Rehab loans for investment-purpose real estate (whether it’s residential or commercial) can be very difficult to obtain. FHA 203K rehab loans are typically not available for non-owner-occupied properties, and Home Equity Lines of Credit (HELOCs) are often times difficult to obtain. These types of loans often fall outside the boundaries of traditional lending, which means that hard money (also called private capital or private money) loans are often the best option to finance a rehab project on an investment property because private lenders are not bound by the same restrictions as institutional lenders. Although hard money loans do come at a higher cost than traditional bank loans, these costs are offset by the ability to take advantage of an opportunity to improve a distressed or problem property and increase its value and income-producing potential.

If you need a rehab loan for a non-owner-occupied property, here are some of the main items you should have in hand when you contact your hard money lender to submit your loan request:

1. Purchase contract. If you’re purchasing a distressed property in addition to rehabbing it, be prepared with the purchase contract to share with your lender.
2. Repair costs. Your lender will expect you to account for the costs of all repairs, whether you will be performing them yourself or hiring a contractor. You should have any relevant bids as well as other rehab-related costs calculated and compiled for your lender.
3. Property photos. Color photos of the property, especially the areas that will be updated or improved, will help your lender better understand your project and plans for the property.
4. Loan application. While not all hard money lenders require applications, it is a good idea to have all the basic information about yourself and the property you want to use to secure the loan when you make your loan request.
5. Proof of insurance. Most lenders will want proof that you have hazard insurance lined up before the loan closes and the rehab project begins.
6. Title report. Lenders will want to be assured that the property has a clear title before they lend against it. While many will obtain a title report as part of their due diligence, you can often speed up the lending process if you have a preliminary title report in hand when you make your loan request.

Because hard money lenders are typically private individuals, each will have his or her own set of requirements. However, for larger loans (over $250,000 in size) there are also a number of companies whose primary business is funding commercial private capital loans.  Some of these companies are more reliable than others.  Be sure to do some online investigation of them by looking for any negative comments posted by past borrowers.  Other things to look for are:  how long has the company been in business – are they able to provide legal or bank references – and very importantly, are they based in your area?  Using out of state hard money lenders can be a very risky business. See our Blog The ABCs of Hard Money Lending Part 3: Avoid the Scams, Video Blog: How to Find a Hard Money Lender, and Loan to Own vs Loan to Help – Tips for Borrowers Looking for Colorado Hard Money for further detail on what we believe to be best practices when looking for a hard money lender.  By researching and contacting your local hard money lender in advance, you can make sure that you are aware of all their particular requirements, which will drastically reduce the time it takes for your loan to be approved and underwritten.