.  This is called the BRRRR strategy.  Now Investor B does multiple investment properties at the same time and never has to worry about financing.  Her business is growing rapidly! 

How does a hard money lender in St. Louis and wholesaling work?

Frequently Asked Questions

What is the average interest rate charged by a hard money lender in St. Louis?

The average interest rate on a hard money loan usually is between 10% to 18% and most lenders also charge points.  These points can take place when the loan is originated or on the backend of the project or sometimes both.  Some hard money lenders start with a higher interest rate and if you do a certain amount of deals with them over time then they’ll decrease your interest rate once a borrower reaches this threshold. 

It’s important to discuss all the terms, interest rates, fees, and points before committing to a hard money loan.  Make sure the lender doesn’t have any hidden fees and that they have a reputable reputation within the market you are investing in.  FasterFunds Lending in St Louis offers a competitive rate with no hidden or undisclosed fees.  They are highly recommended by rehabbers and flippers in the St Louis area and take pride in their high quality of customer service. 

Is hard money lending in St. Louis a good idea?

Hard money has at times been portrayed in a negative light.  The loans are riskier for the lender and are for short-term lending needs only.  Therefore, the interest rates are higher than traditional bank loans.  Having a higher interest rate can sometimes be portrayed as a negative if a potential borrower has access to less expensive forms of capital. 

However, most people starting a business are not independently wealthy and access to a hard money lender in St. Louis allows anyone the ability to finance their real estate business goals and dreams.  In this way, a hard money lender in St. Louis is an industry equalizer and opens the possibilities of real estate investment to all.  Hard money also allows people to scale their business through financing multiple real estate investment properties at once and creates the ability to grow a business faster. 

In many ways, hard money is a tool that when used properly has more benefits than negatives.  There are some circumstances where hard money would not be the best option for an individual situation.  I always recommend researching all your local hard money options and alternative financing options and determining the option best suited for you and your business needs.

What loan-to-value to expect with a hard money lender in St. Louis?

Hard money lenders utilize the property as collateral for their loans.  Hard money lenders are unique in the fact that the loan is based on the asset’s future value after all repairs are completed.  Most hard money lenders can lend between 60 and 75% of the properties after repair value. 

Many hard money lenders will look at the financial picture of the potential borrower as well.  It’s important that a borrower be bankable and in a healthy financial position to make their monthly payments.

What kinds of properties can a hard money lender in St. Louis lend money on?

Hard money is a commercial tool to help people build their businesses.  Due to regulations like Dodd-Frank, it is not an appropriate product for a primary residence.  This means that if you are living in the home a hard money lender in St. Louis is not able to lend on the real estate property.  Typically, hard money is considered a commercial tool because it is used specifically for business-related purposes only. 

Sometimes a hard money lender in St. Louis will also lend on office buildings, warehouses, industrial, self-storage, retail, or apartment buildings.  These larger projects are not every hard money lender’s specialty.  It is important to ask them if they have any limitations on what they are willing to lend on and what types of properties they specialize in.

Can I already have a loan on the property?

Having an existing loan on a property is not ideal.  A hard money lender in St. Louis will require that they be in first lien position to be able to do a loan for you or your business.  Make sure to clarify your individual situation and see what options the lender has for you.

How do I find a good hard money lender in St. Louis?

Finding a hard money lender with a positive reputation and track record is essential.  Reach out to fellow investor networks and see who they use and how they feel about their services.  A great place to ask for recommendations is at your local Real Estate Investments clubs and meetups and see who they recommend. 

You can also search google for a hard money lender in St. Louis and get a list.  Ask them about their experience, terms and how their process works.  Don’t be afraid to ask fellow investors if they have used them and if they would recommend them to other investors.  Remember that a hard money lender in St. Louis is often like a business partner and it’s important to work with a lender that understands your dreams, goals, and business operations.

Always Pursue Proper Due Diligence with a Hard Money Lender in St. Louis

It is important to always know about your lending options and thoroughly research each one.  You should now have an understanding of how a hard money lender in St. Louis can be used as a tool by real estate investors who do not have access to a traditional loan option.  With this understanding of commercial lending, you should be in a position now to find a hard money lender in St. Louis if it fits your needs.

How have St. Louis real estate investors been affected by higher interest rates in traditional lending markets from 2022-2023?

In 2022 and early 2023, the Federal Reserve increased interest rates, which affects everyone seeking traditional lending.  In a high-interest rate environment, people seeking traditional lending may feel discouraged, thinking they can’t get access to loans due to the stricter lending standards and higher interest rates imposed by traditional lenders. 

This can be especially tough for those looking to finance real estate projects, as traditional lenders may require a higher credit score and a lower loan-to-value ratio. 

But fear not! Hard money lending can provide an alternative financing option for borrowers who may not qualify for traditional lending. Hard money lenders may be more willing to lend based on the value of the property rather than the borrower’s credit score, and can often provide quicker funding with less stringent lending criteria. 

This can make it possible for borrowers to access the funds they need to finance real estate projects, even in a high-interest rate environment. So, don’t give up hope! Hard money lending may be the solution you need to get the funds you need for your real estate project.

How can hard money lending help borrowers in a high interest-rate environment?

In a high-interest rate mortgage market, hard money lending can be a great option for borrowers for a few reasons: 

• Hard money loans are funded more quickly than traditional loans. In a competitive real estate market where time is of the essence, that can be really helpful. Borrowers can make more attractive offers and close on properties faster than they would be able to with traditional financing.
• For borrowers with less-than-perfect credit, hard money lenders may be more willing to work with unique financing needs. This can be especially valuable for borrowers who may not qualify for traditional financing or who need a more flexible financing solution.
• Hard money lenders are more willing to finance non-owner-occupied properties, such as investment properties or fix-and-flip projects. This can be a big help for borrowers who are looking to invest in real estate but do not qualify for traditional financing.
• The shorter term and interest-only payments of hard money loans may result in lower overall costs for borrowers, despite higher interest rates and fees, compared to traditional loans. This can be particularly valuable for borrowers who are looking to finance a property for a shorter period of time, such as a fix-and-flip project.

Overall, hard money lending can be a valuable option for borrowers in a high-interest rate mortgage market. However, it’s important to carefully evaluate the terms and conditions of any hard money loan and make sure it’s a good fit for your specific financial situation.

If you are wondering if a hard money lender in St. Louis is something that might work for your next deal, give us a call to find out exactly how it works – (636) 223-4262 or apply now online.

Authored by the FasterFunds Lending Team
Hard Money Lender in St. Louis, MO