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How Can Hard Money Loan Help me with Real Estate Investment

How Can Hard Money Loan Help me with Real Estate Investment

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A hard money loan can be a real game changer if you're hoping to get into real estate and expand your investment portfolio.

An alternative to traditional funding, hard money loans are asset-based. This means borrowers receive loans based on the value of their property. In a country where the real estate market is rising – there were 679,000 new single family homes sold in the first quarter of 2019 in the United States – many people want to cash in on this opportunity. In the last few months, the country's spending on private residential construction work surpassed an estimated $507,231 millions of dollars, and a considerable portion of that could be attributed to home renovators and flippers. Hard money loans offer a great chance to get in the housing market. This is true even if your borrowing history is less than perfect.

What are the Benefits of a Hard Money Loan?

Investing in real estate can be a fantastic and fulfilling endeavor. However, in order to do so you will need some capital. You can't invest in properties if you don't have the funds upfront. That's where hard money lending comes into play. There are many benefits associated with this form of funding. Essentially, hard money loans are awarded based on the value of the property you're purchasing, rather than your credit score and credit history. Generally speaking, people who have been rejected on loan applications through more traditional funding sources such as big banks and mortgage lenders may see success with hard money funding. The application process tends to be easier and more straightforward.

Other benefits of a hard money loan include a quick approval process. If you find a property that you're eager to invest in, you won't be waiting around long once you submit your application for hard money funding. You're much more likely to be approved for this loan compared to asking the bank or a mortgage lender for money. There's plenty of people out there just like you who have wanted to make some exciting real estate moves but have found themselves stuck financially. Hard money loans can be a solid solution that gives you the financial freedom to invest in the right real estate project for you.

Why do People Choose Hard Money Loans?

Last but certainly not least, another reason why so many people are enthusiastically turning to hard money loans is that there are less requirements and restrictions on this funding. You won't have to answer a million questions about your financial situation and your past credit mistakes. Instead, hard money lenders will be looking more closely at the property you plan to buy. The value of this property is very important. Hard money lenders just need to make sure that your investment makes sense. They will also want to know that you will be able to pay back the loan.

How Can You Get a Hard Money Loan?

Hard money loans are extremely helpful for those who want to get into real estate but may not have access to traditional forms of funding. Buying run-down properties and flipping them for a profit is thrilling and rewarding. This is especially true when you get your business blossoming with opportunities coming at you left and right. Whether you're just starting out in the real estate market, or you're a veteran who is ready to try something new, hard money lending could be for you. It's understandable that you may have some more questions, and luckily there are some fantastic hard money funding experts out there who would be happy to help.

In order to secure a hard money loan for your real estate investment, you should search for lenders in your area. Scheduling a meeting with these lenders is a good idea, as you can then have all your questions answered and get a better understanding of what you can expect with a hard money loan. You will also need to provide details on the property you wish to use the hard money loan for. What is the current value of the property and what work are you planning to do to the property to sell it for a profit in a few years time? By demonstrating your real estate plans, you'll be likely to receive approval for this hard money loan that could help you tremendously.

Who Offers Hard Money Loans?

There are some great hard money lenders who are trustworthy and fair and they offer an alternative avenue to funding. These are the types of funding companies that you should want to work with. As with anything, real estate is a huge investment, and it's important to make the best choice for you the first time around. It's likely that hard money loans are the ideal option to achieve your real estate ambitions.

What Else Should you Know?

As with any sort of financial agreement, you should do due diligence and research all your options before signing on the dotted line. While there are so many advantages associated with hard money funding, you also need to be aware of any possible drawbacks that could affect you.

This mainly revolves around interest rates, which are higher than traditional forms of funding. While a mortgage from the bank may offer interest rates somewhere in the range of 3-5%, with a hard money loan you'll be looking more so at interest rates around 8-11%. While these rates can of course vary depending on the lender, it's typical for borrowers to pay more interest on a hard money loan due to the conditions of funding. That being said, this won't matter too much if you stick to your plans of flipping the property and selling at a profit in a few years. Just remember that the interest rates will be higher, and this should factor into your financial planning. You'll also should be pretty sure that your plans for a profit will materialize, so that you end up in the black.

