The Real Deal National

Home flippers beware: Hard money lending is on the rise

The American Association of Private Lenders estimates the amount of hard money lenders to be 8,300
June 13, 2019 05:26PM

The volume of loans that went to home flippers ballooned last year to roughly $20 billion (Credit: iStock)

The volume of loans that went to home flippers ballooned last year to roughly $20 billion (Credit: iStock)

The number of “hard money” lenders is on the rise.

The American Association of Private Lenders estimates that these types of non-bank lenders, who tend to give loans with higher interest rates, and similar “private money” lenders, are up 40 percent since 2016, according to Bloomberg. Though it’s hard to pin down the exact amount of hard money lenders, the group pegs the current amount of such lenders at 8,300.

Much of those monies are headed for real estate investors, particularly those in the home-flipping business, according to the outlet.

The volume of loans that went to home flippers ballooned last year to roughly $20 billion, which is up 37 percent from 2016, according to real estate data firm Attom Data Solutions, Bloomberg reported.

Even though Attom’s figures can’t specify how much of that volume stems from hard money sources, many in the know say hard money lenders are making up a bulk of the financing, according to Bloomberg.

Glen Weinberg of Colorado-based Fairview Commercial Lending told Bloomberg that his company will only loan up to 60 percent of a property’s value, but new lenders may go up to 90 percent.

“There’s a lot of activity,” Weinberg said. “Every time I turn around there’s new entrants.”

So what does this mean for home flippers, who rely on this financing?

A drop in home flipping. West Coast cities like San Jose, California and Seattle already have seen this happen, Bloomberg reported. [Bloomberg] — Mary Diduch