Ask any real estate investment professional, and they’ll tell you the challenges associated with real estate investing. If you’re working with hard money lending, the difficulties may appear endless. But it doesn’t have to be that way. If you want to make the borrowing experience much easier, all you need to do is understand the process and take a look at the facts first.
What is a Hard Money Loan?
The real estate industry is undergoing some major transformations and technological trends. New advances such as 3D printing can have a huge impact on investors, buyers and sellers. But one thing that doesn’t seem to change is how an investor goes about lending money. To a novice, hard money borrowing may seem unusual. But to those more experienced, they see it as a practice that can offer an investor some major benefits. You first need to understand the definition of hard money lending. Made by a private lender or company, hard money lending requires fewer qualifications related to the borrower. It can also take a lot less time to close than the more traditional methods. Included in the loan amount is the renovation costs on a particular project. Most of the emphasis is placed on the loan-to-value ratio and property. But a borrower still must apply, meet and agree to the loan terms.
When Does a Hard Money Loan Make Sense?
The next 10 to fifteen years may be the best time to hit the real estate investment market. Especially in regards to urban real estate. With this rise in demand from millennials taking charge of the market, hard money lenders such as Crawford Park Financial has the experience to help investors. A hard money load could benefit an investor is a borrower needs cash to close quickly on a property. The borrower may have unique opportunity that includes a payoff that has been discounted. Other areas it may prove beneficial is when you don’t qualify for the more traditional bank loans or a property is vacant and needs a significant amount of work.
Area of Expertise
When you’re looking to locate hard money, a private money business may be the best place to start. The firms can bring both lender and borrower together to make their deal work. They also provide a vetted and safe environment to solidify the deal. They may also have a host of inspectors, appraisers and other industry professionals that can make the deal go quicker and smooth than a traditional mortgage.
One of the greatest benefits associated with hard money financing is the versatility of the program. Both the borrower and lender complement the other to meet their needs. A borrower may require different loan terms, but they can pay for that privilege. For a higher ROI, investors can accommodate their needs by offering different payment terms. This allows the seasoned investor the chance to invest in a variety of deals because they don’t have stockholders or loan advisors they have to report to. This allows them the chance to make their own decisions and commit to the deals that they find most attractive.
Hard money lending comes with the same parameters that you would find with the more traditional real estate mortgages. This includes appraisals, escrow requirements and inspections as a part of the loan process. You will also find the necessary documents that can legally bind both parties to the terms that are agreed upon. The loans are also structured in a way that the loan to asset value is somewhat lower. This makes the deal more successful to both borrower and lender.
Great post! I learned a lot about hard money lending by reading this article. Thank you for explaining that "Made by a private lender or company, hard money lending requires fewer qualifications related to the borrower." I have never needed a loan before but it is good to know a hard money loan does not require as much as a regular loan.
Speed is often the main reason borrowers go with hard money.