Hard money loans are short-term higher-interest loans that assist real estate developers and investors acquire property and bankroll expenses related to their real estate projects so that they remain solvent, liquid, and increase their chances of success. They’re an integral part of the real estate investing process with some clear upsides and downsides.

The Pros of Hard Money Loans

There are several reasons why serious real estate investors rely on hard money loans to finance fix-and-flip projects. Here are the top benefits of hard money loans for house flippers:

l  Speed – Hard money loans can be acquired much more quickly than traditional bank loans. They do not usually require credit checks and other due diligence that causes the process to move more slowly at banks. Many hard loan lenders are able to provide money for real estate investments because their primary consideration is whether an investment is a good deal or not.

l  Flexibility – Every hard money lender has their own set of criteria to loan money for a real estate project. Most hard money loans do not come with a list of restrictions that usually beset conventional loans. For that reason, they are more flexible and allow real estate investors to change project goals midstream if necessary.

l  Leverage – Hard money loans provide tremendous leverage for fix-and-flip investors. The investor can enter a project without putting their own money at risk and remaining liquidity.

The Cons of Hard Money Loans

While there are incredible benefits to using a hard money loan for fix-and-flip real estate investments, there are some downsides. Before taking a hard money loan, do your due diligence on the loan, the lender, and, of course, the property investment.

Some downsides to hard money loans include:

l  Interest rates – All real estate investors should consider the cost of capital. Hard money loans are typically higher-interest loans because they are riskier for the lender.

l  Higher-risk – The lender is not the only person assuming a risk on hard money loans. The borrower is also taking a risk. Because the loans are higher-interest and short-term, these loans are riskier because they can lead to high financial burdens if not entered wisely.

l  Must be paid back quickly – Hard money loans are short-term loans. They are typically for 12 months or less, and the investor is on the hook for repaying the loan in the time frame specified. If they are not paid back on time, the investor may be seen as a bigger risk on the next loan and find it difficult to get a loan for their next fix-and-flip project.

Where to Find Hard Money Loans

Hard money loans are not hard to find. Banks, however, do not offer them. Years ago, local private real estate lenders were the primary source of hard money. More recently, however, the JOBS Act of 2012 has made it easier to find hard money loans online. Real estate crowdfunding platforms, marketplace lenders, and other peer-to-peer business models may or may not refer to themselves as hard money lenders, but that is, in essence, the service they are providing.

When you are ready to fund your next fix-and-flip property, be sure to conduct your due diligence on potential lenders thoroughly. Whether you get your hard money loan from a single lender or from an online marketplace with multiple investors financing your project, make sure you look at the lender’s loan history and review the terms of your loan closely. Ultimately, you’ll want to find a partner with a track record of success lending on the property type you’re interested in developing, so that you can grow together over time with more successful projects down the road.

Learn more about Sharestates track record.

When you think about luxury communities near top U.S. ski destinations, what comes to mind? For many people, names like Telluride, Breckenridge, Big Sky, and Park City are at the top of the list. But do ski properties make good investments? Today, we’ll discuss the pros and cons of investing in ski properties. Is it worth it?

Pros of Investing in Luxury Ski Properties

Ski resorts offer investors a unique opportunity. For starters, this is a luxury market, and it’s not just a luxury market. It’s a high-end luxury market. People who buy ski resorts are often buying their second home, and the thought process is typically different than it is for buying a first home.

Before you rush in on a ski property investment, you should decide what you are going to do with the property. You have several options. If it is a fix-and-flip property, you’ll need to make sure your after-repair value will leave you room for a profit. Other options such as renting the home, offering it as a timeshare property, or making it your second home could be just as lucrative in the long-term, but you must decide on your plan. Develop your exit strategy before you enter the investment.