If you're ready to move forward with your real estate hopes and dreams, the next step is to contact a reputable hard money lender to get started on your application. Your next real estate investment could be much closer than you think!

Sources: https://www.huduser.gov/portal/ushmc/quarterly_commentary.html

https://www.census.gov/construction/c30/c30index.html?#

Pros and Cons to a Hard Money Loan

Pros and Cons to a Hard Money Loan

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Personal finances are an important part of your past, present and future. After all, you need money not only to survive, but also to do the things you want to do in life. Sometimes, you may fall short of your savings goals or need to borrow money to make a big purchase. That's where hard money loans can come in.

What are Hard Money Loans?

First of all, it's important to understand what a hard money loan actually is. This is a specific kind of asset-based loan financing in which the funding is secured by real property. In other words, a hard money loan is a form of funding using real estate/property as collateral, rather than the creditworthiness of the borrower. If you have poor credit or struggle to get a loan from traditional lenders for what is deemed a risky property, a hard money loan could save the day. In a world where debt is so common – 58% of college graduates have student debt, according to the Kennedy School at Harvard's Institute of Politics – hard money loans can make a major difference.

These are short term loans with higher interest rates, issued by private individuals and companies that are willing to take on the risk. Many people use hard money loans in their real estate endeavors, with flipping houses being the top example. Property flippers who want to renovate and resell the property within a year or sooner may turn to hard money loans for help. Although the interest is higher, if the borrower intends to pay off the loan quickly, usually within one to three years, then it can be a worthwhile financial move.

Hard money loans are often easier to obtain than traditional forms of financing, and as long as you do your research beforehand and choose a qualified, suitable hard money lender, you should have a good experience. While flipping houses and turnaround situations is a primary reason why hard money loans exist, this funding can also assist borrowers with low credit scores but considerable equity in their property. Plus, hard money loans can be issued quickly, so they can be a good way to avoid foreclosure in the short-term.

Hard money lenders pay less attention to a person's credit score and concentrate more on their property assets. If you've been turned away from traditional funding sources such as a bank or mortgage broker, it may be time to explore the benefits of a hard money loan.

What are Pros of Hard Money Loans?

As with anything in life, there are both pros and cons to a hard money loan. Depending on your situation, you may find that the pros far outweigh the cons. Perhaps one of the biggest advantages to hard money loans is that they move quick. You don't need to wait for weeks and months on end to get approved for this kind of funding. Overall the U.S. has a mind-boggling $10 trillion in mortgage debt alone, as reported by the Federal Reserve, so it's crucial that you make the right choice when it comes to your type of loan. If you need money fast, and you don't mind paying higher interest for the short-term, then a hard money loan could be the solution you've been looking for.

Another pro associated with hard money loans is the relatively straightforward and simple approval process. If you have the right criteria, namely a property that can serve as collateral, you may be approved faster than anticipated. So long as you're working with a trusted hard money lender, you may get great financial news. Being approved for a hard money loan is a big moment, especially if you've want to get into property flipping or you've been refused traditional forms of lending.

It can be frustrated and disappointing to be rejected by banks and mortgage brokers time and time again. If you've been let down by potential lenders and you're feeling flat about your financial circumstances, a hard money loan could have a positive impact on your life. That's because these loans are an attractive alternative for those who could not get a traditional loan due to poor credit history or other circumstances. Hard money lenders tend to be more flexible, as they don't use a typical underwriting process when it comes to approving loans. Instead, these lenders evaluate every deal individually, meaning you may be able to discuss repayment schedules, interest rates and more. Rather than dealing with the big banks and large corporations, you may be working with an individual or small-business minded hard money lender who is more likely to meet your needs.

What are Cons of Hard Money Loans?

Of course, it's also important to consider any potential downsides to hard money loans, which will be dependent on your current financial situation. Generally speaking, the biggest disadvantage to hard money loans is that they can be more expensive in terms of interest. Because they are so fast and flexible, hard money lenders are able to tack on higher interest rates to accommodate the loan terms and conditions.

If you're planning on paying back your loan within a few years, the increased interest rate won't be too much of a factor for you. This is particularly relevant for property flippers who know they will be reselling the property for a profit in a short amount of time. For homebuyers who are planning on living in their house for years to come, higher interest rates may pose a concern. That's certainly something to consider when planning for the future and deciding on which type of funding is best for you and your loved ones.

