Purchasing/Buying Commercial Properties in Real Estate

by | Jun 19, 2024 | Investment Strategies

Buying Commercial Real Estate with Hard Money


Discover the benefits of buying commercial real estate with hard money loans in Washington State. Learn how to navigate the process, including the essential due diligence steps. Moreover, find out how Intrust Funding simplifies financing with no inspections or appraisals required. Enhance your investment strategy with our comprehensive guide and expert insights.

What is Hard Money Lending?

Hard money loans are short-term, asset-based loans provided by private lenders rather than traditional financial institutions. Consequently, these loans are secured by real estate and are typically used for investment purposes. Unlike conventional loans, which focus heavily on the borrower’s creditworthiness, hard money loans, instead, prioritize the value of the property being used as collateral.

Advantages of Using Hard Money in Commercial Real Estate

Speed of Approval and Funding

  • Quick Access to Capital: One of the primary advantages of hard money loans is the speed at which they can be approved and funded. Traditional loans can take weeks or even months to process, while hard money loans can often be approved and funded within days.
  • Minimal Documentation: The documentation requirements for hard money loans are typically less stringent than those for traditional loans, streamlining the approval process.


Flexible Terms

  • Customizable Loan Terms: Hard money lenders often offer more flexible terms than traditional lenders. This can include tailored repayment schedules and the ability to negotiate interest rates.
  • Higher Loan-to-Value Ratios: Some hard money lenders are willing to offer higher loan-to-value (LTV) ratios, which can be beneficial for investors looking to leverage their investments.


Credit Score Considerations

  • Asset-Based Lending: Hard money loans are primarily based on the value of the collateral, not the borrower’s credit score. This makes them an ideal option for investors with less-than-perfect credit or those who have difficulty securing traditional financing.


Due Diligence in Hard Money and Commercial Real Estate

Due diligence is a critical component of any real estate transaction, especially when dealing with hard money loans and commercial properties. It involves a thorough investigation and evaluation of the property and the terms of the loan to ensure that the investment is sound and that there are no unforeseen risks.


Key Elements of Due Diligence

Property Appraisal and Inspection

  • Appraisal Process: In traditional hard money loans, lenders conduct an appraisal to determine the property’s value. This is crucial as the loan amount is based on the appraised value of the property.
  • Inspection: An inspection assesses the condition of the property and identifies any potential issues that could affect its value or usability. This includes checking for structural integrity, compliance with zoning laws, and the condition of essential systems like plumbing and electrical.
  • Note on Intrust Funding: However, at Intrust Funding, we simplify the process further by not requiring formal inspections or appraisals. Instead, we ask for photos of the property, speeding up the approval and funding process even more.


Financial Analysis

  • Cash Flow Projections: Analyze the expected income and expenses associated with the property to ensure it will generate sufficient cash flow to cover the loan payments and provide a return on investment.
  • Market Analysis: Conduct a market analysis to understand the demand for commercial properties in the area, average rental rates, and occupancy levels. This helps in making informed decisions about the potential profitability of the investment.


Legal and Regulatory Compliance

  • Zoning and Land Use: Verify that the property complies with local zoning laws and land use regulations. This includes understanding any restrictions on the property’s use and potential future developments in the area.
  • Title Search: Conduct a title search to ensure there are no liens, encumbrances, or legal disputes associated with the property. This protects the investor from legal complications that could arise after the purchase.


Environmental Assessments 

  • Environmental Site Assessment (ESA): Perform an ESA to identify any environmental liabilities, such as contamination or hazardous materials, that could affect the property’s value and usability.
  • Mitigation Plans: If any environmental issues are found, develop a mitigation plan to address them. This might include cleanup efforts or legal compliance measures.


Review of Loan Terms

  • Interest Rates and Fees: Carefully review the interest rates, fees, and other costs associated with the hard money loan. Ensure that these terms are clear and acceptable.
  • Repayment Schedule: Understand the repayment schedule and ensure that it aligns with your investment strategy and cash flow projections. After you’ve purchased an investment property, you’ll need to perform some renovations to make it a profitable venture. The fix and flip process makes it easy to buy a property that needs some work at a low price, fix it up, and then “flip” it for a profit. In this instance the “flip” entails holding onto the property to rent it out. More on this later. Remember when you renovate, think strategically! Every dollar spent needs to add at least two in value. Fancy finishes are fun, but a fresh exterior and updated kitchen bring the biggest bang for your buck.


Steps to Purchasing Commercial Property with Hard Money

Identify a Suitable Property

  • Research and Due Diligence: Conduct thorough research to find a commercial property that fits your investment criteria. Consider factors such as location, property type, market conditions, and potential for appreciation.


Find a Reputable Hard Money Lender

  • Lender Evaluation: Look for lenders with a strong reputation and experience in commercial real estate financing. Check reviews, ask for referrals, and compare terms from multiple lenders to find the best fit for your needs.


Prepare Your Application

  • Required Documentation: While hard money loans require less documentation than traditional loans, you will still need to provide information about the property, your investment strategy, and proof of funds for the down payment.


Property Appraisal (Deal Analysis from Intrust Funding)

  • Appraisal Process: The lender will conduct an appraisal to determine the property’s value. This is a crucial step as the loan amount will be based on the appraised value of the property.
  • Inspection: An inspection may also be required to assess the condition of the property and identify any potential issues that could affect its value.
  • Intrust Funding’s Way: Give us the 15+ photos of the property and we’ll underwrite the property. We do NOT require an appraisal or inspection. 


Loan Approval and Funding

  • Approval Process: Once the appraisal and inspection are complete, the lender will finalize the loan terms and approve the loan.
  • Funding: After approval, the funds will be disbursed, allowing you to proceed with the purchase of the commercial property.



Buying commercial real estate with hard money can be a powerful tool for investors seeking quick, flexible financing options. By understanding the advantages and potential risks, and by carefully selecting a reputable lender, you can leverage hard money loans to seize profitable investment opportunities. Whether you are looking to expand your real estate portfolio or embark on a new investment venture, hard money loans provide the agility and speed needed to succeed in today’s competitive market.

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