Investing in Property with Hard Money Lenders: Why & How to Do It

Investing in Property with Hard Money Lenders: Why & How to Do It

There’s no denying the fact that investing in real estate can be the perfect path towards generating profit and building wealth. Yet, there is also no denying the fact that accessing the capital needed to get started with this can be quite a challenge. That is, of course, unless you’re filthy rich and have the cash just stashed away somewhere, ready for you to use it whenever you decide to do so. If, however, you’re like most of us, then you could definitely struggle with accessing the necessary capital. Perhaps this could help.

Anyway, if you’ve done any kind of research on this topic already, then you must have come across the hard money lending option. Unlike traditional borrowing, this can be much faster, as well as easier to secure, which is why it has become quite an appealing solution, especially for new investors looking to get involved in a quick-turnaround project. A fast and flexible solution is, after all, always appealing, isn’t it?

Yet, as a smart investor, you don’t want to make any kinds of moves before actually figuring out what hard money loans are, why you may want to invest in property with their help, and how to do it the right way. In short, you have quite some important questions on your mind, and you want to get answers before moving forward. So, what we are going to do right now is answer those questions for you, hoping to help you get a clearer idea on everything and then decide whether you want to do this, as well as learn how to do it correctly.

What Exactly Is a Hard Money Loan?

We are, naturally, going to begin with the question of what hard money loans are in the first place. So, to cut right to the chase, these are short term loans that are offered by private individuals or companies, and that are most usually used for the purposes of investing in real estate. They differ from the traditional borrowing solutions in one crucial aspect. Simply put, instead of looking at your long-term credit history and your general creditworthiness, the lenders look at the value of the property you’re buying in order to decide if you qualify for the loan.

This can help you get an even better idea on what it is: https://en.wikipedia.org/wiki/Hard_money_loan

Thanks to the fact that it is the value of the property that’s considered, the actual approval process is much quicker, which allows you, as the investor, to secure the funds you need much more quickly. And, that can often be necessary for time-sensitive projects. These loans require less documentation, which further shortens the whole application and approval process.

Another thing you should know about these is that they are of short-term character, and the repayment period usually ranges from 6 months to 2 years. And, of course, we cannot fail to mention that the interest rates are slightly higher than those you can get for conventional loans. That, however, is usually a fair price to pay for the convenience and the flexibility you get from this solution.

Why Invest in Property With Hard Money Lenders?

So, you now have a better understanding of the actual concept of hard money loans. What you want to know next is whether investing in property through hard money loans is a good idea for you or not. Let us, therefore, discuss in more details why you may want to do this. That way, you will get a clearer idea on how useful this can be, and you’ll be able to make your final decision on your own.

First things first, there is the fact that this option allows you to get fast funding. As you may very well know already, those traditional loans taken from banks often take weeks, or even months, to be approved. On the other hand, when you work with these private lenders that offer hard money loans, you are bound to get your money much more quickly, often within a few days. This can help investors grab opportunities that they would have missed out on otherwise, if they had to wait for the traditional borrowing process to be completed.

Additionally, another advantage lies in the fact that the requirements are more lenient. What does this precisely mean, though? Well, in short, it means that you can get the money you need even if you don’t have a perfect credit score, or if you already have multiple mortgages. Furthermore, even investors who don’t have a consistent income history can be approved for this particular loan.

When you think about it for a moment, you will realize that this solution is perfect for short-term investments. Why is that? Because you get the money quickly, and because they basically serve to cover the gap until the property is flipped and sold. Meaning you won’t be in debt for a long time.

How to Do It the Right Way?

The only thing that’s left now is for you to understand how to get a good hard money loan. That is, how to do this the right way. Well, as you may have guessed it, the quality of the whole deal will depend on the lenders you will work with. So, that’s what you should focus on the most.

How can you make this choice, though? For one thing, you should take time to research different hard money lenders (more info) in order to understand which one could be best for you. Find more of them online, or get some recommendations from the people you know. Then, take time to check how experienced and reputable they are.

Moving on, remember to check and compare the specific borrowing terms offered, as those are bound to differ from one lender to another. Take interest rates into account, but also check all the other fees, and all the other borrowing terms as well. Once you compare everything, you’ll be ready to make your choice and apply for the perfect solution.