Pros and Cons of Hard Money Lenders Louisiana
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Are you seeking quick financing for your next real estate project in Louisiana? Whether you aim to renovate a historic home in New Orleans or acquire a rental property in Shreveport, hard money loans in Louisiana offer the speed and flexibility you need. These loans provide an alternative to traditional financing, making them an excellent option for those with tight project timelines, limited initial funds, or credit challenges.
Not a real estate investor? If you’re trying to manage the timing between buying and selling your home, we have alternative solutions to help you tap into your home’s equity.
This article will cover the essentials of hard money lending in Louisiana, guiding you in determining if this financing option suits your real estate investment or home-buying needs.
Start Making Offers Without Waiting to Sell Your Home
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
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?
A hard money lender is a private individual or company that provides short-term loans secured by real estate. These lenders focus on the property’s value rather than the borrower’s creditworthiness, making them a popular choice for real estate investors. Here’s a breakdown of what you need to know about hard money lenders and their services:
- Client Types: Hard money lenders cater to real estate investors, including house flippers and those purchasing rental properties. These clients typically need quick, flexible funding options.
- Loan Determination: Hard money lenders use the after-repair value (ARV) to determine loan amounts. ARV is the estimated value of a property after renovations are completed. Lenders usually offer a percentage of the ARV to ensure a profitable and secure investment.
- Interest Rates: Interest rates for hard money loans generally range from 8% to 15%, which is higher than traditional loans due to the increased risk and short-term nature.
- Repayment Periods: These loans typically have repayment periods ranging from 6 to 24 months, providing short-term solutions for real estate projects.
- Additional Costs: Borrowers should expect to pay origination fees, closing costs, and points. Points are a percentage of the loan amount paid upfront.
- Default Consequences: If a borrower fails to repay the loan, the lender has the right to seize the property used as collateral to recover their investment.
How does a hard money loan work?
If you’re a real estate investor looking for a financing option that provides speed and flexibility, connecting with hard money lenders in Louisiana could be beneficial. Here’s a quick rundown of how hard money loans work:
- Short-term loan: These loans usually have a repayment period of 6–24 months, unlike the 15- or 30-year terms of conventional mortgages. Some lenders may extend the term up to 36 months if needed.
- Faster funding option: When you need to close a deal quickly, hard money loans can be approved within days, compared to the 30 to 50 days typical for a mortgage loan.
- Less focus on creditworthiness: Approval relies less on your credit score or income history and more on the property’s value.
- More focus on property value: These loans require collateral, such as a home, and are based on the loan-to-value ratio of the property.
- Not traditional lenders: Individual investors or private lending companies usually provide hard money loans, not traditional banks.
- Loan denial option: These loans are often used by those with poor credit who have been denied a mortgage but possess significant home equity.
- Higher interest rates: Due to higher risk, these loans have higher interest rates than traditional mortgages.
- Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30%, depending on the property’s value and loan specifics.
- More flexibility: With less government regulation, hard money lenders in Louisiana can set flexible credit scores and debt-to-income (DTI) criteria, and loans can help avoid foreclosure.
- Potential for interest-only payments: Unlike traditional mortgages, hard money loans may allow for interest-only or deferred payments initially.
What are hard money loans used for?
Hard money loans address specific financing needs in the Louisiana real estate market. They’re often sought by investors who require fast funding or may have difficulty qualifying for traditional bank loans. Here’s a look at situations where hard money loans can be particularly useful:
| Situation | Explanation |
| Flipping a house | For Louisiana investors focused on flipping homes, hard money loans offer quick cash for purchasing and renovating properties, helping them compete in competitive markets and resell for profit swiftly. |
| Buying an investment rental property | Investors seeking rental properties can use hard money loans to acquire and repair properties quickly, enabling landlords to generate rental income sooner. |
| Purchasing commercial real estate | Hard money loans benefit commercial real estate transactions due to their flexibility and fast closing times. They allow investors to seize valuable opportunities without delay. |
| Borrowers who can’t qualify for traditional loans | Individuals with substantial home equity but poor credit may use hard money loans, focusing more on the property’s value than the borrower’s credit score. |
| Homeowners facing foreclosure | Homeowners nearing foreclosure may use hard money loans to refinance debts or buy time to sell their property, providing a temporary solution to avoid losing their home. |
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 looking to leverage your home’s equity, consider these alternative options:
Take out a second mortgage:
A home equity loan or home equity line of credit (HELOC) allows you to borrow against the equity in your home, typically at lower interest rates compared to hard money loans.