That said, there are some distinct advantages to investing in a ski property. These include:

  • The clientele – Since you are dealing with a luxury property, and quite possibly a second home, you will be doing business with people who have a lot of money at their disposal.
  • A ready-made market – Ski properties have a built-in market. Not only are they luxury investments, but ski property buyers are in a class by themselves. According to the Mountain Resort Market Outlook by RCLCO Real Estate Advisors, mountain resort sales transactions correspond with the number of skier visits at the resort. If you invest at a popular resort, you’ll be sitting pretty.
  • Potential ROI is higher – Because luxury ski properties tend to start in the upper six-figure range, your potential ROI is higher, especially if you invest in a fix-and-flip and buy at a better-than-average LTV.
  • Predictable market – Ski resort property markets are more easily predictable than average housing markets. For one thing, it’s seasonal. If you wait to buy at the beginning of ski season, you are too late and will see more competition. Another consideration is the specific geographic location. A more popular resort lends itself to potentially higher transaction values and less time on the market. Another market indicator may be the overall state of the economy.
  • The timeshare option – Many winter vacationers do not want to own a property they will only live in for two or three months. A ski property lends itself to timesharing. In fact, there is a solid market for vacation properties that offer fractional opportunities.

In general, there are plenty of upsides to investing in luxury ski properties, but there are also pitfalls.

The Cons of Investing in Ski Properties

One downside to investing in high-end ski properties is property taxes. Higher values homes come with bigger tax burdens. If you are a buy-and-hold investor, prepare to pay a lot of real estate taxes. Other downsides include:

  • Property maintenance – If you own the vacation property, you are responsible for the upkeep. If you don’t live near the ski property, that can be a burden. You’ll need to hire someone you can trust to keep an eye on the property.
  • Association fees – Many ski resort properties are a part of co-ops, or they are condominiums. If you invest in these properties, expect to pay association dues.
  • Risky investment – High-end luxury vacation properties are risky investments. All sorts of things can go wrong. And if you lose on these investments, you could lose a lot of money. The key is to buy at the right place in the right location, and at the right time. Remember, develop your exit plan before you enter the investment.

Ski properties are great opportunities for serious investors if they have a solid business plan. Just make sure it’s solid before getting started.

Here are some properties in Park City that have been funded by Sharestates

  • Loan Amount: $2,562,000
  • Purchase Price: $2,400,000
  • Property Type: Residential
  • LTV: 80%
  • LTC: 80%
  • ARV: 58%
  • Loan Amount: $2,103,000
  • Purchase Price: $900,000
  • Property Type: Residential
  • LTV: 80%
  • LTC: 73%
  • ARV: 64%

To look at more real estate properties that Shareshares has funded or to inquire about funding your next project click below

Baltimore’s real estate market is experiencing quite a bit of attention from investors recently. The economy has been experiencing slow but steady growth, making it a reliable choice to invest in real estate properties. The top industries that have been boosting the Baltimore economy are in areas such as healthcare, education (due to so many large colleges in the area), life sciences, and cybersecurity, but also the Port of Baltimore to a large extent. According to mashvisor.com, fix-and-flip investments proved successful for Baltimore real estate investors in 2017, 2018 and may continue through 2019. In fact, fix-and-flip investors boasted a whopping 96.6% average return on investment in 2017! This was supported by a year-over-year increase of investment property prices in excess of 2.4%. According to baltimorepostexaminer.com back in November 2018 the median home price in Baltimore was $237,855, much lower than some bigger real estate markets in the country, leaving investors with a lot of opportunity to expand their real estate portfolios.

Sharestates recently funded several blanket loans in Baltimore with properties in several different locations of the city. Several property locations are surrounding Druid Hill Park, a beautiful urban park in northwest Baltimore. Druid Hill Park, like Central park in NYC, is one of the oldest landscaped public parks in the US. Neighborhoods surrounding Druid Hill Park are known to feel suburban like in an urban city with good schools and smaller parks but also a good bar scene for the younger crowd. The following blanket loan was for a borrower acquiring the properties with the intention of adding value through renovations. The initial loan was for $2,745,000 with a rehab budget of $465,000. The properties in the blanket loan were all single-family residential properties.

Property Photos:

 

  • Loan Amount: $2,745,000.00
  • Purchase Price: $2,095.029.52
  • LTV: 58%
  • LTC: 80%
  • Average renovation budget: $465,000.00
  • ARV: 47% or $5,825,000.00

 

 

 

For more information about other properties Sharestates has funded or to submit your upcoming projects to get funding click below.

