Hard Money for Real Estate Investing
Real estate investors–at one time or other–may need extra capital to get them into their next deal. Cash is tied up in other property, but they want to keep moving with another acquisition. Maybe they’re not eligible right now to borrow from the typical lending sources. What do you do?
Hard money loans help investors who need quick and easy money to get their deals done fast and efficiently, whether that be flipping or developing.
You may have heard about HARD MONEY and think this type of financing could be the way to get you through. You might be right! Hard money has its place in real estate funding.
BUT YOU HAVE TO KNOW WHAT YOU’RE DOING! Hard money loans can be risky and expensive.
A quick description of hard money loans:
- Short-term loan, typically 6-12 months, maybe longer.
- Funded by private investors or groups of investors rather than conventional banks or credit unions.
- Loans based more on the property’s value than on the borrower’s credit.
- Amount of loan is determined by loan to value (LTV), the ratio of the loan amount divided by the value of the property.
- Because these loans have greater risk, interest rates are always higher than conventional loans, often 10-15%, plus points.
- Hard money loans can be funded very quickly, sometimes within a week.
- These loans work well for flix and flips, construction loans, bridge loans, and quick capital needs.
Most of this sounds pretty good, right? If you plan your purchase and rehab carefully, hard money might be a solution for you.
Get to KNOW your hard money lender. Meet face-to-face if possible so you’re sure of their credibility, integrity and honesty.
Create your plan so you know you can meet the monthly interest payments and the final balloon balance at the end, even if the unexpected crops up. Remember, deadlines for final payoff of hard money loans are generally firm and penalties for not meeting your contract are costly.
Work closely with your investment real estate broker to get a recommendation for a hard money lender and to cover all the necessary bases before you sign on the line.
This financing strategy could work well for you if you plan thoroughly and know what you’re doing. Good Luck!
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