Hard Money Lenders Tucson: The Right Move?

Published on August 9th, 2024
10 min read

Joseph Gordon Editor
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Joseph Gordon Editor

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Joseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.

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Looking for a quick financing solution for your real estate ventures in Tucson? Whether you’re flipping houses in El Presidio or investing in rental properties in the Sam Hughes neighborhood, hard money loans might be the answer you’re seeking. These loans, known for their flexibility and speed, cater to various needs and can be a game-changer for Tucson investors.

In this guide, we’ll explore everything you need to know about hard money loans. From understanding what hard money lenders are to uncovering the costs and alternative options, you’ll find valuable insights tailored to the unique real estate landscape of Tucson.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

Hard money lenders offer short-term, asset-based loans primarily to real estate investors such as house flippers and those buying rental properties. Unlike traditional lenders, they focus on the property’s value, particularly its after-repair value (ARV), which is the estimated value of the property after renovations.

These lenders usually charge higher interest rates and fees to offset the increased risk they take. If a borrower fails to repay, the lender can foreclose on the property. Hard money loans are a practical option for those needing quick, flexible funding solutions to capitalize on lucrative real estate opportunities.

How does a hard money loan work?

Hard money loans in Tucson operate differently than traditional loans, offering unique benefits and challenges for real estate investors. Here’s a detailed look at how these loans work:

Short-term loan: Typically lasting between 6 months to a few years, these loans are designed for quick projects.
Faster funding option: Approval and funding can occur within days, much faster than the typical 30 to 50 days for conventional loans.
Less focus on creditworthiness: Borrowers with lower credit scores can still qualify, as the property’s value is the primary concern.
More focus on property value: The loan-to-value ratio is importantl, with emphasis on the after-repair value.
Not traditional lenders: These loans come from private investors or companies, not banks.
Loan denial option: If the project seems too risky, lenders can deny the loan even if the property has potential.
Higher interest rates: Rates often range from 8% to 15% or higher due to the increased risk.
Might require larger down payments: Expect to put down 20%–30% of the property’s value.
More flexibility: Terms can be more negotiable compared to traditional loans.
Potential for interest-only payments: Some lenders offer interest-only payment options during the loan term, reducing initial cash outflow.

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What are hard money loans used for?

Hard money loans are versatile financial tools used in various real estate scenarios. Here’s how they can be beneficial:

Flipping a house: Investors often use hard money loans to purchase and renovate homes quickly for resale, leveraging the property’s after-repair value.
Buying an investment rental property: These loans can help investors acquire rental properties to generate steady income.
Purchasing commercial real estate: Investors use hard money loans to buy commercial properties, benefiting from quick access to capital for timely opportunities.
Borrowers who can’t qualify for traditional loans: Those with poor credit but significant property equity can use hard money loans as an alternative.
Homeowners facing foreclosure: A hard money loan can provide the necessary funds to pay off debts and avoid foreclosure, using the home as collateral.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

Interest rates: 8% to 15% or higher, based on risk assessment.
Origination fees: 1% to 5% of the loan amount.
Closing costs: Legal, appraisal, and administrative fees.
Points: A percentage of the loan amount charged upfront.

Online calculators can help estimate these costs.

Alternatives to working with hard money lenders

If you’re a homeowner rather than an investor, looking to leverage your current home’s equity, here are a few options to consider:

Take out a second mortgage: If you have substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide the needed funds at a lower interest rate.
Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment, often with lower interest rates.
Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates.
Use a government-backed loan program: Programs offered by the FHA, VA, or USDA can assist in purchasing homes with lower down payments and reduced interest rates.
Peer-to-peer loan: These loans are provided by individual investors through lending platforms like Funding Circle, often with different terms than hard money loans.
Specialized loan programs: Consider specialized loans for fixer-uppers or investment property refinancing if you already have a hard money loan and seek to replace it.
Request a seller financing option: In some cases, sellers may agree to finance the purchase themselves, resulting in lower closing costs and less stringent eligibility requirements.

How to buy before you sell

HomeLight’s Buy Before You Sell program offers a seamless solution for homeowners looking to buy a new home before selling your current one. This program allows you to secure your dream home without the stress of selling first.

The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.

Here’s how HomeLight Buy Before You Sell works:

Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings you could see in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home. On top of that, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.

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A home that is building equity for its owners.

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3 top hard money lenders in Tucson

Traditional lenders might not be the solution for every real estate investment. If you’re looking to move quickly and capitalize on an opportunity, explore the hard money lending options available in Tucson.

Hard Money Lenders Arizona, Tucson

Based in Phoenix, this company offers several types of real estate lending, including fix-and-flip and bridge loans. It serves areas like Avondale, Buckeye, Chandler, Flagstaff, and Tucson. Business-purpose loans are often approved within 24 hours.

Lending clientele: Residential and commercial real estate investors, plus homeowners

Loan criteria: Up to 85% LTV or LTC; in some cases, up to 90%

Hard Money Lenders Arizona holds a 4.9-star rating on Google from over 200 reviews.

hardmoneylendersarizona.com

480-576-5822

Capital Fund 1, Tucson

Capital Fund 1, with offices in several states, including Arizona, has provided direct private capital and hard money loans since 2009. It offers fix-and-flip, buy-and-hold, bridge, and construction loans. Borrowers can receive approval the same day after applying, and funding can be completed within 24 hours once all documents are collected.

Lending clientele: Residential and commercial real estate investors

Loan criteria: Rates start at 9.9%, varying by loan program. For instance, Fix & Flip Loans offer up to 75% loan-to-value on the home’s acquisition cost.

Capital Fund 1 has a 4.4-star rating on Google from over 100 reviews.

capitalfund1.com

480-405-4470

Prime Plus Mortgages, Tucson

Prime Plus Mortgages, based in Scottsdale, Arizona, is a licensed hard money lender serving Maricopa County. They specialize in hard money loans for developers, property flippers, and buy-and-hold investors. Complete their online application for a rate quote within 12-24 hours.

Lending clientele: Residential and commercial real estate investors

Loan criteria: Up to 90% LTV

Prime Plus Mortgages holds a 5.0-star rating on Google from 180 reviews.

primeplusmortgages.com/tucson-hard-money-loans

480-923-7602

Should I partner with a hard money lender in Tucson?

The decision to use a hard money lender in Tucson should be based on your individual situation and real estate investment goals.

Hard money loans are best suited for real estate investors needing finances for renovations or acquisitions when time is a factor. They offer speed and flexibility but come with higher costs and risks.

HomeLight’s Buy Before You Sell program might be a more suitable alternative for homeowners looking to leverage their equity. This program allows you to buy your new home before selling your current one, offering a streamlined process that minimizes stress and provides financial flexibility.

Header Image Source: (JC Cervantes / Unsplash)

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