Private and institutional investors are branching out into smaller markets to achieve higher returns. According to Forbes.com more than half (55%) of the apartment properties bought and sold for more than $1 million in 2017 were located in secondary markets which is up from 42% in 2010. Also according to Forbes.com there are a few key benefits:

  • They are less volatile in downturns, which makes them particularly attractive late in the investment cycle.
  • Deals in these markets are not overvalued and offer higher returns.
  • They offer stronger growth potential due to a lower cost of living and less supply.

For portfolio diversification, Sharestates offers investment opportunities in secondary markets also. Here are a few properties recently funded by Sharestates, below.

This first property is located in Austin which is the capital of Texas and also one of the largest cities in the US.The city of Austin is about an hour and twenty minutes from San Antonio and about three hours from Houston. Austin is known for its live music scene, endless sunshine, natural beauty/outdoor adventures and the great balance of small town feel to big metropolis.

  • Loan Size: $303,000
  • Residential
  • Purchase Price: $295,000
  • LTV: 72%
  • LTC: 84%
  • Average renovation budget:   $67,200
  • ARV: 68% or $466,000

The second property is in Saint Paul, the capital of Minnesota. Saint Paul has big city amenities like museums and sport stadiums but also a very midwestern feel. Separated by the Mississippi River, the Twin Cities (Minneapolis/Saint Paul) are considered one metropolitan area but actually include two unique cities, featuring downtown cosmopolitan cores surrounded by distinctive neighborhoods and suburban communities.

  • Loan Size: $233,000
  • Residential
  • Purchase Price: $206,847
  • LTV: 76%
  • LTC: 76%
  • ARV: 66% or $351,000

The last property we’re highlighting is in Charlotte, North Carolina. Charlotte is the most populated city in North Carolina and has been ranked as one of the fasted growing cities from 2004 through 2014. There are many great reasons to live in Charlotte. The job market is booming with both the corporate headquarters of Bank of America and the the east coast hub of Wells Fargo located there. Charlotte has fantastic schools, and the quality of life is often cited as a reason for moving to the area with a cost of living below the national average by about 4%. 

  • Loan Size: $2,670,000
  • Residential -Town House
  • Refinance
  • LTV: 64%

 

 

For more information about other properties Sharestates has funded or to submit your upcoming projects to get funding click below.

A transitional real estate market is when the market is swinging from a buyer’s market to a seller’s market, or vice-versa. Such a market can have an impact in many areas of the real estate sector, but what does it do to the lending market?

In a buyer’s market, conditions tend to favor buyers. That means the supply of housing exceeds the demand for housing and buyers have the advantage regarding price negotiations. In a seller’s market, the opposite is true. Demand exceeds supply and sellers tend to have the upper hand. Either condition can lead to an onslaught of new mortgages, but the terms of the mortgage may change based on these market conditions to favor either the buyer or the seller. In a transitional market, neither party has an advantage in negotiations, and that can impact the lending market in different ways.

Throughout 2018, the Fed raised interest rates several times. This has created quite a stir in the markets. Rising interest rates tend to mean a slowdown in new mortgages as the cost of lending rises.

What Happens When the Cost of Lending Increases?

When it becomes too expensive for people to buy homes, they tend to rent more. As a result, that often leads to more multifamily real estate development. It can also lead to more single-family rentals under certain conditions. Real estate developers tend to borrow more money to pay for the cost of these developments, and that’s when transitional lending tends to peak. This has been the case in the development market since the foreclosure crisis. More people have opted to rent, for a variety of reasons, and developers have responded.

National Real Estate Investor Online estimated, in 2017, that the transitional lending market was at $50 billion, up from $20 billion in 2011. They also saw no reason for that to slow down and noted that the real estate market indicated more debt rather than equity for the foreseeable future. However, it is now two years later and we have watched interest rates go up several times. This change in Fed policy will likely lead to a slowdown in transitional lending as developers gauge market direction. Should home renters start to buy again, we could see a shift from debt to equity in the housing markets. What will that do to marketplace lending?

