Hard money for land and commercial property: lower leverage, longer exits

Residential fix-and-flip is the hard money mainstream. Land and commercial property are the same idea with less leverage, more paperwork, and exits that take longer — because the collateral is harder to sell in a hurry.

Land

Raw land is the hardest collateral to lend on: no income, slow resale, value dependent on entitlements that may never come. Typical terms: 40% to 60% loan-to-value on an appraisal that discounts heavily for time to sell, 12 to 24 months, rates at the upper end of the hard money range, and often a requirement that interest be prepaid or reserved. Lenders favor entitled or improved lots with utilities and road access over raw acreage, in-fill parcels near built neighborhoods over rural tracts, and borrowers with a funded plan — construction financing lined up, a builder under contract — over speculation.

Commercial

Commercial bridge and hard money loans cover small apartment buildings, mixed-use, retail, office, self-storage and industrial property between acquisition and a permanent loan. Leverage of 60% to 70% of as-is value (up to 75% of stabilized value on strong deals), terms of 12 to 36 months, interest-only, with rates from roughly 9% to 13% and 1 to 3 points. Underwriting focuses on the property’s current and projected net operating income, the business plan (lease-up, renovation, repositioning), the borrower’s experience with that asset type, and the permanent take-out — an agency loan for apartments, a bank or CMBS loan for other types.

How lenders value each

• Land: comparable land sales adjusted for size, zoning, utilities and entitlement status; sometimes a residual analysis (finished value minus development cost and profit).
• Commercial: income capitalization (NOI ÷ cap rate) as the primary method, checked against sales comparables and replacement cost; lenders stress the cap rate and vacancy.

What changes for the borrower

1. More equity: 30% to 60% down is normal.
2. More documentation: rent rolls, leases, operating statements, environmental reports (Phase I), surveys, zoning letters.
3. Longer closings: three to six weeks, driven by third-party reports.
4. Exit scrutiny: lenders want to see permanent financing terms and whether the stabilized property will qualify.
5. Recourse: personal guarantees are standard; non-recourse appears only on larger institutional bridges.

Frequently asked questions

Can I get hard money for a construction project?

Yes — ground-up construction loans from hard money lenders fund land plus construction in draws, typically at 60% to 75% of cost and 60% to 70% of completed value, with strong preference for experienced builders and pre-sold or pre-leased projects.

Why is land leverage so low?

Because a defaulted land loan can take a year or more to liquidate and values are volatile. The lender needs a cushion deep enough to absorb a price cut and carrying costs during a long sale.

Are commercial hard money loans subject to consumer rules?

No; they are business-purpose commercial loans outside consumer mortgage regulation. State usury and licensing rules still apply, and many states treat commercial lending more permissively than residential.

Related: What is a hard money loan? Asset-based lending explained · Bridge loans: buying before you sell, and other short gaps · Hard money rates, points and LTV: typical ranges and what moves them · Hard money exit strategies: sell, refinance, or hold — and the plan B. Hub: Hard money.