Cash-out refinance:
Through a cash-out refinance, you can refinance your current mortgage for a higher amount than what you owe and use the extra cash for your new investment. This often offers lower interest rates than hard money loans.
Borrow from family or friends:
Getting a personal loan from family or friends can provide the funds you need with flexible terms and potentially no interest, making it a more budget-friendly option.
Use a government-backed loan program:
Government-backed programs like those from the FHA, VA, or USDA can help you buy a home with lower down payments and favorable interest rates.
Peer-to-peer loan:
These loans, facilitated through online platforms, connect borrowers with individual investors. They work similarly to hard money loans but can offer different terms and conditions.
Specialized loan programs:
Look into specialized loans designed for specific purposes, such as fixer-uppers or refinancing existing investments, which can replace hard money loans with potentially better terms.
Request a seller financing option:
In some instances, sellers may be willing to finance the purchase themselves. This can lead to lower closing costs and more flexible eligibility requirements.
How to buy before you sell
Sometimes, the perfect listing pops up when you’re least expecting it. Maybe it’s a rare mid-century modern home or a two-bedroom condo within walking distance of your job.
If you’re a Louisiana homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that streamlines the process.
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%.
3 top hard money lenders in Louisiana
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 Louisiana.
Tidal Loans, Louisiana
Tidal Loans, a Houston-based hard money lender, provides nationwide lending for real estate investors. They support Louisiana investors in New Orleans, Baton Rouge, Shreveport, and Lafayette with funds to purchase investment properties.
Lending clientele: Residential and commercial real estate investors and developers
Loan criteria: Up to 80% on “as is” or “as repaired” value if repairs are included LTV; Up to 90% LTC
Tidal Loans maintains a 4.8-star Google rating from over 70 reviews. Customers highlight their professionalism, commitment to service, and the friendliness of their staff.
tidalloans.com/louisiana-hard-money-lenders
832-757-1262
Aloha Capital, Louisiana
Aloha Capital offers financing for property acquisition, refinance, and cash-out refinance, supporting strategies like Fix-and-Flips, BRRRR, Fix-to-Rent, Turnkey Rentals, Multifamily Value-Add, Apartment Acquisitions, and infill Residential Development.
Lending clientele: Residential real estate investors
Loan criteria: Loans between $75,000 to $3 million
Aloha Capital has earned a 4.6-star Google rating from 18 reviews. One client commended the company for its guidance through the lending process and expressed eagerness to work on future properties.
alohaprivatelending.com/hard-money-loans-louisiana
303-245-0291
LendingOne, Louisiana
LendingOne, based in Florida, is a private money lender providing short-term mortgage loans for investment properties throughout Louisiana. They cater to real estate investors in cities such as Baton Rouge, New Orleans, Shreveport, and others across Louisiana.
Lending clientele: Residential real estate investors
Loan criteria: Loan terms vary: Fix-and-flip loan rates between 7.49%-12.9%, Up to 75% ARV
LendingOne has a 4.3 Google star rating from hundreds of reviews and holds an A+ BBB accreditation since 2017. A recent review highlights John Alverez’s exceptional service, rescuing an investment deal that another lender couldn’t secure.
lendingone.com/loans/hard-money/louisiana/
866-481-3943
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Louisiana?
Deciding whether a hard money loan is right for you depends on your individual situation and real estate investment goals. Here are some of the main things to consider:
- Best suited for real estate investors:
Hard money loans are ideal for investors who need quick funding for projects with tight timelines or those who can’t qualify for traditional financing. If you’re ready to manage higher costs and shorter repayment terms, a hard money loan in Louisiana might be the perfect fit for your next investment opportunity. - Alternative for homeowners:
For homeowners looking to tap into their home’s equity without high interest rates, consider HomeLight’s Buy Before You Sell program. This program allows you to buy your new home first and sell your old one later, paying a small flat fee while benefiting from a competitive offer and simplified move. - Long-term strategy:
As with any major financial decision, consider your long-term strategy and consult with a financial advisor to ensure it aligns with your overall investment goals. - Connecting with professionals:
If you want to connect with investor-friendly real estate agents in Louisiana who have access to trusted hard money lenders, HomeLight can introduce you to top professionals in your area.
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