Debt or Equity: It’s Important to Know Where The Market is Headed

Home buyers and sellers should understand the current market condition and where the real estate market is headed before they decide to buy, sell, or rent. U.S. News recently published an article on what to expect from the housing market in 2019 and wrote this:

Home sellers  are also seeing growing number of alternatives to placing their home on the market. The last few years have seen growth in the number of iBuyers and similar investment companies that specialize in quick cash purchases of properties to renovate and resell them. Rather than listing their home with a broker, homeowners can sell the house directly. Platforms are debuting where larger companies facilitate the transaction by teaming up with local investors who make the purchase and renovate.

Fix-and-flips are just one market. There are also new housing development and rental markets. Home ownership went from below 63 percent in 2016 to 64.4 percent in the third quarter last year. That’s encouraging, but interest rates rising last year could result in another slight slow down. And in January 2018, new housing starts were at a 10-year high. They went down throughout the year.

In a transitional market, lending may not be at its best, but it’s also not at its worst. That means investors may have to search harder for the right deals, but they should be open to both debt and equity deals as long as they can justify potential returns against the real risks. In other words, keep an open but critical mind. 

For more information about how to fund your next real estate project click below.

Philadelphia is a hot housing market right now, and according to Zillow.com prices have risen 11.3% in the last year and 31% in the last 2 years. This is a lot higher than some other big cities in the U.S. like San Francisco, Los Angeles, Miami, Seattle, and Boston. With Philadelphia being a hot market, 2018 saw a lot of new construction and demand seems to be growing at a steady pace. This is in part due to a growing job market. In 2018 the rate of job growth grew faster than that national average says Mashvisor.com. According to some experts the Philadelphia real estate market is a smart and safe choice for investing now also because of its stability, which is one of the most important things to look for when investing in real estate. Being stable makes for low risk investment for a buy and hold investor. A report from Philly.com in early 2018 says Philadelphia’s real estate prices reported a jump of 10.5% in the median property price.

With all this growth in the Philadelphia real estate market, Sharestates has been active funding new deals with real estate developers in the region.

Here are some statistics from Sharestates:

  • Sharestates has funded 51 Philadelphia loans to date for a total funded volume of $29,964,000
  • 30 of the loans funded were for residential properties
  • 5 of the loans funded were for mixed-use properties
  • 1 of the loans funded were for multi-family properties
  • 4 of the loans funded were for commercial properties
  • 11 of the loans funded were for land deals
  • Average loan size: $589,529
  • Average loan to value (LTV): 73%
  • Average renovation budget: $320,892
  • Average after repair value (ARV): 42% or $1,637,670

Here are a few projects that Sharestates has recently funded:

This first property is a mixed-use property with 6 residential units and 1 commercial unit. This property is located in Queen Village which is immediately south of Center City and remains the oldest residential neighborhood in Philly.  The borrower acquired this property as a “fix & flip” and once rehab is complete, the developer will list this property for sale.

 

  • Appraised value: $1,600,000
  • Loan amount: $1,092,000
  • Purchase Price: $1,560,000
  • LTV: 68%
  • LTC: 70%

 

The next property is located in the Kensington neighborhood of Philadelphia. This area has recently seen a growth of young urban professionals moving in, which is partly due to low rents and a growth of hip bars as well as a large micro-brewery scene. The property is mixed-use and the borrower is acquiring the property with intentions of adding value through rehabilitation. When rehab is completed the property and/or the units will be leased out to tenants. 

 

   

  •     Appraised value: $660,000
  •     Loan amount: $473,000
  •     Purchase Price: $630,000
  •     LTV: 72%
  •     LTC: 75%

 

 

 

For more information about other properties Sharestates has funded or to submit your upcoming projects to get funding click below.

