Hard Money Loans
A hard money loan is a short-term loan that is used by real estate investors. They have also been called bridge loans and usually have terms of about a year. The loan is secured by the property and usually doesn’t have credit checks for the investor.
These are given to investors who want to flip homes, or to buy a home in need of repair and then renovate it. The investors can get the funds they need ahead of time and then pay it off when they sell the home. They can also be given funds throughout the process in the form of draws.
You can find this type of loan in many places. The easiest way to find one is to put hard money loans into your favorite search engine and go from there. Make sure you do your due diligence and research each company you are thinking about using.
This article will give you some information that you might not have known about hard money loans. It will help you to learn more about them. You can also do more research to find the information that you are seeking.
Things You Might Not Have Known
- They Can Make Complex Deals Happen – These loans are good for investors who have high-risk deals that can be rejected by traditional lenders. Hard money lenders are used to funding these types of deals because they usually see that they are paid off by the investors. They are more willing to fund these types of deals because they are worth the risks.
- They Are Not as Expensive as They Seem – Interest rates can be higher than with traditional loans, but those costs are often outweighed by returns and other benefits. The interest rates aren’t as bad as they could be, often they are the same as high interest loans for people with bad credit: https://en.wikipedia.org/wiki/Hard_money_loan. You also need to remember that these loans are often given to investors with bad credit scores but with excellent business sense.
- Cash Reserves – Investors need to have cash reserves to show that they can pay the loan back even if the project isn’t doing well. This is important because there are often unforeseen incidents that happen. Homes might not be sold in time or there may be catastrophes that happen.
- They Can be Used for Many Things – These can be used to buy tenant inhabited properties, as well as rehab financing or cash out loans. Private bridge lenders will also help people who can’t get conventional loans. This includes foreign nationals and landlords that have marijuana tenanted properties.
- They Can be Closed Quickly – Hard money lenders can usually close their loans with two to three weeks, unlike traditional banks that often take two to three months. If you have all your application pieces together, this timeline can even be quicker. You might even be lucky enough to have your funds in days rather than weeks.
- Lenders are Flexible – Hard money lenders are usually more flexible than traditional banks. They can usually be more creative than traditional lenders. This helps those who don’t qualify for a traditional loan.
- They Can Use Asset Based Underwriting – Using asset-based underwriting allows them to lend for properties that need to be rehabilitated or other distressed properties. See here. It is important to know that the property must meet loan-to-value requirements. That means that property flippers can get these loans easily.
- They Allow You to Make Cash Offers – You can make cash offers more easily if you get a hard money loan. That gives you cash up front so that you can buy immediately and not have to wait for loan funds. This is a way to be more competitive in your business.
- They are Short Term and Require Interest Only Payments – You will be making interest only payments so that you can use the remainder of your cash for your project. This allows you to get the loan and to begin work on your project. It also helps you to finish your project on time so that the loan can be paid in full.
- They Value Character Over Credit – Although hard money lenders do look at your credit report, they don’t value you that as much as they do your character. If you have a proven record of paying back your loans on time, you are more likely to get a hard money loan than if you have decent credit. This makes it easier for house flippers to buy homes and flip them quickly.
Conclusion
Hard money loans are great for people who flip houses for a living. They are easy to get if you have a great reputation and a great record of paying your debts off quickly. You don’t need to have excellent credit to get a hard money loan.
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