COVID-19’s Impact on Real Estate Investor Loans – (Residential Hard Money Lenders)


At the start of the pandemic Covid-19 hit the lending market like a sledge hammer.  Banks, hard money, private money, bridge loans, everything froze in an instant.  As the owner of an online lending platform I was in the middle of it all.  Investors that wanted to refinance their properties couldn’t and the brave ones that wanted to acquire were having a hard time finding lenders willing to fund their deals.

There were some residential hard money lenders continuing to lend but with stricter terms.  LTVs dropped to 65 but guess what?  Any investors that took those hard money loans ended up making out really well.  The markets initially tightened but eventually loosened.  The tightening spooked the industry.  Builders stopped building, investors stopped buying and rehabbing, nobody was moving.  But for those brave investors that continued buying, we all know what happened next.  The housing market started booming.  People were fleeing cities, looking for a place in the suburbs with more space and a backyard.  People no longer had to commute to work, instead working from home doing Zoom calls.  Suddenly it didn’t matter where you lived.  Because of the lack of new homes and rehabbed homes, low interest rates, stimulus checks, prices skyrocketed.  Buyers were buying “as is – cash” on primary homes!  A house would list and they’d have 30 buyers show up with their contractors throwing ladders up on the roof.  It was insane.

Needless to say, those investors that kept plugging along with residential hard money lenders for their flips made boatloads of money.  Rehabbers were making on one deal what they normally made on two or three!  I know some investors that plan on retiring a lot sooner because of how much they’ve made flipping properties since Covid-19 hit.  I even know some former W2 employees who lost their jobs and were able to get hard money loans on fix & flips because these types of lenders provide low doc loans.  They base the loan off the financials of the property (what it’ll be worth after being rehabbed) not the borrower’s income.  What would normally be an impossible loan with a traditional lender became possible.  The lender protects itself via interest rate, LTV and points.  But who cares if you make a huge profit!  I’ll gladly pay money if it means the difference of not making any money and making a ton of money.

The greatest investor of all time, Warren Buffet, said “be fearful when others are greedy, and greedy when others are fearful.”  The real estate investors that invested when others were fearful came out on top.  It’s something to keep in mind.  Huge events that seem like they’re going to change things forever either don’t or they change in a way that no one predicts.

I was living in NYC on 9/11 and thought Manhattan was done.  I thought everyone would move out.  Real estate would plummet.  I was sure of it.  Guess what?  It didn’t.  People are making the same predictions this time around.  Cities will become ghost towns.  Prices will fall off a cliff.  I don’t think so.  Drop some, yes.  Will they go back up?  Probably.  And the ones who’ll make out are the ones that continued investing using real estate investor loans to get them done.