Anyone who has ever lived in Queens, NY knows it’s one of the most underrated boroughs in NYC. It may not be as glamorous as Manhattan or as cool as Brooklyn, but it has some wonderful assets. Transportation to all points in NYC is readily available by subway, commuter train, or ferry, and it’s available for much less money than any other borough. Yet, Queens is on its own, a thriving metropolis even without the other boroughs. For example, Astoria Park has a beautiful city park feel but it’s not nearly as crowded as the more traveled Central Park in Manhattan or Prospect Park in Brooklyn. Another amazing aspect of Queens is the amount of ethnic diversity in the borough making Queens a bastion of both amazing food and authentic ambiance in its many different neighborhoods. Locals know that the best soup dumplings can be found in Flushing and the best Greek and Mediterranean cuisine can be found on the streets of  Astoria.

With Amazon Headquarters soon moving to LIC, the housing and real estate markets could see an even bigger rise in people migrating to Queens than over the past year. People will be looking for more affordable middle-class housing which could be easily found in Queens, for now. The NYC Economic Development Corp (NYCEDC) registered 2,847 new housing units and 1,234 of those were in Queens as of February 2018. This was nearly a 300% jump compared to an average over the preceding 12 months. NYCEDC has also said this was the highest jump since December 2015. The number of homes in the market grew in Queen’s as well and the borough’s price index increased 7.3% to $530,556 according to a StreetEasy report that was released on July 25th 2018. The report also stated that Northwest Queens prices rose 5.1% to $775,122. Sharestates has funded many properties in the Borough of Queens.

Below are some statistics:

  • Sharestates has funded 63 Queens loans to date for a total funded volume of $46,093,000
  • 46 of the loans funded were for residential properties
  • 4 of the loans funded were for mixed-use properties
  • 3 of the loans funded were for multi-family properties
  • 9 of the loans funded were for commercial properties
  • 1 of the loans funded were for land deals
  • Average loan size: $731,634
  • Average loan to value (LTV): 69%
  • Average renovation budget: $207,771
  • Average after repair value (ARV): 57% or $1,391,571

The first residential property presented below was funded by Sharestates and is located in Forest Hills, Queens. This was a refinance and is planned to be sold as is.

Single Family

Residential

Refinance

Appraised value: $2,875,000

Loan amount: $1,900,000

LTV: 66%

The second residential property presented below was also funded by Sharestates and is located in Astoria, Queens. This was a refinance and is planned to be sold as is.

2-4 Family Residential

Refinance

Appraised value: $1,300,000

Loan amount: $910,000

LTV: 70%

Click below if you are interested in finding out more about Sharestates loan programs.

Capital expenditures for commercial real estate are not easy to come by. Developers should work on acquiring a positive track record in the types of developments they wish to attract capital. But they must also learn to be more agile in seeking out investments. One way to achieve this is to use crowdfunding and marketplace lending websites that give developers broader access to investors they may not reach in other ways.

Deloitte also recommends that CRE developers rebalance their property portfolios. They recommend focusing in two specific areas: Creating memorable tenant experiences and diversifying their investor base to attract higher capital investments. Those are both good suggestions.

On the first point, Deloitte recommends making use of emerging technologies such as mixed reality to give potential buyers and tenants a 360-degree immersive view of property options as well as Internet of Things, artificial intelligence, and predictive analytics.

Another practical suggestion offered in the report is to include more flexible lease arrangements such as hybrid leases where tenants can have both short-term and long-term options.

Rise of the Proptechs

Property technology companies are coming into their own. In fact, 95 percent of the respondents to Deloitte’s survey said they expect hospitality and multifamily proptech companies to have moderate to significant influence on commercial real estate development in the near future. Ninety percent expect mixed-use to be influential while 81 percent and 77 percent expect retail and industrial proptech companies, respectively, to have influence.

Interestingly, in 2014, there were 255 proptech launches globally and $3 billion invested in those companies. In 2017, there were 21 proptech launches with $13 billion of commercial investments entering the sector. Investors clearly are interested in those proptech companies that show promise.

Overall, technology allows investors and CRE developers to be more agile in the marketplace.

With Amazon HQ moving to Washington DC in the near future, real estate speculators have once again turned their attention to the DC metro area. There are many reasons why DC is a great place for millennials in particular, from new job opportunities to safe neighborhoods and excellent school districts. According to the Huffington Post young adults between the ages of 25-34 have been moving to Washington DC more than any other city in the US. The Wall Street Journal also reported that between 2010 and 2012 the metro Washington area – which includes suburbs in Maryland and Virginia – saw an average annual net gain of 12,583 people from the millennial generation.

