It is a lifeline to real estate investors, serving their needs for quick access to money when other lenders can’t keep up with them. But securing approval requires preparation, especially when dealing with an investment property. Your task as a broker involves guiding clients in setting up their properties to meet the criteria of the lender.

This article will walk you through necessary steps to prepare investment properties for the hard money loan approval process in order to give your clients the best opportunity at success.

Why Preparation Matters

Hard money lenders rely more on the value and potential of the property in question than on the borrower’s credit score or financial history. Which means a well-prepared property can make or break a deal. The broker who can help their clients prepare stands out as a trusted partner and assures smoother approvals with faster funding.

Step 1: Understand the Lender’s Criteria
Every hard money lender has his own set of criteria for approving loans. Typically, they assess:

  • Loan-to-Value (LTV) Ratio: The most common lenders cap LTV ratios at 65–75% of the property’s value.
  • Property Type: Single-family homes, multi-family units, and commercial are common; however, each lender may have different specializations of property.
  • ARV: After-repair value, a fix-and-flip project where the lender will assess the value of the property post-renovation.

Pro Tip: Find yourself a lender, such as Lending Bee, with more transparent terms that clearly outline their guidelines, making it much easier to prepare your properties for approval.

Step 2: Get the Necessary Documents
Hard money loans do not require as much documentation as traditional loans, but some documents are vital. Prepare your clients with the following:

  • Property Appraisal or Comparative Sales Data: Recent appraisal or comparables showing market value of property.
  • Renovation Plans (if applicable): The plans should provide comprehensive cost estimates and timelines of fix-and-flip projects.
  • Exit Strategy: This could be selling the property or refinancing. An exit strategy provides the lender with proof of repayment.

Why This Matters: Organized documentation saves time and shows lenders that the borrower is serious and prepared.

Step 3: Evaluate Property Condition
Lenders like properties where potential is recognizable, and risks can be controlled. Have your clients pay attention to:

  • Major Repairs: Structural, roofing, or foundation problems should be fixed or involved in the plans of renovation.
  • Code Violations: Any legal or safety issues should be resolved prior to application.
  • Curb Appeal: Lenders understand this will not be a finished product, but there is some confidence inspired in a clean and presentable property.

Pro Tip: If the property has big issues, work with the client to outline how those will be resolved during the project.

Step 4: Determine Loan Amount vs. Property Value
The requested loan amount should be suitable for the property value and lender’s LTV requirements. If the property value is too low for the desired loan, one could consider the following options:

  • Alternative Funding Sources: Using hard money in concert with other funding sources.
  • Adjusting the Loan Request: So that the request is within the risk tolerance of the lender.

Help your clients strike this balance to strengthen their application.

Step 5: Highlight the Exit Strategy
A solid exit strategy is one of the cornerstones to hard money loan approval. Work with your clients to:

  • Spell the Plan Out: Selling after renovations, refinancing into a long-term loan, or another clear way of repayment.
  • Provide Supporting Documents: Market analyses or refinance pre-approval letters are the paperwork that fortifies this.

Lenders such as Lending Bee like to emphasize clear and practical exit strategies; hence, this becomes one of the key talking points in an application.

Step 6: Paint the Project’s Profit Picture
In fix-and-flip projects, the possibility of profit is what matters. Help your client outline the following:

  • Purchase Price: A good deal on property adds value to the application.
  • Renovation Costs: Precise estimates with contingency buffers.
  • After-Repair Value (ARV): Proof of expected market value post-renovation.
  • Profit Margin: A clear projection of returns post all costs.

It is not only reassuring for the lender, but this information will place your client in an advantageous position as a smart investor.

Common Mistakes to Avoid

Even the best-prepared clients can fall into one of these traps. As a broker, your job is to steer them clear of these pitfalls:

  • Underestimating Costs: Make sure the renovation budgets include the unexpected expenses.
  • Skipping Due Diligence: Encourage thorough inspections and market research.
  • Rushing the Application: A rushed application with missing documents or unclear plans can delay funding.

Pro Tip: Review everything upfront, you save time and build credibility with the lender.

Why Lending Bee Makes Approvals Easier

Partner with the right lender, and the process just got a lot easier for you and your clients. Lending Bee stands apart because:

  • We Manage Our Own Funds: No third-party delays mean faster approvals and funding.
  • Transparent Requirements: Clear guidelines help brokers and clients be prepared, no guessing.
  • Flexible Terms: Solutions to fit varied investment strategies.

At Lending Bee, our staff understands the speed of how real estate deals are done-starting with approvals and funding in just days.

Success Story: A Broker’s Win with Lending Bee

A broker recently referred a client to our company who was looking to purchase and renovate a multi-family property in Los Angeles. The client required $800,000 with an LTV of 65%. Lending Bee was able to approve the loan in three days based on the potential of the property and a very well-prepared application. Renovations were completed on time, and the client sold the property for a substantial profit, paying off the loan early.

This success showcases how preparation and partnering with the right lender make all the difference.
It all starts with setting your client up for success with their hard money loan. From the property assessment to the documentation and financial planning, it’s all about setting them up for success. And by partnering them with a trusted lender like Lending Bee, you ensure that they get the support and speed to make it successful.

Ready to help your clients secure the financing they need? Call Lending Bee today to learn more about our fast, flexible hard money solutions.