With the new year now in full swing, there are three overall trends to watch for in the private capital lending market:

1. An increase in commercial hard money loans. As the housing market settles into a state of equilibrium for the most part, it is likely that there will be an upswing in hard money loans for commercial properties and projects. This practice has become more common for two reasons: first, the decrease in funds and increase in requirements from banks and institutional lenders; and, second, the leveling out of the commercial market that has somewhat ameliorated the high risk involved with obtaining hard money financing for these projects. While these projects are still viewed as high risk, there are also great rewards that can be reaped from such investments, given the right circumstance and location.
2. More international lenders providing hard money financing. Hard money loans began as a way to finance investment-property purchases in the U.S. and Canada. The idea has now caught on, and they are becoming a more common financing option worldwide. This year, expect to see a marked increase in the number of international lending institutions that are offering hard money loans for investment-purpose properties. With the current stability of the worldwide housing market, these loans have very few downsides to discourage lenders from underwriting them.
3. A decrease in hard money interest rates. While hard money loans will always have higher interest rates than conventional lending institutions, their rates are continuing to drop as the economy improves and the real estate market stabilizes itself. During the financial crisis in 2008, hard money rates were often in the 20 percent range with some even approaching the legal limit of 29 percent. In recent years, the rates have dropped to the mid teens, ranging from 10 to 15 percent. The current forecast for rates in 2015 predicts a further decrease into the 8 to 12 percent range.

All in all, these three trends indicate that 2015 is going to be a year for hard money and private capital loans. With decreased interest rates and risks involved, the benefits can more easily outweigh the costs of such financing, making it a more practical option for more deals—though it’s important to remember that hard money loans are not the right fit for every project.

If you have a project in need of a hard money loan, contact Montegra at 303-377-4181.