Sharestates has recently funded properties in DC, the southern part of Maryland and the northern counties of Virginia. One property that Sharestates recently funded was a private loan on a mixed-use building with 2 residential units and 1 commercial unit that is located in the Capital Hill neighborhood of Washington DC. The specific area is historically known as Lincoln Square and has the largest urban park also in the Capital Hill neighborhood called Lincoln Park. Some information about this property:

  • Appraised value: $3,200,000
  • Loan amount: $2,560,000
  • Purchase Price: $3,200,000
  • LTV: 61%
  • After-repair value: $3,225,000
  • ARV: 57%

 

 

 

 

Another property funded by Sharestates is located in the beautiful town of Potomac Maryland and is considered a commuter town to Washington DC. It is located approximately 13 miles from DC and on average takes about 35 minutes to drive without traffic. Potomac MD is also one of the richest towns in the US ranked by Forbes.com. The property was an investment for a private loan on a residential property. The borrower acquired the property as a “fix & flip” and once rehab is complete will put property on the market to sell. Here is some information about this property:

 

  • Appraised value: $1,470,500
  • Loan amount: $1,100,000
  • LTV: 75%
  • Purchase Price: $1,500,000
  • LTC: 73%

 

 

To read about more loans Sharestates’ has funded or to get information on how to get funding for your next real estate investment.

Real estate developers, property rehabilitation professionals, and landlords all have one thing in common. At some point, they’re going to need outside funding for a project. For many such real estate professionals, a bank is not an option.

The biggest problem with banks for real estate investors is that many banks won’t fund their project. Banks typically have stringent loan application requirements. If you get approved for a loan, you’ll end up in a 20- or 30-year mortgage contract. That means you’ll be tethered to the bank for a long time. Marketplace lending, however, offers a reasonable alternative that won’t keep your assets tied up long-term or keep you tied to a creditor for very long.

Why The Marketplace Lending Option is Attractive

Marketplace lending offers several benefits that real estate investors can’t get at a bank. Here are a few to consider:

  1. You borrow from a pool of financiers – With marketplace lending, you aren’t tied to one lender for a long period of time. Marketplace lending platforms like Sharestates take money from a pool of investors who believe in your project and want you to succeed.
  2. No long-term agreement – Marketplace loans also tend to be short-term, bridge financing solutions. You can fund a project on a six or twelve month amortization schedule, which allows you to pursue other projects and secure more funding for those projects while you complete your project and pay back your loan.
  3. Fewer hoops to jump through – Not all marketplace lending platforms require a credit check. Those that do don’t rely entirely on your FICO score to approve your loan. If you can guarantee your funding by proving you have the means to pay it back should your project go south, a marketplace lending platform is likely to give you the nod before a bank will.
  4. You can fund more than one project at a time – Banks are very concerned about borrowers’ leverage in the marketplace. While marketplace lenders care about that too, if you can prove you have the means to offer returns on the investment for your backers, you have a better chance at getting the funding you need from a marketplace lender.
  5. You can access your funds more quickly – The loan processing time at a bank is very slow. It could be weeks before you get your hands on the money you need to complete a project. With marketplace lending, once approved, your funding arrives quickly. That means you can turn your property around quicker, pay back your loan, and fund another project.
  6. You can finance smaller projects – Another benefit to going through a marketplace lender is you can secure funding for a small project. Many banks have minimum loan limits. If you want to fund a project below that limit, they won’t approve your loan.
  7. Marketplace lending is more flexible – Many marketplace lending platforms don’t just provide loans. If it makes more sense to structure your real estate project as an equity offer, then you can offer investors a return on their investment without taking out a loan that you have to pay back. Banks don’t offer that option, and if you find one that does, it will cost you to set it up.

Marketplace lending is a great option for real estate developers and other investors who appreciate quick funding at fair prices that won’t lock you into long-term contracts. Consider your options before you decide on a funding source, and make sure to due your due diligence on the lender and their underwriting criteria.