As an international investor or foreign national borrower looking to buy property in the United States, it’s important to know the differences between hard and soft money loans so you can pursue the best loan for your investment.
If you are ready to invest in a real estate project, it can be disheartening to wade through the red tape and restrictions of securing a loan through conventional means.
As an international or foreign investor, you may also face added difficulties because traditional money lenders – like banks – require more documentation and verification for foreign nationals.
Understanding the differences between hard and soft loans can help you make the best decision as you grow your U.S. based real estate investments.
Soft Money Lending – Traditional loans
Soft money loans are typical in the United States and involve institutions like banks, credit unions, and other conventional lenders. These are usually long term loans with lower interest rates that can take months to manifest, much longer than most investors are willing to wait.
Because interest rates are relatively low, there are also more stringent criteria for qualifying for these loans. Large banks have a low risk tolerance when it comes to loans. As such, these loan approvals are based on the borrower’s credit score, cash flow, and general financial health.
Taking months to secure and see the funding from, these loans require a large amount of documentation and information in order to approve, which can be both time-consuming and frustrating for foreign nationals.
Because financial health is measured differently in different countries, and the risks inherent with international money exchanges, banks are less likely to approve loans from international investors. For some international investors, time to approval can be even longer, and the process can require even more documentation due to a variety of factors that may affect the funding needed or the timeframe to realize it.
All in all, soft money lending involves large institutions like banks providing lower interest, long-term loans. The approval process can be lengthy and involve a lot of bureaucratic headache, which is why smart, savvy international investors often choose a private real estate loan – a hard money loan – to ensure they get the fast funding they need to properly invest in a real estate project.
Hard Money Lending
Instead of borrowing from a bank or more traditional financial institution, privately funded, independent hard money lenders like Community Capital Holdings are a proven option for those who need answers, need funding now, and need their real estate investment partner to be nimble.
Instead of approving loans based on the borrower’s financial history and credit score, hard money loans are approved based on the viability of the asset that is being bought. With hard money lending, the collateral is the property itself.
Because these loans are privately funded and the property itself is the priority, the less restrictive, “looser” approval criteria makes hard money lending the preferred method of funding for many international investors and foreign national borrowers.
While rates may be higher, hard money is quicker, and involves less bureaucracy, making it easier and more efficient to get the money you need. These private real estate loans also tend to have more flexible and customizable agreements. Lenders like Community Capital are independent, and therefore have the flexibility to customize terms and make deals that suit both parties.
Hard money lenders – like Community Capital Holdings – are invested in the success of your investment. We are more like a partner who works with you to make the best investment decisions. Using our connections and experience, we are a hard money lender who can get you the answers you need within 24 hours – so you always have an important edge in the investment market.
Why Hard Money Loans Are Preferred by International Investors
Hard money loans are the better option for international investors, because of their flexibility, funding options, and the quick decision-making process.
As an international investor, it is inconvenient to be tied up by red tape and bogged down by bureaucracy for months at a time. As you wait for a soft money loan to be approved, you may miss out on real estate investment projects or income-producing properties.
Because hard money lenders aren’t as concerned with stringent financial checks and exhaustive background checks, these private real estate loans are more easily attained by foreign nationals. With a hard money loan – like the ones available from Community Capital Holdings – you’ll be able to be qualified quickly and get the funds you need to move fast.
Losing out on opportunities as they arise or missing out on a potential investment makes hard money loans attractive for serious investors, and it’s why we do what we do. By not requiring the same documentation as soft money loans, our lending model allows foreign nationals and international investors to take advantage of every real estate investment they find.
Choosing the Right Hard Money Lender
It’s important to work with a lender that is knowledgeable in the local real estate market. Coming from abroad, you may not know the intricacies of the local market you want to invest in, so having a local, connected real estate investment partner who knows the ins and outs of the market can be invaluable.
Community Capital Holdings is based in South Florida, and we know the Florida real estate market better than anyone else. We live here. We invest here. We lend here.
With over 120 years of combined experience, we have helped thousands of borrowers reach their real estate investment goals and value the relationships we have built along the way.
Community Capital Holdings is well-capitalized, highly regarded and very nimble – using our connections and experience to get you the answers you need within 24 hours.
We have helped countless international investors navigate the growing South Florida market and secure favorable loans quicker than traditional bank loans. We specialize in hard money loans for the non-homestead investment properties, like:
- Commercial properties
- Office buildings
- Retail properties
- Single-Family and Multi-Family Homes (Investment only)
- Townhouses and Condos
- Apartment Complexes
- Special-Use Properties
- Warehouses and Industrial
- Construction projects
- Medical Office-Condo
To learn more about how we can help international borrowers invest in real estate here in Florida, contact us or call us at (954) 947-1232.