Just like any other funding option, hard money loans aren't perfect. You must keep in mind that lenders may use more conservative methods to evaluate your property than you'd expect. Combined with the expensive fees, hard money loans need to be carefully thought about before signing on the dotted line. If it seems feasible for you, and you've met with a reputable hard money lender and read through everything, then you should know what to expect and hopefully have success with your loan in the future.

If you're interested in learning more about hard money loans and figuring out if they would work for you, then it's time to contact your local hard money lender today. They'll be able to help you further understand this funding and make the right financial move for you.

Sources: https://iop.harvard.edu/student-debt-viewed-major-problem-financial-considerations-important-factor-most-millennials-when

https://www.federalreserve.gov/data/mortoutstand/current.htm

https://hardmoneylendersonline.com/hard-money-loans

Using a Hardmoney Lender To Reach Business Goals

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Getting into the home-flipping industry isn’t as easy to do as it may seem. In order to be able to flip a home, you first need to be able to buy it. Getting financing from a traditional lender often takes a lot of time, which can mean that the property sells before you are able to even get financing to buy it. Fortunately, there is another lending option available. Hard money loans are loans with quick approval and that can be obtained using the property you plan to buy as collateral. The following guide walks you through a few tips to use when you want to use hard money loans to get your flipping business off the ground.

You Need to Have an Estimate for the Flipping Costs

When you go to apply for a hard money loan, it’s best to have an estimate for what the actual cost of the flip will be. This shows the lender that you have a plan in mind, know what the costs will be and that it will be a profitable investment for them to make. Hard money loans are often riskier for lenders because they don’t require an overly high credit score or a huge down payment for loan approval.

Hard Money Lenders Often Need to See the Property

Before you can be approved for a hard money loan, it’s common for a lender to send an agent to look at the property in person. The agent determines if the investment is worth making by looking at the condition of the property, the plans you have for it and the real estate market as a whole in the area. If the property is located in a part of town where the properties sit for an extended period of time without selling, the lender may be leerier about approving your loan.

Hard Money Loans Can Get the Ball Rolling Quickly

When you flip a home, the sooner you can start working on the remodeling the better. Approval for a hard money loan can take as little as a few days, whereas approval for a traditional loan can take quite a few weeks or even months. Being able to get the money you need for the home as quickly as you can better your chances of actually being able to get it.

Hard Money Loans Designed to be Paid off Quickly

Typically, flippers get hard money loans because they know that they are going to repay them quickly. They plan to buy the home, flip it and make a huge profit. The money they get from the sale goes directly to pay off the loan that then any money left over serves as their profits. Knowing that you are paying a slightly higher interest rate than you would if you had a traditional loan can sometimes light a fire in you that makes you work harder and faster. This ensures that you are able to make as much profit as possible because you are paying the least amount in interest payments as you can.

Getting Future Loans Will be Easier

When you work with hard money lenders and prove that you will pay off the loan quickly, it makes it easier to get a loan with them in the future. Being able to show that you are responsible and diligent proves that you aren’t as much of a risk as some other borrowers and can make it much easier for you to get another loan in the future. This is ideal when flipping houses because you want to go through as little hassle as possible when it comes to getting financing for the loans as you can.

In 2018, home ownership dropped to 64.2%, meaning that home buying is at an all-time low. First time flippers make the mistake of buying a home without taking the neighborhood into consideration. This could be a huge problem according to property expert Egypt Sherrod. “I think it’s a mistake to buy and try to flip a property in a troubled neighborhood where every other home on the street is in disrepair,”.  It’s important to make sure not only the house, but the neighborhood is appealing to potential buyers in the current buyer’s market. To better your chances of approval of a hard loan, have detailed examples of what you plan to do to make the house unique and the positive aspects of the neighborhood and surrounding areas. Getting a hard money loan may be easier than a traditional loan, but proper preparation is key.

References:

U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey, April 25, 2019. https://www.census.gov/housing/hvs/files/currenthvspress.pdf

Gray, Liz. Flipping a House? 5 Dos and Don’ts You Need to Know First. https://www.hgtv.com/shows/flipping-virgins/house-flipping-dos-donts-from-egypt-sherrod